Bill Text: NJ S2507 | 2010-2011 | Regular Session | Introduced
Bill Title: Prohibits delegation of investment discretion of Director of Division of Investment to outside managers.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2010-12-09 - Introduced in the Senate, Referred to Senate State Government, Wagering, Tourism & Historic Preservation Committee [S2507 Detail]
Download: New_Jersey-2010-S2507-Introduced.html
Sponsored by:
Senator LINDA R. GREENSTEIN
District 14 (Mercer and Middlesex)
SYNOPSIS
Prohibits delegation of investment discretion of Director of Division of Investment to outside managers.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning the exercise of the investment discretion of the Director of the Division of Investment and amending P.L.1950, c.270.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 11 of P.L.1950, c.270 (C.52:18A-89) is amended to read as follows:
11. a. Limitations, conditions and restrictions contained in any law concerning the kind or nature of investment of any of the moneys of any of the funds or accounts referred to herein shall continue in full force and effect; provided, however, that subject to any acceptance required, or limitation or restriction contained herein: the Director of the Division of Investment shall at all times have authority to invest and reinvest any such moneys in investments as defined in subsection c. of this section and, for or on behalf of any such fund or account, to sell or exchange any such investments.
b. In investing and reinvesting any and all money and property committed to the director's investment discretion from any source whatsoever, and in acquiring, retaining, selling, exchanging and managing investments, the Director of the Division of Investment shall exercise the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. In making each investment, the director may, depending on the nature and objectives of the portfolio, consider the whole portfolio, provided that, in making each investment, the director shall act with the reasonable expectation that the return on each investment shall be commensurate with the risk associated with each investment. The director shall be under a duty to manage and invest the portfolio solely in the interests of the beneficiaries of the portfolio and for the exclusive purpose of providing financial benefits to the beneficiaries of the portfolio. The director shall not contract with, or transfer authority to, any person or entity outside the Division of Investment for the investment or reinvestment of moneys or for the purchase, sale or exchange of any investments or securities under the control and management of the Division of Investment except for the administrative functions of such investment, reinvestment, purchase, sale or exchange transactions.
c. For the purposes of this section, "investments" means and includes property of every nature, real, personal and mixed, tangible and intangible, and specifically includes, solely by way of description and not by way of limitation, bonds, debentures and other corporate obligations, direct and indirect investments in equity real estate , mortgages and other direct or indirect interests in real estate or investments secured by real estate, capital stocks, common stocks, preferred stocks, diversified pools of venture capital which otherwise could be made consistent with the standard of care required by subsection b. of this section, common trust funds as defined in and regulated by sections 36 through 46 of P.L.1948, c.67 (C.17:9A-36 through 17:9A-46), repurchase agreements, securities loan transactions secured by cash, securities issued by the United States government or its agencies, or irrevocable bank letters of credit, whether directly or through a bank or similar financial institution acting as agent or trustee, mutual funds, and any other security issued by an investment company or investment trust, whether managed or not by third parties, registered under the "Investment Company Act of 1940," 15 U.S.C. s.80a-1 et seq. No investment that is otherwise permissible under this subsection shall be considered to be unlawful solely because the investment is made indirectly or through a partnership, trust, or other legal entity.
(cf: P.L.1997, c.26, s.26)
2. Section 13 of P.L.1950, c.270 (C.52:18A-91) is amended to read as follows:
13. a. The State Investment Council shall consult with the Director of the Division of Investment from time to time with respect to the work of the division. It shall have access to all files and records of the division and may require any officer or employee therein to provide such information as it may deem necessary in the performance of its functions. The council shall have authority to inspect and audit the respective accounts and funds administered through the Division of Investment. It shall formulate and establish, and may from time to time amend, modify or repeal, such policies as it may deem necessary or proper, which shall govern the methods, practices or procedures for investment, reinvestment, purchase, sale or exchange transactions to be followed by the Director of the Division of Investment established hereunder. The council shall not have the authority to permit any person or entity outside the Division of Investment to exercise the investment discretion of the Director of the Division of Investment, pursuant to subsection b. of section 11 of P.L.1950, c.270 (C.52:18A-89), with regard to investment, reinvestment, purchase, sale or exchange transactions.
b. On or before January first of each year, and at such other times as it may deem in the public interest, the council shall report to the Governor, the Legislature, and the State Treasurer with respect to its work and the work of the Division of Investment. In addition to the reports specified above and in section 14 of P.L.1950, c.270 (C.52:18A-92), the council shall issue a report by March 1 of each year on the investment activities for the prior calendar year, which shall include a summary of the current investment policies and strategies of the council and those in effect during the prior calendar year, a detailed summary for each financial product of the amount invested, whether the investments were made by employees of the Division of Investment or by external managers, performance benchmarks, and actual performance during the calendar year. The report shall be submitted to the Governor, the Legislature, and the State Treasurer, and shall be made available to the public through the official Internet site of the State.
c. The council shall hold a meeting each year that shall be open to the public, and shall accept comments from the public at such meeting. The matters that shall be open to discussion and public comment during this annual meeting shall include the investment policies and strategies of the council, the investment activities of the council, the financial disclosure statements filed by council members, and the certification of contributions filed by external managers, as well as other appropriate matters concerning the operations, activities and reports of the council.
d. An external manager shall be required to file a certification before being retained, and annually thereafter, that discloses the political contributions made, during the 12 months preceding the certification, by the manager or the manager's firm, or a political committee in which the manager or firm was active. The certification shall specify the political contributions made to candidates for elective public office in this State and any political committee established for the support of such candidates, and contributions made for the transition and inaugural expenses of any candidate who is elected to public office. As used in this subsection, "contribution" and "political committee" shall have the meaning set forth in "The New Jersey Campaign Contributions and Expenditures Reporting Act," P.L.1973, c.83 (C.19:44A-1 et al.). This certification shall be in addition to any other such disclosure required by law or executive order of the Governor.
(cf: P.L.2007, c.103, s.51)
3. This act shall take effect immediately.
STATEMENT
This bill prohibits the State Investment Council and the Director of the Division of Investment in the Department of the Treasury from delegating management discretion and investment decisions to a private outside entity for the investment of assets of the State-administered retirement systems. In so doing, this bill makes explicit the existing statutory prohibition to that effect, which the Superior Court of New Jersey affirmed in August 2008 (Communications Workers of America, AFL-CIO, et al. v. David Rousseau, et al., No.: A-5198-04T1 (N.J. Super. Ct. App. Div. Aug. 22, 2008)).
