Bill Text: FL S1530 | 2010 | Regular Session | Introduced

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Bill Title: State Board of Administration [WPSC]

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Failed) 2010-04-30 - Died in Committee on Governmental Oversight and Accountability, companion bill(s) passed, see CS/CS/HB 1307 (Ch. 2010-180) [S1530 Detail]

Download: Florida-2010-S1530-Introduced.html

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Florida Senate - 2010                                    SB 1530 
 
By Senator Deutch 
30-00451-10                                           20101530__ 
1                        A bill to be entitled 
2         An act relating to the State Board of Administration; 
3         amending s. 215.44, F.S.; requiring that the board 
4         create an audit committee for specified purposes; 
5         providing for membership of the committee; providing 
6         requirements for members of the committee; prescribing 
7         terms for members; providing that members are state 
8         officers as defined by state law; providing duties and 
9         powers of the committee; requiring that the executive 
10         director of the board respond in writing and indicate 
11         whether action will be taken within a specified period 
12         after receipt of a recommendation from the committee; 
13         requiring that a copy of the executive director’s 
14         response be provided to the board and the committee; 
15         requiring that the committee appoint a Chief of 
16         Internal Audit; providing powers and obligations of 
17         the chief; authorizing the board to prescribe 
18         additional powers and duties to the committee; 
19         amending s. 215.441, F.S.; requiring that the board 
20         appoint an executive director; providing requirements 
21         for appointment as executive director; providing 
22         duties of the executive director; authorizing the 
23         board to set additional requirements for appointment; 
24         providing that the executive director is a state 
25         officer for purposes of certain provisions of state 
26         law; amending s. 215.442, F.S.; requiring that the 
27         executive director’s quarterly report to the board of 
28         trustees of the State Board of Administration and 
29         Investment Advisory Council contain certain 
30         information; amending s. 215.444, F.S.; increasing the 
31         number of members of the Investment Advisory Council; 
32         requiring that the council annually make certain 
33         recommendations; requiring that the council approve 
34         all new products considered for investment by the 
35         board; requiring that a specified number of members of 
36         the council represent specified interests; providing 
37         that members are state officers for purposes of 
38         certain provisions of state law; amending s. 215.47, 
39         F.S.; conforming cross-references; amending s. 
40         215.475, F.S.; requiring that the Investment Advisory 
41         Council assist in the development of the Florida 
42         Retirement System Defined Benefit Plan Investment 
43         Policy Statement; deleting provisions requiring the 
44         review of recommended changes to the statement by the 
45         council; creating s. 215.4754, F.S.; requiring that 
46         the board adopt by rule standards of conduct for 
47         investment advisers and managers; providing 
48         circumstances under which a contract with an 
49         investment adviser or manager is voidable; prohibiting 
50         an Investment Advisory Council member or such member’s 
51         business organization or affiliate from performing 
52         certain actions during the member’s service on the 
53         council and for a specified period thereafter; 
54         creating s. 215.4755, F.S.; requiring that an 
55         investment adviser or manager disclose certain 
56         information to the board; requiring that an investment 
57         adviser or manager annually file a statement with the 
58         board; requiring that the statement contain certain 
59         information and be filed on or before a specified 
60         deadline on a form prescribed by the board; requiring 
61         that the statement cover the preceding calendar year; 
62         requiring that an investment adviser or manager file a 
63         new or amended statement under certain circumstances; 
64         amending s. 218.409, F.S.; requiring that the board 
65         create a participating investor council; providing 
66         purposes of the council; providing an effective date. 
67 
68  Be It Enacted by the Legislature of the State of Florida: 
69 
70         Section 1. Present subsections (3) through (9) of section 
71  215.44, Florida Statutes, are renumbered as subsections (4) 
72  through (10), respectively, and a new subsection (3) is added to 
73  that section, to read: 
74         215.44 Board of Administration; powers and duties in 
75  relation to investment of trust funds.— 
76         (3)(a) The board shall create an audit committee to assist 
77  the board in fulfilling its oversight responsibilities in the 
78  areas of financial reporting, internal controls and risk 
79  assessment, audit processes, and compliance with laws and rules. 
80  The audit committee shall be chaired by the Chief Financial 
81  Officer and shall consist of six members. The Governor and the 
82  Attorney General shall each appoint two members to the audit 
83  committee, and the Chief Financial Officer shall appoint one 
84  member. Each member must be independent and free from any 
85  relationship that would interfere with the exercise of his or 
86  her independent judgment as a member of the committee. Each 
