LGC Certification of Mutual Funds

A summary of the minimum fund standards that must be met by a fund to qualify for LGC certification is below. Please refer to the full content of the standards here.

•    The fund may only invest in securities permitted by G.S. 159-30(c); securities may not have a maturity exceeding seven years.

•    The fund must be registered with the SEC and comply with all applicable SEC rules, regulations, and reporting requirements. SEC-registered funds are searchable on the SEC Mutual Funds Search.

•    The fund must be established and operated in such a manner that any local, state, or federal income tax liability is passed through to the participants.

•    The fund must periodically report performance in conformance with SEC rules and regulations, including the fund's performance against the benchmarks assigned by the fund. The fund’s benchmarks must meet certain specified requirements.

•    The fund must calculate a daily net asset value according to US “generally accepted accounting principles” and allow investors to transact daily at the net asset value.

•    The fund must be managed by an investment adviser registered with either the SEC or with the North Carolina Secretary of State; the investment adviser must comply with all applicable federal and state rules, regulations, and reporting requirements. SEC-registered investment advisers may be found in the Investment Adviser Public Disclosure database. To verify a state-registered investment professional, the Securities Division of the North Carolina Secretary of State provides a Securities Registration search function and an Investor Hotline (919-814-5400).

•    The fund’s sales and marketing must adhere to all applicable federal and state laws and regulations.

•    The fund must bear one of the two highest ratings of at least one nationally recognized rating service and must not bear a rating below one of the two highest ratings by any nationally recognized rating service.

•    The fund must disclose prominently in its prospectus, marketing materials, and communications that it invests only in those securities that are authorized for investment by units of local government pursuant to G.S. 159-30(c)(8) and Title 20, Chapter 03, Section .0712 of North Carolina Administrative Code.

•    For any LGC-certified mutual fund, the fund must disclose prominently in its prospectus, marketing materials, and communications that, in contrast to a LGC-certified money market mutual fund, the fund does not seek to maintain a stable one-dollar net asset value (NAV) per share.

LGC certification of a mutual fund provides assurance only that the fund requested certification, the fund’s certification proposal was complete (20 NCAC 03 .0713), the fund met all of the minimum fund standards for certification (20 NCAC 03 .0712), the fund’s required annual and interim attestations have been submitted (20 NCAC 03 .0714), and that the LGC has not terminated the certification (20 NCAC 03 .0715). LGC certification of a mutual fund does not imply a recommendation, endorsement, or guarantee by the LGC or LGC staff of the fund or its performance. 

When deciding whether to invest idle funds in an LGC-certified mutual fund, units should understand:

•    the requirements of G.S. 159-30 (Investment of idle funds)
•    the minimum fund standards for a fund to qualify for LGC certification (20 NCAC 03 .0712)
•    the difference between an LGC-certified mutual fund and an LGC-certified money market mutual fund (20 NCAC 03 .0711, 20 NCAC 03 .0712)
•    the limitations of LGC certification (see above)