Bill Text: CA AB1584 | 2009-2010 | Regular Session | Enrolled

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Public employees' retirement: retirement boards.

Spectrum: Slight Partisan Bill (Democrat 5-2)

Status: (Passed) 2009-10-11 - Chaptered by Secretary of State - Chapter 301, Statutes of 2009. [AB1584 Detail]

Download: California-2009-AB1584-Enrolled.html

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BILL NUMBER: AB 1584	ENROLLED
	BILL TEXT

	PASSED THE SENATE  SEPTEMBER 3, 2009
	PASSED THE ASSEMBLY  SEPTEMBER 11, 2009
	AMENDED IN SENATE  SEPTEMBER 1, 2009
	AMENDED IN ASSEMBLY  JUNE 18, 2009

INTRODUCED BY   Assembly Member Hernandez
   (Principal coauthor: Senator Correa)
   (Coauthors: Assembly Members Beall, Conway, Furutani, Nestande,
and Torrico)

                        MAY 26, 2009

   An act to amend Section 22212.5 of the Education Code, and to
amend Sections 20098 and 31528 of, and to add Sections 7508.5,
7513.8, 7513.85, 7513.9, and 7513.95 to, the Government Code,
relating to public employees' retirement, and declaring the urgency
thereof, to take effect immediately.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 1584, Hernandez. Public employees' retirement: retirement
boards.
   Existing law prohibits designated officers and employees of the
Board of Administration of the Public Employees' Retirement System
(PERS) and the Teachers' Retirement Board of the State Teachers'
Retirement System (STRS), who served in those positions for less than
5 years, from taking any specified action on behalf of any person,
other than the state, to influence certain actions by the retirement
boards or systems within 2 years after leaving that position.
   The County Employees Retirement Law of 1937 prohibits a member or
employee of a retirement board from becoming an endorser, surety, or
obligor on, or from having any personal interest in the making of an
investment for the board, or in the gains or profits that accrue from
those investments, except as specified. That law also prohibits a
member or employee of a retirement board or board of investments from
selling or providing any investment product that would be considered
an asset of the retirement fund to a retirement system established
under that law.
   This bill would include a member of the board, a deputy executive
officer, and an assistant executive officer among those positions
subject to the 2-year postemployment restriction, and would delete
the qualification that the person have served in that position for
less than 5 years. The bill also would make that postemployment
restriction applicable to designated officers and employees, board
members, and administrators of county retirement systems and
specified employees of other public pension and retirement systems.
   This bill would require the retirement boards of each public
pension or retirement system to develop and implement, on or before
June 30, 2010, a policy requiring the disclosure of payments to
placement agents, as defined, in connection with system investments
in or through external managers, as defined. The bill would prohibit
an external manager or placement agent that violates that policy from
soliciting new investments from the system for 5 years after the
violation was committed, but would provide for the reduction of that
prohibition as specified. The bill also would prohibit the system
from entering into any agreement with an external manager that does
not agree in writing to comply with the policy. The bill would
require a placement agent, prior to acting as a placement agent in
connection with any potential system investment, to disclose to the
board all campaign contributions made by the placement agent to any
elected member of the board, and all gifts given to any member of the
board, during the prior 24-month period, and to disclose any
subsequent campaign contribution made by the placement agent to an
elected member of the board, or a subsequent gift given to any member
of the board, during the time the placement agent is receiving
compensation in connection with a system investment. The bill would
prohibit a member or employee of the board from, directly or
indirectly, by himself or herself, or as an agent, partner, or
employee of a person or entity other than the board, selling or
providing any investment product that would be considered an asset of
the fund to any public retirement system in California.
   This bill would declare that it is to take effect immediately as
an urgency statute.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 22212.5 of the Education Code is amended to
read:
   22212.5.  (a) Except as otherwise provided in subdivision (d),
this section shall apply to the following positions in the system:
chief executive officer, system actuary, general counsel, chief
investment officer, and other investment officers and portfolio
managers whose positions are designated managerial pursuant to
Section 18801.1 of the Government Code.
   (b) Notwithstanding Sections 19816, 19825, 19826, 19829, and 19832
of the Government Code, the board shall fix the compensation for the
positions specified in subdivision (a). In so doing, the board shall
be guided by the principles contained in Sections 19826 and 19829 of
the Government Code, consistent with its fiduciary responsibility to
its members to recruit and retain highly qualified and effective
employees for these positions.
   (c) When a position specified in subdivision (a) is filled through
a general civil service appointment, it shall be filled from an
