Senate Bill No. 653
(By Senator Plymale)
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[Introduced February 18, 2002; referred to the Committee
on Pensions; and then to the Committee on Finance.]
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A BILL to amend and reenact section twelve, article six, chapter
twelve of the code of West Virginia, one thousand nine hundred
thirty-one, as amended; and to further amend said article by
adding thereto a new section, designated section eighteen, all
relating to defining "international securities"; allowing for
a ten percent allocation to "alternative" investments of
individual participant plans, consolidated fund or any other
endowment or fund managed by the board of investment
management; providing that the board's determinations
concerning the characterization of the type of a particular
investment shall be conclusive; and providing that said
article is to be liberally construed.
Be it enacted by the Legislature of West Virginia:
That section twelve, article six, chapter twelve of the code
of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted; and that said article be further amended
by adding thereto a new section, designated section eighteen, all
to read as follows:
ARTICLE 6. WEST VIRGINIA INVESTMENT MANAGEMENT BOARD.
§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.
(b) The board shall hold in international securities no more
than twenty percent of the assets managed by the board and no more
than twenty percent of the assets of any individual participant
plan or the consolidated fund. "International security" means a
security, the trading of which occurs neither in whole nor in part
in United States currency.
(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) 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) 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) In addition to any and all other investment authority
granted to the board by this article, the board is expressly
authorized to invest no more than ten percent of the assets managed
by the board and no more than ten percent of the assets of any individual participant plan, consolidated fund or any other
endowment or other fund managed by the board, in any investment
commercially recognized as an alternative investment, as determined
by the board from time to time. The investments described in this
subsection shall not be subject to any limitations or restrictions
set forth in this article or elsewhere in the code except for the
ten percent limitation set forth in this subsection, the percentage
limitations set forth in subsection (a) of this section 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, shall be 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
hereof. The determinations and interpretations made by the board
with respect to this article, including, without limitation, 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, shall be conclusive.
(NOTE: The purpose of this bill is to define the term
international securities for purposes of the West Virginia board of
investment management. The bill allows the board to make a ten
percent allocation to "alternative" investments of individual
participant plans, consolidated funds or any other endowment or
fund managed by the board. The bill, additionally, provides that
the board's determinations concerning the characterization of the
type of a particular investment shall be conclusive, while
providing that article six is to be liberally construed.
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.)