Florida Senate - 2011                             CS for SB 1182
       By the Committee on Budget; and Senator Ring
       576-05095-11                                          20111182c1
    1                        A bill to be entitled                      
    2         An act relating to the State Board of Administration;
    3         amending s. 215.44, F.S.; authorizing the board to
    4         invest the assets of a governmental entity in the
    5         Local Government Surplus Funds Trust Fund without a
    6         trust agreement with that governmental entity;
    7         providing that certain investments made by the board
    8         under a trust agreement are subject only to the
    9         restrictions and limitations contained in the trust
   10         agreement; amending s. 215.444, F.S.; reducing the
   11         number of members on the Investment Advisory Council;
   12         amending s. 215.4755, F.S.; correcting cross
   13         references; clarifying provisions prohibiting certain
   14         conflicts of interest by investment advisers and
   15         managers retained by the board; providing an effective
   16         date.
   18  Be It Enacted by the Legislature of the State of Florida:
   20         Section 1. Subsections (1) and (3) of section 215.44,
   21  Florida Statutes, are amended to read:
   22         215.44 Board of Administration; powers and duties in
   23  relation to investment of trust funds.—
   24         (1) Except when otherwise specifically provided by the
   25  State Constitution and subject to any limitations of the trust
   26  agreement relating to a trust fund, the Board of Administration,
   27  sometimes referred to in this chapter as “board” or “Trustees of
   28  the State Board of Administration,” composed of the Governor as
   29  chair, the Chief Financial Officer, and the Attorney General,
   30  shall invest all the funds in the System Trust Fund, as defined
   31  in s. 121.021(36), and all other funds specifically required by
   32  law to be invested by the board pursuant to ss. 215.44-215.53 to
   33  the fullest extent that is consistent with the cash
   34  requirements, trust agreement, and investment objectives of the
   35  fund. Notwithstanding any other law to the contrary, the State
   36  Board of Administration may invest any funds of any state
   37  agency, any state university or college, any unit of local
   38  government, or any direct-support organization thereof pursuant
   39  to the terms of a trust agreement with the head of the state
   40  agency or the governing body of the state university or college,
   41  unit of local government, or direct-support organization
   42  thereof, or pursuant to the enrollment requirements stated in s.
   43  218.407, and may invest such funds in the Local Government
   44  Surplus Funds Trust Fund created by s. 218.405, without a trust
   45  agreement, upon completion of enrollment materials provided by
   46  the board. The board shall approve the undertaking of
   47  investments subject to a trust agreement before execution of
   48  such trust agreement by the State Board of Administration. The
   49  funds and the earnings therefrom are exempt from the service
   50  charge imposed by s. 215.20. As used in this subsection, the
   51  term “state agency” has the same meaning as that provided in s.
   52  216.011, and the terms “governing body” and “unit of local
   53  government” have the same meaning as that provided in s.
   54  218.403.
   55         (3) Notwithstanding any law to the contrary, all
   56  investments made by the State Board of Administration pursuant
   57  to ss. 215.44-215.53 shall be subject to the restrictions and
   58  limitations contained in s. 215.47, except that investments made
   59  by the board under a trust agreement pursuant to subsection (1)
   60  are subject only to the restrictions and limitations contained
   61  in that trust agreement.
   62         Section 2. Section 215.444, Florida Statutes, is amended to
   63  read:
   64         215.444 Investment Advisory Council.—
   65         (1) There is created a six-member Investment Advisory
   66  Council to review the investments made by the staff of the Board
   67  of Administration and to make recommendations to the board
   68  regarding investment policy, strategy, and procedures. Beginning
   69  February 1, 2011, the membership of the council shall be
   70  expanded to nine members. Beginning July 1, 2011, council
   71  membership shall be reduced by not refilling council positions
   72  as the terms of the members expire until council membership
   73  consists of six members. The council shall meet with staff of
   74  the board at least once each quarter and shall provide a
   75  quarterly report directly to the Board of Trustees of the State
   76  Board of Administration at a meeting of the board.
   77         (2) The members of the council shall be appointed by the
   78  board as a resource to the Board of Trustees of the State Board
   79  of Administration and shall be subject to confirmation by the
   80  Senate. These individuals shall possess special knowledge,
   81  experience, and familiarity with portfolio management,
   82  institutional investments, and fiduciary responsibilities.