eligible list based on an examination that was held on an open basis,
and tenure in those positions shall be subject to the provisions of
Article 2 (commencing with Section 19590) of Chapter 7 of Part 2 of
Division 5 of Title 2 of the Government Code. In addition to the
causes for action specified in that article, the board may take
action under the article for causes related to its fiduciary
responsibility to its members, including the employee's failure to
meet specified performance objectives.
   (d) An individual who held a position designated in subdivision
(a), or was a member of the board, a deputy executive officer, or an
assistant executive officer, shall not, for a period of two years
after leaving that position, for compensation, act as agent or
attorney for, or otherwise represent, any other person, except the
state, by making any formal or informal appearance before or by
making any oral or written communication to the board, or any officer
or employee thereof, if the appearance or communication is made for
the purpose of influencing administrative or legislative action or
any action or proceeding involving the issuance, amendment, awarding,
or revocation of a permit, license, grant, contract, or sale or
purchase of goods or property.
  SEC. 2.  Section 7508.5 is added to the Government Code, to read:
   7508.5.  Except as otherwise provided in Section 20098 or 31528 of
this code, or Section 22212.5 of the Education Code, an individual
who was a member of the retirement board of a public pension or
retirement system, as defined in subdivision (h) of Section 17 of
Article XVI of the California Constitution, or an administrator,
executive officer, investment officer, or general counsel of that
board, shall not, for a period of two years after leaving that
position, for compensation, act as agent or attorney for, or
otherwise represent, any other person except the public entity
maintaining that pension or retirement system, by making any formal
or informal appearance before, or any oral or written communication
to, the pension or retirement system, or any officer or employee
thereof, if the appearance or communication is made for the purpose
of influencing administrative or legislative action, or any action or
proceeding involving the issuance, amendment, awarding, or
revocation of a permit, license, grant, contract, or sale or purchase
of goods or property.
  SEC. 3.  Section 7513.8 is added to the Government Code, to read:
   7513.8.  As used in Sections 7513.85, 7513.9, and 7513.95:
   (a) "Board" means the retirement board of a public pension or
retirement system, as defined in subdivision (h) of Section 17 of
Article XVI of the California Constitution.
   (b) "External manager" means an asset management firm that is
seeking to be, or has been, retained by a public retirement system in
California to manage a portfolio of assets, including securities,
for a fee.
   (c) "Placement agent" means any person or entity hired, engaged,
or retained by, or acting on behalf of, an external manager, or on
behalf of another placement agent, as a finder, solicitor, marketer,
consultant, broker, or other intermediary to raise money or
investment from, or to obtain access to, a public retirement system
in California, directly or indirectly, including, without limitation,
through an investment vehicle.
  SEC. 4.  Section 7513.85 is added to the Government Code, to read:
   7513.85.  (a) The board shall develop and implement, on or before
June 30, 2010, a policy requiring the disclosure of payments to
placement agents in connection with system investments in or through
external managers. The policy shall include, but not be limited to,
the following requirements:
   (1) Disclosure of the existence of relationships between external
managers and placement agents.
   (2) A resume for each officer, partner, or principal of the
placement agent detailing the person's education, professional
designations, regulatory licenses, and investment and work
experience.
   (3) A description of any and all compensation of any kind
provided, or agreed to be provided, to a placement agent.
   (4) A description of the services to be performed by the placement
agent.
   (5) A statement whether the placement agent, or any of its
affiliates, are registered with the Securities and Exchange
Commission or the Financial Industry Regulatory Association, or any
similar regulatory agent in a country other than the United States,
and the details of that registration or explanation as to why no
registration is required.
   (6) A statement whether the placement agent, or any of its
affiliates, is registered as a lobbyist with any state or national
government.
   (b) Any external manager or placement agent that violates the
policy shall not solicit new investments from the system for five
years after the violation was committed. However, this prohibition
may be reduced by a majority vote of the board at a public session
upon a showing of good cause.
   (c) The system shall not enter into any agreement with an external
manager that does not agree in writing to comply with the policy.
   (d) Nothing in this section shall require the board to take action
as described in this section unless the board determines, in good
faith, that the action described in this section is consistent with
the fiduciary responsibilities of the board as described in Section
17 of Article XVI of the California Constitution.
  SEC. 5.  Section 7513.9 is added to the Government Code, to read:
   7513.9.  (a) Any placement agent, prior to acting as a placement
agent in connection with any potential system investment, shall