87  member shall be appointed to a term of 4 years and shall serve 
88  at the pleasure of his or her appointing authority. Persons 
89  appointed to the audit committee must have relevant knowledge 
90  and expertise as determined by the board. Members of the 
91  committee are state officers for purposes of s. 112.3145. 
92         (b) The audit committee shall independently and objectively 
93  monitor on an ongoing basis the board’s processes for financial 
94  reporting, internal controls and risk assessment, and compliance 
95  with laws and rules. The audit committee shall direct the 
96  efforts of the board’s independent external auditors and the 
97  board’s internal audit staff. The committee shall report, at 
98  least quarterly, all findings and recommendations to the 
99  executive director and the board. 
100         (c) The audit committee may: 
101         1. Seek any information it requires from employees of the 
102  board, who shall provide such information upon request, and from 
103  third parties; 
104         2. Meet, as necessary, with the investment advisory 
105  council, the investor council, board employees, or external 
106  auditors; 
107         3. Review the budget for the Office of Internal Audit; and 
108         4. Retain outside accountants, consultants, attorneys, or 
109  others approved by the board to assist in conducting an audit, 
110  review, or special investigation as directed by the board. 
111         (d) Upon receipt of any recommendation from the committee, 
112  the executive director shall, within 30 days after receipt, 
113  respond in writing and indicate whether action will be taken. 
114  The executive director shall specify the action that will be 
115  taken or the reasons for not taking action. A copy of the 
116  executive director’s written response shall be provided to the 
117  committee and the board. 
118         (e) The committee shall appoint a Chief of Internal Audit, 
119  who shall have those powers and duties set by the committee and 
120  report to the committee. 
121         (f) The committee shall have additional powers and duties 
122  as set by the board. 
123         Section 2. Section 215.441, Florida Statutes, is amended to 
124  read: 
125         215.441 Board of Administration; appointment of executive 
126  director.— 
127         (1) The State Board of Administration shall appoint an 
128  executive director to manage and invest funds as directed by the 
129  board. The executive director must have proven knowledge and 
130  expertise in overseeing institutional investment portfolios, and 
131  must have extensive experience in any two or more of the 
132  following areas: domestic equity or fixed-income securities, 
133  international equity or fixed-income securities, cash 
134  management, alternative investments, managed futures, or real 
135  estate investment trusts. The board may set additional 
136  requirements for appointment. 
137         (2) The appointment of the executive director of the State 
138  Board of Administration shall be subject to the approval by a 
139  majority vote of the Board of Trustees of the State Board of 
140  Administration, and the Governor must vote on the prevailing 
141  side. Such appointment must be affirmed by the Investment 
142  Advisory Council and reaffirmed in the same manner by the board 
143  of trustees on an annual basis. 
144         (3) The executive director is a state officer for purposes 
145  of s. 112.3145. 
146         Section 3. Subsection (1) of section 215.442, Florida 
147  Statutes, is amended to read: 
148         215.442 Executive director; reporting requirements; public 
149  meeting.— 
150         (1) Beginning October 2007 and quarterly thereafter, The 
151  executive director shall present to the Board of Trustees of the 
152  State Board of Administration and the Investment Advisory 
153  Council a quarterly report to include the following: 
154         (a) The name of each equity and alternative investment in 
155  which the State Board of Administration has invested for the 
156  quarter. 
157         (b) The industry category of each equity. 
158         (c) The type and value of assets that have been downgraded 
159  during the preceding quarter. 
160         Section 4. Section 215.444, Florida Statutes, is amended to 
161  read: 
162         215.444 Investment Advisory Council.— 
163         (1) There is created a nine-member six-member Investment 
164  Advisory Council to review the investments made by the staff of 
165  the Board of Administration and to make recommendations to the 
166  board regarding investment policy, strategy, and procedures. The 
167  council shall recommend asset allocations for funds held by the 
168  board and shall approve all new product types considered for 
169  investment by the board. 
170         (2) The members of the council shall be appointed by the 
171  board and shall be subject to confirmation by the Senate. The 
172  members must include one member representing local governments, 
173  one representative of a state employees’ union in the Regular 
174  Class, one representative of a teachers’ union, one 
175  representative of a police union, one representative of a 
176  firefighters’ union, and one beneficiary of the Florida 
177  Retirement System. These individuals shall possess special 
178  knowledge, experience, and familiarity with financial 
179  investments and portfolio management. Members shall be appointed 
180  for 4-year terms. A vacancy shall be filled for the remainder of 
181  the unexpired term. The council shall annually elect a chair and 
182  a vice chair from its membership. A member may not be elected to 
183  consecutive terms as chair or vice chair. Members of the council 
184  are state officers for purposes of s. 112.3145. 
185         Section 5. Subsection (15) of section 215.47, Florida 
