H.
B.
102
(By Mr. Speaker (Mr. Chambers) and Delegate Burk)
(By Request of the Executive)
[Introduced May 16, 1993; referred to the
Committee on Finance.]
A BILL to amend and reenact sections six, nine and ten, article six, chapter twelve of the code of West Virginia, one thousand nine hundred thirty-one, as amended, all relating to the board of investments; authorizing a charge against the assets managed by the board; deposit of the charge to the credit of the general revenue; expanding the authorized investments of the board; providing certain restrictions on authorized investments.
Be it enacted by the Legislature of West Virginia:
That sections six, nine and ten, article six, chapter twelve of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted, all to read as follows:
ARTICLE 6. WEST VIRGINIA STATE BOARD OF INVESTMENTS.
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6
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6. Costs and expenses; fees for services; special revenue
account; costs of determining third parties'
liability; recoupment of investment losses.
(a) The board shall make a charge against the earnings assets of the various funds managed by the board for all necessary expenses of the board. This charge may not exceed fourteen basis points. The charge shall be on a pro rata basis of actual earnings of the various funds managed by the board. The charge shall be deposited to the credit of the general revenue fund.
(b) There is hereby created in the state treasury a special revenue account to be known as the "loss expenses account." The purpose of this account is to provide funds to the board of investments to pay costs, fees and expenses incurred, or to be incurred, for the following: (1) Investigation and pursuit of claims against third parties for the investment losses incurred during the period beginning the first day of August, one thousand nine hundred eighty-four, and ending on the thirty-first day of January, one thousand nine hundred eighty-nine; (2) consulting services regarding the restructuring of the office of the treasurer following said losses; and (3) implementation of the recommendations made as a result of the consultations regarding restructuring. That special revenue account shall be funded by depositing income derived by the board from securities lending and recoveries from third parties. The board is authorized to deposit into the special revenue account, and to expend in accordance with the provisions of this section, those funds received from such recoveries and not more than two million dollars annually from income derived by the board from securities lending. Funds in the loss expense account in excess of reasonably estimated costs, fees and expenses for any fiscal year and any funds remaining in such special revenue account at the end of each fiscal year after expenditures, for the purposes specified above, may be transferred by the board to its "liquidity investment pool," to be used, in such manner as the board determines, to eliminate the present imbalance in the state accounts caused by the investment losses described above in this subsection:
Provided,
That amounts collected which are found from time to time to exceed the funds needed for the purposes set forth in this section may be transferred to other accounts or funds and redesignated for other purposes by appropriation of the Legislature. The authority for this special revenue account expires on the thirtieth day of June, one thousand nine hundred ninety-five.
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9. Permissible investments.
Notwithstanding the restrictions which may otherwise be provided by law as to the investment of funds, the board may invest funds made available to it in any of the following:
(a) Any direct obligation of, or obligation guaranteed as to the payment of both principal and interest by, the United States of America;
(b) Any evidence of indebtedness issued by any United States government agency guaranteed as to the payment of both principal and interest, directly or indirectly, by the United States of America including, but not limited to, the following: Government National Mortgage Association, Federal Land Banks, Federal Home Loan Banks, Federal Intermediate Credit Banks, Banks for Cooperatives, Tennessee Valley Authority, United States Postal Service, Farmers Home Administration, Export-Import Bank, Federal Financing Bank, Federal Home Loan Mortgage Corporation, Student Loan Marketing Association and Federal Farm Credit Banks;
(c) Any evidence of indebtedness issued by the Federal National Mortgage Association to the extent such indebtedness is guaranteed by the Government National Mortgage Association;
(d) Any evidence of indebtedness that is secured by a first lien deed of trust or mortgage upon real property situate within this state, if the payment thereof is substantially insured or guaranteed by the United States of America or any agency thereof;
(e) Direct and general obligations of this state;
(f) Any undivided interest in a trust, the corpus of which is restricted to mortgages on real property and, unless all of such property is situate within the state and insured, such trust at the time of the acquisition of such undivided interest, is rated in one of the three highest rating grades by an agency which is nationally known in the field of rating pooled mortgage trusts;
(g) Any bond, note, debenture, commercial paper or other evidence of indebtedness of any private corporation or association: organized and operating in the United States
Provided,
That any such security is, at the time of its acquisition, rated in one of the three highest rating grades by an agency which is nationally known in the field of rating corporate securities:
Provided, however,
That if any commercial paper and/or any such security will mature within one year from the date of its issuance, it shall, at the time of its acquisition, be rated in one of the two highest rating grades by such an agency:
Provided further,
That any such security not rated in one of the two highest rating grades by any such agency and commercial paper or other evidence of indebtedness of any private corporation or association shall be purchased only upon the written recommendation from an investment adviser that has over three hundred million dollars in other funds under its management;
(h) Negotiable certificates of deposit issued by any bank, trust company, national banking association or savings institution, organized and operating in the United States which mature in less than one year and are fully collateralized;
(i) Interest earning deposits including certificates of deposit, with any duly designated state depository, which deposits are fully secured by a collaterally secured bond as provided in section four, article one of this chapter; and
(j) Any corporate stock of any private corporation or association organized and operating in the United States and which is also listed on the Standard and Poor's List of 500 in the Wilshire 5000 Equity Index and Morgan Stanley Capitol International World Index; and
(k) Mutual funds.
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10. Restrictions on investments.
Moneys on deposit in the consolidated fund and the consolidated pension fund shall be invested as permitted by section nine of this article subject to the restrictions and conditions contained in this section:
(1) At no time shall more than seventy-five percent of the portfolio of either fund be invested in securities described in subdivision (g) of said section nine;
(2) At no time shall more than twenty percent of the portfolio of either fund be invested in securities described in said subdivision (g) which mature within one year from the date of issuance thereof;
(3) At no time shall more than three nine percent of the portfolio of either fund be invested in securities issued by a single private corporation or association;
(4) At no time shall more than twenty percent of the portfolio of the consolidated pension fund be invested in securities described in subdivision (j) of section nine of this article; and
(5) At no time may any of the consolidated fund be invested in securities described in subdivision (j) of section nine of this article.
(6) At no time shall more than nine percent of the portfolio of either fund be invested in any single mutual fund.
(7) At no time shall more than twenty percent of the portfolio of either fund be invested in mutual funds:
Provided,
That at no time may any of the consolidated fund or consolidated pension fund be invested in a mutual fund which does not meet the requirements established by section nine of this article and does not meet the restrictions and conditions set forth in this section.
For the purpose of making the computations required by this section, securities shall be valued in accordance with generally accepted accounting principles.
NOTE: The purpose of this bill is to authorize the board of investments to make a charge against the assets managed by the board and to expand the permissible investments which may be made by the board.
Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.