disclose to the board all campaign contributions made by the
placement agent to any elected member of the board during the prior
24-month period. Additionally, any subsequent campaign contribution
made by the placement agent to an elected member of the board during
the time the placement agent is receiving compensation in connection
with a system investment shall also be disclosed.
   (b) Any placement agent, prior to acting as a placement agent in
connection with any potential system investment, shall disclose to
the board all gifts, as defined in Section 82028, given by the
placement agent to any member of the board during the prior 24-month
period. Additionally, any subsequent gift given by the placement
agent to any member of the board during the time the placement agent
is receiving compensation in connection with a system investment
shall also be disclosed.
  SEC. 6.  Section 7513.95 is added to the Government Code, to read:
   7513.95.  A member or employee of the board shall not, directly or
indirectly, by himself or herself, or as an agent, partner, or
employee of a person or entity other than the board, sell or provide
any investment product that would be considered an asset of the fund
to any public retirement system in California.
  SEC. 7.  Section 20098 of the Government Code is amended to read:
   20098.  (a) The board shall appoint and, notwithstanding Sections
19816, 19825, 19826, 19829, and 19832 shall fix the compensation of
an executive officer, a general counsel, a chief actuary, a chief
investment officer, and other investment officers and portfolio
managers whose positions are designated managerial pursuant to
Section 18801.1.
   (b) The executive officer, deputy executive officers, and the
assistant executive officers may administer oaths.
   (c) When fixing the compensation for the positions specified in
subdivision (a), the board shall be guided by the principles
contained in Sections 19826 and 19829, consistent with its fiduciary
responsibility to its members to recruit and retain highly qualified
and effective employees for these positions.
   (d) When a position specified in subdivision (a) is filled through
a general civil service appointment, it shall be filled from an
eligible list based on an examination that was held on an open basis,
and tenure in the position shall be subject to the provisions of
Article 2 (commencing with Section 19590) of Chapter 7 of Part 2 of
Division 5 of Title 2. In addition to the causes for action specified
in that article, the board may take action under the article for
causes related to its fiduciary responsibility to its members,
including the employee's failure to meet specified performance
objectives.
   (e) An individual who held a position designated in subdivision
(a), or was a member of the board, a deputy executive officer, or an
assistant executive officer, shall not, for a period of two years
after leaving that position, for compensation, act as agent or
attorney for, or otherwise represent, any other person, except the
state, by making any formal or informal appearance before, or any
oral or written communication to, the Public Employees' Retirement
System, or any officer or employee thereof, if the appearance or
communication is made for the purpose of influencing administrative
or legislative action or any action or proceeding involving the
issuance, amendment, awarding, or revocation of a permit, license,
grant, contract, or sale or purchase of goods or property.
  SEC. 8.  Section 31528 of the Government Code is amended to read:
   31528.  (a) Unless permitted by this chapter, a member or employee
of the board shall not become an endorser, surety, or obligor on, or
have any personal interest, direct or indirect, in the making of any
investment for the board, or in the gains or profits accruing from
those investments. A member or employee of the board shall not
directly or indirectly, for himself or herself, or as an agent or
partner of others, borrow or use any of the funds or deposits of the
retirement system, except to make current and necessary payments
authorized by the board.
   (b) A member or employee of the board shall not, directly or
indirectly, by himself or herself, or as an agent or partner or
employee of others, sell or provide any investment product that would
be considered an asset of the fund, to any retirement system
established pursuant to this chapter.
   (c) An individual who held a position designated in Section
31522.3, 31522.4, or 31522.5, or was a member of the board or an
administrator, shall not, for a period of two years after leaving
that position, for compensation, act as agent or attorney for, or
otherwise represent, any other person except the county, by making
any formal or informal appearance before, or any oral or written
communication to, the retirement system, or any officer or employee
thereof, if the appearance or communication is made for the purpose
of influencing administrative or legislative action, or any action or
proceeding involving the issuance, amendment, awarding, or
revocation of a permit, license, grant, contract, or sale or purchase
of goods or property.
  SEC. 9.  This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
   In order to ensure that public pension board members, employees,
and consultants conduct business to the highest ethical standard,
comply with all fiduciary responsibilities, and actively work to
eliminate actual or perceived conflicts of interest as soon as
possible, it is necessary that this act take effect immediately.