H. B. 2742
(By Delegates Kiss, Browning, Campbell, Rutledge,
Burk and Wallace
)
(Originating in the House Committee on Finance)
[March 26, 1993]
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 said charge into
an appropriated special revenue account to pay expenses of
the board; expanding the authorized investments of the
board.
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.
§12-6-6. 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 earningsassets 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 a special revenue account hereby created in the
state treasury known as the "Administrative Expense Account"
which shall be annually appropriated by line item by the
Legislature:
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.
(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 todeposit 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.
§12-6-9. 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 principaland 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 byan 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.
§12-6-10. Restrictions on investments.
Moneys on deposit in the consolidated fund and theconsolidated 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 fund:
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 thissection.
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.