12 LC
21 1671S
The
Senate Retirement Committee offered the following substitute to SB
402:
A
BILL TO BE ENTITLED
AN ACT
To
amend Article 7 of Chapter 20 of Title 47 of the Official Code of Georgia
Annotated, the "Public Retirement Systems Investment Authority Law," so as to
provide a short title; to define certain terms and limitations relating to
certain types of investments; to provide that the provisions of this Act shall
be applicable only to certain retirement systems and certain other large
retirement systems; to provide that the Teachers Retirement System of Georgia
(T.R.S.) shall be exempt from the provisions of this Act; to provide that
certain public retirement systems other than the Teachers Retirement System of
Georgia may invest retirement system assets in certain types of alternative
investments, private placements, and other private investments; to provide that
such investments may be made up to a certain amount; to shield information
related to such investment from public scrutiny; to provide that the director of
certain retirement systems shall provide an annual report to the Governor and
the chairperson of the Senate and House of Representatives standing committees
on retirement; to provide for the contents of such report; to provide for a code
of ethics; to amend Code Section 50-18-72 of the Official Code of Georgia
Annotated, relating to when public disclosure of records is not required and
disclosure exempting legal authority, so as to exempt certain public records
from public inspection; to repeal conflicting laws; and for other
purposes.
BE
IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
SECTION
1.
This
Act shall be known and may be cited as the "Employees' Retirement System of
Georgia Enhanced Investment Authority Act."
SECTION
2.
Article
7 of Chapter 20 of Title 47 of the Official Code of Georgia Annotated, the
"Public Retirement Systems Investment Authority Law," is amended by revising
subsection (c) of Code Section 47-20-82, relating to investing funds,
eligibility, and investment limitations, as follows:
"(c)
Any investment limitation based upon the amount of the fund's assets shall
relate to such assets on the basis of the assets' aggregate historical cost.
For purposes
of any investment made in alternative investments pursuant to Code Section
47-7-127 or 47-20-87, aggregate historical cost shall include all contractually
committed, unpaid
amounts."
SECTION
3.
Said
article is further amended by adding a new Code section to read as
follows:
"47-20-87.
(a)
As used in this Code section, the term:
(1)
'Alternative investments' means the following investments:
(A)
Privately placed investment pools, including, without limitation, private
investment funds, such as:
(i)
Leveraged buyout funds;
(ii)
Mezzanine funds;
(iii)
Workout funds;
(iv)
Debt funds;
(v)
Venture capital funds;
(vi)
Merchant banking funds; and
(vii)
Funds of funds and secondary funds
that
include investments in privately placed investment pools described in this
subparagraph, in each case whether structured as a partnership, limited
liability company, trust, corporation, joint venture, or other entity or
investment vehicle of any type; organized or operating in one of the states or
territories of the United States or outside the United States; such pool will
invest in the United States or outside the United States or any combination
thereof; or such pool makes investments of the type described in subparagraph
(B) of this paragraph or other investments of any type or any combination
thereof;
(B)
Private placements and other private investments, including without
limitation:
(i)
Leveraged buyouts;
(ii)
Venture capital investment;
(iii)
Equity investments, including, without limitation, preferred and common
stock;
(iv)
Warrants;
(v)
Options;
(vi)
Private investments in public securities;
(vii)
Recapitalizations;
(viii)
Privatizations;
(ix)
Mezzanine debt investments;
(x)
Distressed debt and equity investments, including, without limitation, cases in
which the investor may take control of the issuer;
(xi)
Other debt investments, whether secured or unsecured, senior or subordinated,
recourse or nonrecourse, convertible, or otherwise;
(xii)
Convertible securities;
(xiii)
Receivables;
(xiv)
Interests, as such term is referred to in 11 U.S.C. Sections 501 and
502;
(xv)
Claims, as such term is defined in 11 U.S.C. Section 101(5);
(xvi)
Debt and equity derivative instruments of all types; and
(xvii)
All other debt and equity private placements of all types, in each case
whether
issued
by a partnership, limited liability company, trust, corporation, joint venture,
or other entity or vehicle of any type or whether the issuer is organized or
does business in one of the states or territories of the United States or
outside the United States; and
(C)
Any distribution in kind received by an eligible large retirement system in
connection with any investment described in subparagraphs (A) and (B) of this
paragraph.
(2)
'Eligible large retirement system' means a large retirement system as defined in
subsection (a) of Code Section 47-20-84; provided, however, that such term shall
not include the Teachers Retirement System of Georgia.
(b)
In addition to the eligible investments authorized by Code Section 47-20-82, and
without applicability of any restrictions set forth in Code Sections 47-20-83
and 47-20-84, an eligible large retirement system is authorized to invest in
alternative investments in accordance with the provisions of this Code section.
Further, when provisions of Code Section 47-20-83 or 47-20-84 or any provisions
of this article other than this Code section limit a particular form of
investment to a certain percentage of retirement system assets, the denominator
will include alternative investments with all other investments, but the
numerator for any such calculation shall not include any alternative
investments, even if any such alternative investment is of a like kind as the
investments that are included in the numerator.
(c)
An alternative investment shall not exceed in any case 20 percent of the
aggregate amount of:
(1)
The capital to be invested in the applicable private pool, including all
parallel pools and other related investment vehicles established as part of the
investment program of the applicable private pool; and
(2)
The securities being issued in the applicable private placement, in each case
determined at the time such alternative investment is initially either made or
committed to be made, as applicable, but taking into consideration any
investments that have previously been or are concurrently being made or
committed to be made.
