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Introduced Version Senate Bill 130 History

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Senate Bill No. 130

(By Senator McCabe)

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[Introduced February 9, 2005; referred to the Committee

on Government Organization; and then to the Committee on Finance.]

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A BILL to amend and reenact §12-6-9c and §12-6-12 of the Code of West Virginia, 1931, as amended; and to amend said code by adding thereto a new section, designated §12-6-18, all relating to the investment powers of the Investment Management Board; removing certain requirements regarding investments in the securities of, or any interest in, any investment company or investment trust under the Investment Company Act of 1940; increasing the percentage of investments that may be made in equities and international securities; clarifying the application of the prudent investor standard to limitations on certain types or amounts of investments; eliminating certain restrictions on the purchase of securities in a particular company, commercial paper and corporate debt and eliminating the requirement that a list of approved securities be maintained by the Board; authorizing investments in alternative investments, subject to certain restrictions and limitations; and specifying that the investment powers of the Board are to be broadly and liberally construed to permit the Board to achieve its corporate purposes, consistent at all times with the prudent investor standard.

Be it enacted by the Legislature of West Virginia:

That §12-6-9c and §12-6-12 of the Code of West Virginia, 1931, as amended, be amended and reenacted; and that said code be amended by adding thereto a new section, designated §12-6-18, all to read as follows:

ARTICLE 6. WEST VIRGINIA INVESTMENT MANAGEMENT BOARD.

§12-6-9c. Authorization of additional investments.

Notwithstanding the restrictions which may otherwise be provided by law with respect to the investment of funds, the board, all administrators, custodians or trustees of pension funds, each political subdivision of this State and each county board of education is authorized to may invest funds in the securities of or any other interest in any investment company or investment trust registered under the Investment Company Act of 1940, 15 U. S. C. §80a, the portfolio of which is limited: (i) To obligations issued by or guaranteed as to the payment of both principal and interest by the United States of America or its agencies or instrumentalities; and (ii) to repurchase agreements fully
collateralized by obligations of the United States government or its agencies or instrumentalities.: Provided, That the investment company or investment trust takes delivery of the collateral either directly or through an authorized custodian: Provided, however, That the investment company or investment trust is rated within one of the top two rating categories of any nationally recognized rating service such as Moody's or Standard & Poor's. §12-6-12. Investment restrictions.
(a) The board shall hold in equity investments no more than sixty percent of the assets managed by the board and no more than sixty percent of the assets of any individual participant plan or the consolidated fund or the consolidated fund and no more than seventy percent in the case of the teachers retirement system and the death, disability and retirement fund of the West Virginia State Police described in subsections (a)(2) and (a)(4), section nine-a of this article or any higher percentages as may be permissible or appropriate for all investments under this subsection under the prudent investor standard set forth in section eleven of this article.

(b) The board shall hold in international securities no more than twenty thirty-five percent of the assets managed by the board and no more than twenty thirty-five percent of the assets of any individual participant plan or the consolidated fund. or such higher percentages as are permissible or appropriate under the
prudent investor standard set forth in section eleven of this article. "International security" shall be defined as a security the trading of which occurs, neither in whole or in part, in United States dollars.
(c) The board may not at the time of purchase hold more than five percent of the assets managed by the board in the equity securities of any single company or association: Provided, That if a company or association has a market weighting of greater than five percent in the Standard & Poor's 500 index of companies, the board may hold securities of that equity equal to its market weighting.

(d) The board shall at all times limit its asset allocation and types of securities to the following:

(1) The board may not hold more than twenty percent of the aggregate participant plan assets in commercial paper. Any commercial paper at the time of its acquisition shall be in one of the two highest rating categories by an agency nationally known for rating commercial paper;

(2) At no time shall the board hold more than seventy-five percent of the assets managed by the board in corporate debt. Any corporate debt security at the time of its acquisition shall be rated in one of the six highest rating categories by a nationally recognized rating agency; and

(3) No security may be purchased by the board unless the type
of security is on a list approved by the board. The board may modify the securities list at any time and shall give notice of that action pursuant to subsection (g), section three of this article and shall review the list at its annual meeting.
(e) (c) Notwithstanding the investment limitations set forth in this section, it is recognized that the assets managed by the board, or the assets of the consolidated fund or participant plans, whether considered in the aggregate or individually, may temporarily exceed the investment limitations in this section due to market appreciation, depreciation and rebalancing limitations. Accordingly, the limitations on investments set forth in this section shall not be considered to have been violated if the board rebalances the assets it manages or the assets of the consolidated fund or participant plans, whichever is applicable, to comply with the limitations set forth in this section at least once every six months based upon the latest available market information and any other reliable market data that the board considers advisable to take into consideration.

(f) (d) The board, at the annual meeting provided for in subsection (h), section three of this article, shall review, establish and modify, if necessary, the investment objectives of the individual participant plans as incorporated in the investment policy statements of the respective trusts so as to provide for the financial security of the trust funds giving consideration to the
following:
(1) Preservation of capital;

(2) Diversification;

(3) Risk tolerance;

(4) Rate of return;

(5) Stability;

(6) Turnover;

(7) Liquidity; and

(8) Reasonable cost of fees.

(g) (e) In addition to any and all other investment authority granted to the board by this article, the board may invest no more than forty percent of the assets managed by the board and no more than forty percent of the assets of any individual participant plan or any other endowment or other fund managed by the board, or higher percentages as may be permissible or appropriate under the prudent investor standard set forth in section eleven of this article, in any investment commercially recognized as an alternative investment as determined by the board, from time to time. Alternative investments may include, but are not limited to, the following: Venture capital, mezzanine debt, buyout funds, private real estate, publicly traded real estate, long/short strategies, market neutral strategies, distressed securities and fixed income arbitrage and any investment determined by the board to be similar to one or more of these types of investment. The
investments described in this subsection are not subject to any limitations or restrictions set forth in this article or elsewhere in the code except for the forty-percent limitation set forth in this subsection and the standard of care set forth in section eleven of this article. The determinations made by the board with respect to the characterization of the type or functional nature of any particular investment made pursuant to this subsection shall be given great weight and, unless clearly erroneous, are conclusive.
§12-6-18. Liberal construction; determinations and interpretations by board.

This article, being necessary for and to secure the public health, safety, convenience and welfare of the citizens of this State, shall be liberally construed to effect the public purposes of this article. The powers granted to the board in this article, including, without limitation, those granted in section five of this article, are intended to be broad and shall be construed broadly so as to vest in the board the full and complete power and authority necessary or appropriate to carry out and effectuate its corporate purposes in the financial markets of the world, as they may evolve from time to time. The powers specifically enumerated in section five of this article are representative and not restrictive and in all instances the powers are to be broadly construed so as to permit the board to take all reasonable, necessary and appropriate actions and to engage in all commercially customary investment transactions and activities consistent with or necessary or appropriate to achieve its corporate purposes, at all times in a fashion consistent with the prudent investor standard. The determinations and interpretations made by the board with respect to this article, including, but not limited to, the determinations and interpretations made by the board with respect to the characterization of the type or functional nature of any particular investment made pursuant to this article, shall be given great weight and, unless clearly erroneous, are conclusive.

NOTE: The purpose of this bill is to remove restriction on investment by the West Virginia Investment Management Board. The bill allows the Board to increase the percentages of certain investments, and certain international securities held by the Board. The Board is required to make investments consistent with the prevalent investor standard.


Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.


§12-6-18 is new; therefore, strike-throughs and underscoring have been omitted.
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