The Legal List Explained

September 29, 2020

The “Legal List” refers to investments that are approved for municipalities by the Province through a regulation under the Municipal Act.  Sometimes called the “prescribed list” it generally includes: 

  • Canadian federal, provincial and municipal government or government-guaranteed bonds

  • Short-term and fixed-income securities issued by Canadian chartered banks and credit unions

  • Other prescribed securities

Equity exposure is allowed exclusively through ONE’s Canadian Equity Fund and similarly the ONE Canadian Corporate Bond Fund is the only access to corporate bonds. With few exceptions, only Canadian securities are eligible. The regulation also requires a minimum credit rating of A- for fixed income products (bonds). The list aims to limit any losses by providing a narrow range of options that are low risk, which can translate into lower potential returns (the risk-reward trade-off).


Until Prudent Investor was introduced in 2018, the Legal List was the only option for municipal investing. Municipalities who opt-in to Prudent Investor can now invest in any security that is appropriate for their circumstances. The Prudent Investor standard can help municipalities manage risk through a more diverse portfolio. It also includes a structured governance framework to promote high-quality investment planning, management and reporting.


Both Prudent Investor and Legal List include annual reporting, as required by the Municipal Act. Both also require an investment policy statement that addresses risk tolerance, investment mix and professional legal and financial advice.


While the Legal List has its limits, you can maximize returns through careful planning. Many municipalities have earned revenue for long-term capital projects and even generated operating revenue, through smart investment on the Legal List.


The first step is to have a deep understanding of municipal cash flow, including time horizons. ONE offers five investment products designed for different municipal investment horizons, ranging from fairly liquid short-term savings to a Canadian Equity portfolio that is appropriate for time horizons of five or more years:


Investment planning balances risks and rewards. Generally, governments don’t want to take risks with public dollars even if there is potential for better returns. However, depending on time horizons, it doesn’t have to be an either/or decision. If time is on your side, you can plan out investments in a way that safeguards money needed sooner and puts longer term money into a diversified portfolio of products, where it will ultimately earn more despite short-term ups and downs. Whether on the Legal List or under Prudent Investor, the ONE Investment Advisory Team helps municipal investors develop and plan to meet their short-term and long-term objectives.

Investment Planning
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