Each
alternative investment by an eligible large retirement system shall have
previously been or shall be concurrently made or committed to be made by at
least four other investors not affiliated with the issuer. Such four other
investors shall be investing on substantially the same terms and conditions as
those applicable to the investment by the eligible large retirement system to
the extent such other investors are similarly situated with the eligible large
retirement system. Alternative investments shall only be made in private pools
and issuers that have at least $100 million in assets, including committed
capital, at the time the investment is initially made or committed to be made by
an eligible large retirement system.
(d)
Alternative investments by an eligible large retirement system shall not in the
aggregate exceed 5 percent of the eligible large retirement system assets at any
time. The board of trustees of an eligible large retirement system shall have
the discretion to designate whether any investment that is permitted to be made
as an alternative investment pursuant to this Code section and that is also
permitted to be made as an investment pursuant to Code Section 47-20-83 shall be
treated for purposes of the 5 percent limitation and otherwise as an alternative
investment made pursuant to this Code section or as an investment made pursuant
to Code Section 47-20-83. If the eligible large retirement system is not in
compliance with the limitations imposed by this subsection, it shall make a good
faith effort to come into compliance within two years and in any event as soon
as practicable thereafter; provided, however, that during any period of
noncompliance, the eligible large retirement system shall not increase the
percentage of its assets committed to be invested in alternative investments but
shall be permitted during such period to continue to make investments as
required by the then existing commitments of the eligible large retirement
system to alternative investments made before the period of
noncompliance.
(e)
The provisions of this subsection shall apply only to the Employees' Retirement
System of Georgia. New commitments to alternative investments shall not in the
aggregate exceed 1 percent of the retirement system assets in any calendar year
until the first occurrence that 4 1/2 percent of the retirement system assets
are invested in alternative investments, at which time there shall be no limit
on the percentage of commitments that may be made in any calendar year, subject
to compliance with the other provisions of this Code section.
(f)(1)
For purposes of this subsection, the term 'information' shall include, without
limitation, preinvestment and postinvestment diligence information, including
reviews and analyses prepared or provided by the issuer of a potential or actual
alternative investment or prepared by or for an eligible large retirement system
or otherwise relating to a potential or actual alternative
investment.
(2)
In addition to those records that are exempted from being open to inspection by
the general public under Code Section 47-1-14 and except as otherwise provided
in this subsection, an eligible large retirement system may in its discretion
treat as confidential and withhold from public inspection and disclosure all
information prepared or provided by the issuer of a potential or actual
alternative investment or prepared by or for an eligible large retirement system
or otherwise relating to a potential or actual alternative investment and held
by an eligible large retirement system and may agree in making an alternative
investment to treat such information as confidential and withhold it from public
inspection and disclosure.
(3)
Notwithstanding the provisions of paragraphs (1) and (2) of this subsection, any
public retirement system created by this title, other than by Chapter 5 of this
title, shall make publicly available the following information, but only to the
extent the following information is otherwise available or maintained by said
retirement system in the normal course and only after a period of one year from
the date such records were created:
(A)
The name of any alternative investment in which the retirement system has
invested; excluding, in the case of an alternative investment in a privately
placed investment pool, any information concerning the investments made by such
privately placed investment pool;
(B)
The date the retirement system first invested in an alternative
investment;
(C)
The aggregate amount of money, expressed in dollars, the retirement system has
invested in alternative investments as of the end of any fiscal
quarter;
(D)
The aggregate amount of money and the value of any in kind or other
distribution, in each case, expressed in dollars, the retirement system received
from alternative investments;
(E)
The internal rate of return or the result under any other such standard used by
the retirement system in connection with alternative investments for the asset
class and for the period for which the return or standard was calculated;
and
(F)
The remaining cost of alternative investments in which the retirement system has
invested as of the end of any fiscal quarter.
(4)
The provisions of this Code section shall not restrict access to information and
records under process of law or by officers otherwise entitled to them for
official purposes, but such information and records shall have the same
confidential status under process or with such officers as it does in the hands
of an eligible large retirement system, and such officers shall respect such
confidentiality to the extent consistent with their separate powers and
duties.
(5)
On the third Monday in January of each year, the director of any public
retirement system created by this title, other than by Chapter 5 of this title,
shall provide a report to the Governor and the chairpersons of the House and
Senate standing committees on retirement detailing the performance of any
investments made pursuant to this Code section, including, without limitation, a
clear statement of the aggregate loss or profit on such investments for the
preceding year. This paragraph shall not be construed so as to require the
disclosure of any information otherwise protected by this
subsection.
(g)
Unless the information has been publicly released, preinvestment and
postinvestment diligence information, including reviews and analyses, prepared
or maintained by the eligible large retirement system or by an alternative
investment firm shall be confidential and exempted from being open to inspection
by the general public pursuant to Article 4 of Chapter 18 of Title 50, except to
the extent it is subject to disclosure from the requirements of subsection (f)
of this Code section.
(h)
The respective boards of trustees of eligible large retirement systems making
investments authorized by this Code section shall adopt a code of ethics for the
consideration of and investment in and disposition of alternative
investments.
(i)
Funds invested pursuant to this Code section and any return on such investment
shall remain funds of the retirement
system."
SECTION
4.
Code
Section 50-18-72 of the Official Code of Georgia Annotated, relating to when
public disclosure of records is not required and disclosure of exempting legal
authority, is amended in subsection (a) by striking "or" at the end of paragraph
(22), by replacing the period with "; or" at the end of paragraph (23), and by
adding a new paragraph to read as follows:
"(24)
Records that are expressly exempt from public inspection pursuant to Code
Section 47-20-87."
SECTION
5.
All
laws and parts of laws in conflict with this Act are repealed.