| 1 | A bill to be entitled |
| 2 | An act relating to public funds; creating s. 215.478, |
| 3 | F.S.; prescribing investment principles for public |
| 4 | officers and employees investing public moneys and for |
| 5 | specified officers and employees of firms providing |
| 6 | investment banking and equity management services for |
| 7 | governmental agencies with respect to investment of public |
| 8 | moneys; providing applicability; providing an effective |
| 9 | date. |
| 10 |
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| 11 | Be It Enacted by the Legislature of the State of Florida: |
| 12 |
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| 13 | Section 1. Section 215.478, Florida Statutes, is created |
| 14 | to read: |
| 15 | 215.478 Investment protection principles.-- |
| 16 | (1) Each person acting individually or as a member of a |
| 17 | collegial body making investments of public moneys as an |
| 18 | employee or officer of a state agency or an agency of county, |
| 19 | municipal, or other local government, and each employee or |
| 20 | officer of a nongovernmental entity that is retained by such an |
| 21 | agency to provide investment banking or equity management |
| 22 | services who makes investment decisions with respect to public |
| 23 | moneys held in a fiduciary capacity, must comply with the |
| 24 | following investment principles. The person must: |
| 25 | (a) Eliminate conflicts of interest in decisionmaking. |
| 26 | (b) Comply with all standards adopted by the agency, the |
| 27 | moneys of which are being invested with respect to disclosure |
| 28 | requirements that are more stringent than those provided by |
| 29 | general law. |
| 30 | (c) Consider the corporate governance practices of the |
| 31 | companies in which public moneys are invested. |
| 32 | (2) Each nongovernmental entity that provides investment |
| 33 | banking services for which it is retained by a state agency or |
| 34 | an agency of county, municipal, or other local government must, |
| 35 | as a condition of eligibility for receiving compensation for |
| 36 | such services: |
| 37 | (a) Sever any link between compensation for analysts and |
| 38 | investment banking. |
| 39 | (b) Prohibit investment banking input into analyst |
| 40 | compensation. |
| 41 | (c) Create a review committee to approve all research |
| 42 | recommendations. |
| 43 | (d) Upon discontinuation of research coverage of a |
| 44 | company, disclose the coverage termination and the reason for |
| 45 | the termination. |
| 46 | (e) Disclose in research reports whether the firm has |
| 47 | received, or is entitled to receive, any compensation from a |
| 48 | covered company within the preceding 12 months. |
| 49 | (f) Establish a monitoring process to ensure compliance |
| 50 | with all investment protection principles to which it is |
| 51 | subject. |
| 52 | (3) Within each equity management firm doing business with |
| 53 | a state agency or an agency of county, municipal, or other local |
| 54 | government, each active equity manager must: |
| 55 | (a) Disclose periodically, as determined by rule of the |
| 56 | agency whose moneys are being managed but in no case less |
| 57 | frequently than annually, any client relationship, including |
| 58 | management of a plan under 26 U.S.C. s. 401(k), in which the |
| 59 | firm could invest public moneys in the securities of the client. |
| 60 | (b) Disclose annually the manner in which its portfolio |
| 61 | managers and research analysts are compensated, including, but |
| 62 | not limited to, any compensation resulting from the solicitation |
| 63 | or acquisition of new clients or the retention of existing |
| 64 | clients. |
| 65 | (c) Report no less frequently than quarterly the amount of |
| 66 | commissions related to public moneys paid to broker-dealers and |
| 67 | the percentage of commissions paid to broker-dealers that have |
| 68 | publicly announced that they have adopted the investment |
| 69 | protection principles. |
| 70 | (d) Adopt safeguards to ensure that client relationships |
| 71 | of any affiliate company do not influence investment decisions |
| 72 | of the firm; provide the state agency or agency of county, |
| 73 | municipal, or other local government a copy of the safeguards |
| 74 | plan; and certify annually to the state agency or agency of |
| 75 | county, municipal, or other local government that the plan is |
| 76 | being fully enforced. |
| 77 | (e) Consider the quality and integrity of the firm's |
| 78 | accounting and financial data, including all public filings and |
| 79 | statements, as well as whether its outside auditors also provide |
| 80 | consulting or other services to the firm. |
| 81 | (f) Consider the corporate governance policies and |
| 82 | practices of the firm. |
| 83 | Section 2. This act shall take effect upon becoming a law |
| 84 | and shall apply July 1, 2005, with respect to state agency |
| 85 | officers and employees and outside investment banking or |
| 86 | management firms retained by state agencies and October 1, 2005, |
| 87 | with respect to officers and employees of, and outside |
| 88 | investment banking or management firms retained by, agencies of |
| 89 | county, municipal, or other local government. |