Bill Text: CA AB2833 | 2015-2016 | Regular Session | Introduced

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

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Bill Title: Public investment funds: disclosures.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Passed) 2016-09-14 - Chaptered by Secretary of State - Chapter 361, Statutes of 2016. [AB2833 Detail]

Download: California-2015-AB2833-Introduced.html

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BILL NUMBER: AB 2833	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Cooley

                        FEBRUARY 19, 2016

   An act to add Section 7514.7 to the Government Code, relating to
retirement.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2833, as introduced, Cooley. Public retirement: pension funds:
disclosures.
   The California Constitution commits to the retirement board of a
public pension or retirement system plenary authority and fiduciary
responsibility for investment of moneys and administration of the
system. Existing law requires a retirement board to develop and
implement a policy requiring disclosure of payments to placement
agents, as defined, in connection with system investments in or
through external managers that includes prescribed elements. Existing
law requires disclosure of campaign contributions or gifts made by a
placement agent to any member of a public pension retirement board,
as specified. Existing law requires a public retirement system to
obtain an actuarial valuation of the system not less than triennially
and submit audited financial statements to the State Controller who
then publishes a report on the financial condition of public
retirement systems.
   This bill, for contracts entered into on and after January 1,
2017, would require a public pension or retirement system to require
private equity fund managers, partnerships, portfolio companies, and
affiliates to make specified disclosures regarding fees and expenses
in connection with limited partner agreements on a form prescribed by
the system. Consistent with requirements relating to public records,
the bill would require a public pension or retirement system to
disclose the information received in connection with the limited
partner agreements at least once annually at a meeting open to the
public. The bill would make a statement of legislative intent.
Because this bill would impose new requirements on local entities
relating to the collection of information and its presentation at an
open meeting, it would impose a state-mandated local program.
   The California Constitution requires local agencies, for the
purpose of ensuring public access to the meetings of public bodies
and the writings of public officials and agencies, to comply with a
statutory enactment that amends or enacts laws relating to public
records or open meetings and contains findings demonstrating that the
enactment furthers the constitutional requirements relating to this
purpose.
   This bill would make legislative findings to that effect.
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


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

  SECTION 1.  It is the intent of the Legislature in enacting this
section to increase the transparency of fees paid by public pension
funds to private equity general partners. Pension funds pay
significant fees to private equity firms and do not have sufficient
information regarding the character and amount of those fees. As
fiduciaries, public fund trustees have a duty to maximize investment
returns in order to ensure promised benefits are adequately funded
and to minimize taxpayer costs. Because fees paid to private equity
general partners reduce returns, public fund trustees need to be able
to see and understand all of the fees they are charged.
  SEC. 2.  Section 7514.7 is added to the Government Code, to read:
   7514.7.  (a) Every public pension or retirement system shall
require its private equity fund managers, partnerships, portfolio
companies, and affiliates to make the following disclosures, on a
form prescribed by the system, in regard to each limited partner
agreement:
   (1) The fees and expenses that the retirement system pays directly
to the private equity fund managers and partnerships subject to the
agreement.
   (2) The fees and expenses not included in paragraph (1) that are
paid from the private equity fund, including carried interest, to the
private equity fund general partners and affiliates.
   (3) The fees and expenses paid by the private equity portfolio
companies to the private equity fund general partners and affiliates.

   (b) Consistent with the requirements of Section 6254.26, a public
pension or retirement system shall disclose the information received
pursuant to subdivision (a) at least once annually at a meeting open
to the public.
   (c) For purposes of this section, the following definitions shall
apply:
   (1) "Carried interest" means a share of the profits of a private
equity fund that is due to the fund manager or general partner.
   (2) "Private equity" means an asset class consisting of equity
securities and debt in operating companies that are not publicly
traded on a stock exchange.
   (d) This section shall apply to contracts the system entered into,
extended, renewed, or amended on or after January 1, 2017.
  SEC. 3.  The Legislature finds and declares that Section 1 of this
act, which adds Section 7514.7 to the Government Code, furthers,
within the meaning of paragraph (7) of subdivision (b) of Section 3
of Article I of the California Constitution, the purposes of that
constitutional section as it relates to the right of public access to
the meetings of local public bodies or the writings of local public
officials and local agencies. Pursuant to paragraph (7) of
subdivision (b) of Section 3 of Article I of the California
Constitution, the Legislature makes the following findings:
   The information in the disclosures required under subdivisions (a)
and (b) of Section 7514.7 of the Government Code are necessary to
ensure public confidence in the integrity of investments made by
retirement boards pursuant to limited partner agreements.
  SEC. 4.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district under this act would result from a legislative mandate that
is within the scope of paragraph (7) of subdivision (b) of Section 3
of Article I of the California Constitution.