186  Statutes, is amended to read: 
187         215.47 Investments; authorized securities; loan of 
188  securities.—Subject to the limitations and conditions of the 
189  State Constitution or of the trust agreement relating to a trust 
190  fund, moneys available for investments under ss. 215.44-215.53 
191  may be invested as follows: 
192         (15) With no more, in the aggregate, than 10 percent of any 
193  fund in alternative investments, as defined in s. 
194  215.44(9)(c)1.a. s. 215.44(8)(c)1.a., through participation in 
195  the vehicles defined in s. 215.44(9)(c)1.b. s. 215.44(8)(c)1.b., 
196  or in securities or investments that are not publicly traded and 
197  are not otherwise authorized by this section. 
198         Section 6. Section 215.475, Florida Statutes, is amended to 
199  read: 
200         215.475 Investment policy statement.— 
201         (1) In making investments for the System Trust Fund 
202  pursuant to ss. 215.44-215.53, the board shall make no 
203  investment which is not in conformance with the Florida 
204  Retirement System Defined Benefit Plan Investment Policy 
205  Statement, hereinafter referred to as “the IPS,” as developed by 
206  the executive director and the Investment Advisory Council and 
207  approved by the board. The IPS must include, among other items, 
208  the investment objectives of the System Trust Fund; permitted 
209  types of securities in which the board may invest; and 
210  evaluation criteria necessary to measure the investment 
211  performance of the fund. As required from time to time, the 
212  executive director of the board may present recommended changes 
213  in the IPS to the board and Investment Advisory Council for 
214  approval. 
215         (2) Prior to any recommended changes in the IPS being 
216  presented to the board, the executive director of the board 
217  shall present such changes to the Investment Advisory Council 
218  for review. The council shall present the results of its review 
219  to the board prior to the board’s final approval of the IPS or 
220  changes in the IPS. 
221         Section 7. Section 215.4754, Florida Statutes, is created 
222  to read: 
223         215.4754 Ethics requirements for investment advisers and 
224  managers.— 
225         (1) The board shall adopt by rule standards of conduct 
226  applicable to investment advisers and managers retained pursuant 
227  to s. 215.44(2)(b). 
228         (2) A contract under which an investment adviser or manager 
229  renders financial services or advice to the board is voidable by 
230  the board if the investment adviser or manager violates a 
231  standard of conduct adopted under this section. 
232         (3) An Investment Advisory Council member or such member’s 
233  business organization or affiliate may not directly or 
234  indirectly contract with or provide any services for the 
235  investment of trust funds of the state during the time of such 
236  member’s service on the council or for 1 year thereafter. 
237         Section 8. Section 215.4755, Florida Statutes, is created 
238  to read: 
239         215.4755 Disclosure requirements for investment advisers 
240  and managers.— 
241         (1) An investment adviser or manager retained pursuant to 
242  s. 215.44(2)(b) shall disclose in writing to the board: 
243         (a) Any relationship the investment adviser or manager has 
244  with any party to a transaction with the board, other than a 
245  relationship necessary to the investment or funds-management 
246  services that the investment adviser or manager performs for the 
247  board, if a prudent person could expect the relationship to 
248  diminish the investment adviser’s or manager’s independence of 
249  judgment in the performance of his or her responsibilities to 
250  the board; and 
251         (b) All direct or indirect pecuniary interests the 
252  investment adviser or manager has in any party to a transaction 
253  with the board, if the transaction is connected with any 
254  financial advice or service the investment adviser or manager 
255  provides to the board in connection with the management or 
256  investment of funds pursuant to s. 215.44(1). 
257         (2) The investment adviser or manager shall disclose a 
258  relationship described in paragraph (1)(a) without regard to 
259  whether the relationship is a direct, indirect, personal, 
260  private, commercial, or business relationship. 
261         (a) An investment adviser or manager retained pursuant to 
262  s. 215.44(2)(b) shall annually file a statement with the board 
263  disclosing each relationship or pecuniary interest described by 
264  this section. If no such relationship or pecuniary interest 
265  existed during the disclosure period, the statement must 
266  affirmatively state that fact. 
267         (b) The annual statement shall be filed no later than 
268  January 1 on a form prescribed by the board. The statement shall 
269  cover the reporting period of the previous calendar year. 
270         (c) The investment adviser or manager shall promptly file a 
271  new or amended statement with the board whenever there is new 
272  information to report under this section. 
273         Section 9. Present subsections (9) and (10) of section 
274  218.409, Florida Statutes, are renumbered as subsections (10) 
275  and (11), respectively, and a new subsection (9) is added to 
276  that section, to read: 
277         218.409 Administration of the trust fund; creation of 
278  advisory council.— 
279         (9) The board shall create a participating investor council 
280  to advise the board regarding the investment practices, internal 
281  controls and risk assessment, and audit processes for funds 
282  invested by the board pursuant to this part. 
283         Section 10. This act shall take effect July 1, 2010.