   83  Members shall be appointed for 4-year terms. A vacancy shall be
   84  filled for the remainder of the unexpired term. The council
   85  shall annually elect a chair and a vice chair from its
   86  membership. A member may not be elected to consecutive terms as
   87  chair or vice chair.
   88         (3) The council members must undergo regular fiduciary
   89  training as required by the board and must complete an annual
   90  conflict disclosure statement. In carrying out their duties,
   91  council members must make recommendations consistent with the
   92  fiduciary standards applicable to the board.
   93         (4) The council may create subcommittees as necessary to
   94  carry out its duties and responsibilities.
   95         Section 3. Subsections (1) and (2) of section 215.4755,
   96  Florida Statutes, are amended to read:
   97         215.4755 Certification and disclosure requirements for
   98  investment advisers and managers.—
   99         (1) An investment adviser or manager who has discretionary
  100  investment authority for direct holdings and who is retained as
  101  provided in s. 215.44(2)(b) 215.44(2)(c) shall agree pursuant to
  102  contract to annually certify in writing to the board that:
  103         (a) All investment decisions made on behalf of the trust
  104  funds and the board are made in the best interests of the trust
  105  funds and the board and not made in a manner to the advantage of
  106  such investment adviser or manager, other persons, or clients to
  107  the detriment of the trust funds and the board.
  108         (b) Appropriate policies, procedures, or other safeguards
  109  have been adopted and implemented to ensure that relationships
  110  with any affiliated persons or entities do not adversely
  111  influence the investment decisions made on behalf of the trust
  112  funds and the board.
  113         (c) A written code of ethics, conduct, or other set of
  114  standards, which governs the professional behavior and
  115  expectations of owners, general partners, directors or managers,
  116  officers, and employees of the investment adviser or manager,
  117  has been adopted and implemented and is effectively monitored
  118  and enforced. The investment advisers’ and managers’ code of
  119  ethics shall require that:
  120         1. Officers and employees involved in the investment
  121  process refrain from personal business activity that could
  122  conflict with the proper execution and management of the
  123  investment program over which the investment adviser or manager
  124  has discretionary investment authority or that could impair
  125  their ability to make impartial decisions with respect to such
  126  investment program; and
  127         2. Officers and employees refrain from undertaking personal
  128  investment transactions with the same employee at a broker
  129  dealer firm individual with whom business is conducted on behalf
  130  of the board.
  131         (d) The investment adviser or manager has proactively and
  132  promptly disclosed to the board, notwithstanding subsection (2),
  133  any known circumstances or situations that a prudent person
  134  could expect to create an actual or, potential, or perceived
  135  conflict of interest, including specifically:
  136         1. Any material interests in or with financial institutions
  137  with which officers and employees conduct business on behalf of
  138  the trust funds and the board; and
  139         2. Any personal financial or investment positions of the
  140  investment adviser or manager that could be related to the
  141  performance of an investment program over which the investment
  142  adviser or manager has discretionary investment authority on
  143  behalf of the board.
  144         (2) At the board’s request, an investment adviser or
  145  manager who has discretionary investment authority over direct
  146  holdings and who is retained as provided in s. 215.44(2)(b)
  147  215.44(2)(c) shall disclose in writing to the board:
  148         (a) Any nonconfidential, nonproprietary information or
  149  reports to substantiate the certifications required under
  150  subsection (1).
  151         (b) All direct or indirect pecuniary interests that the
  152  investment adviser or manager has in or with any party to a
  153  transaction with the board, if the transaction is related to any
  154  discretionary investment authority that the investment adviser
  155  or manager exercises on behalf of the board.
  156         Section 4. This act shall take effect July 1, 2011.