2013 -- H 6133

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LC02571

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO PUBLIC FINANCE - STATE INVESTMENT COMMISSION

     Introduced By: Representative Spencer E. Dickinson

     Date Introduced: May 16, 2013

     Referred To: House Finance

It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 35-10-1, 35-10-6 and 35-10-14 of the General Laws in Chapter 35-

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10 entitled "State Investment Commission" are hereby amended to read as follows:

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     35-10-1. Establishment -- Membership -- Officers -- Quorum -- Investment votes --

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Fund managers. -- (a) There is hereby authorized, created and established in the office of the

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general treasurer governor a state investment commission, the membership of which shall consist

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of the general treasurer governor, ex officio, or a deputy general treasurer as his or her designee,

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who shall act as chairperson, the director of administration, ex officio, or any assistant director of

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administration as his or her designee, who shall act as secretary, a director of the higher education

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assistance authority, or his or her designee to be appointed by the general treasurer governor, an

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active or retired teacher, state, or municipal employee member of the retirement system or official

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from the teacher teacher's union, state, or municipal employee unions to be appointed by the

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general treasurer governor for a term of three (3) years, an active or retired state employee

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member of the retirement system or official from the state employee unions to be appointed by

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the governor for a term of three (3) years, and active or retired municipal employee member of

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the retirement system or official from the municipal employee unions to be appointed by the

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governor for a term of three (3) years, the executive director of the state retirement board, who

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shall be a nonvoting member, two (2) members of the general public to be appointed by the

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general treasurer, one of whom shall serve for an initial term of one year, and one of whom shall

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serve for an initial term of two (2) years and until his or her successor is appointed and qualified

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and three (3) members of the general public to be appointed by the governor, one of whom shall

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serve for an initial term of three (3) years, one of whom shall serve for an initial term of two (2)

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years, and one of whom shall serve for an initial term of one year and until his or her successor is

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appointed and qualified. Thereafter, the general public members shall serve for three (3) year

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terms and until his or her successor is appointed and qualified. The members of the general public

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appointed by the governor and the general treasurer shall be qualified by training or experience in

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the field of investment or finance.

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      The commission may elect from among its own members such other officers as they

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deem necessary. All general treasurer and gubernatorial appointments made under this section

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after the effective date of this act [July 4, 2006] shall be subject to the advice and consent of the

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senate. No one shall be eligible for appointment unless he or she is a resident of this state.

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      Public members of the board shall be removable by the chair for cause only, and removal

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solely for partisan or personal reasons unrelated to capacity or fitness for the office shall be

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unlawful.

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      Newly appointed and qualified public members shall, within six (6) months of their

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appointment, attend a training course that shall be developed and provided by the office of the

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general treasurer and shall include instruction in the following areas: the provisions of chapters

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35-10, 42-46, 36-14 and 38-2 of the Rhode Island general laws; and the board's rules and

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regulations. The director of the department of administration shall, within ninety (90) days of the

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effective date of this act [July 4, 2006] prepare and disseminate training materials relating to the

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provisions of chapters 42-46, 36-14 and 38-2.

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      Any member of the general public who was appointed by the governor or general

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treasurer prior to the effective date of this act [July 4, 2006]shall continue to serve until such time

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as a successor is appointed and qualified.

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      (b) A member shall be eligible to succeed himself or herself. In the event of a vacancy in

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the office of an appointive member, the vacancy shall be filled by the appointing authority for the

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unexpired term.

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      (c) A majority of all the members of the commission shall be necessary to constitute a

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quorum thereof. The approval of a majority of the commission shall be required prior to the

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purchase or sale of any investment, excepting those investments made by investment managers

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engaged by the commission and invested in accordance with the commission's statement of

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investment objectives and policies, day to day cash investments by the general treasurer governor,

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and, because of the importance of speedy action, investments in obligations of the United States

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government or certificates of deposit maturing within one year. These investments may be made

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within the framework of a policy established by the commission without prior approval of each

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transaction. The commission shall be empowered to engage one or more fund managers and to

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delegate to the manager or managers the authority to carry out the investment of the funds within

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the commission's control, or any portion thereof, in accordance with the objectives of the

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commission as set forth in its statement of investment objectives and policies.

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      (d) The day-to-day administration of the commission, including the voting of proxies and

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the execution of investment acquisitions and dispositions of the commission's assets, shall be

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carried out by the office of the general treasurer governor; provided, that the costs and expenses

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incurred in the management of the funds within the commission's control shall remain the

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obligation of those funds and not that of the general treasurer.

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      (e) Within ninety (90) days after the end of each fiscal year during which the board has

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conducted business, the commission shall submit an annual report to the governor, the speaker of

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the house of representatives, the president of the senate, and the secretary of state of its activities

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during that fiscal year. The report shall provide: an operating statement summarizing meetings or

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hearings held, meeting minutes if requested, subjects addressed, decisions rendered, rules or

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regulations promulgated, studies conducted, policies and plans developed, approved, or modified,

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and programs administered or initiated; a consolidated financial statement of all the funds

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received and expended including the source of funds, a listing of any staff supported by these

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funds, and a summary of any clerical, administrative or technical support received; a summary of

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performance during the previous fiscal year including accomplishments, shortcomings and

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remedies; a synopsis of hearings, complaints, suspensions, or other legal matters related to the

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authority of the board; a summary of any training courses held pursuant to section 35-10-1; a

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briefing on anticipated activities in the upcoming fiscal year; and findings and recommendations

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for improvements. The report shall be posted electronically on the general assembly and the

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secretary of state's website as prescribed in section 42-20-8.2 of the Rhode Island general laws.

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The director of the department of administration shall be responsible for the enforcement of this

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provision.

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     35-10-6. Investment of funds not immediately required. -- (a) Except as otherwise

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provided in this chapter, any money not immediately required shall be invested for the benefit of

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the several funds in any security or investment in which deposits of savings banks and

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participation deposits in banks and trust companies may be legally invested; provided, that

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investments shall be made in securities as would be acquired by prudent persons of discretion and

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intelligence in these matters, who are seeking a reasonable income and the preservation of their

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capital.

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      (b) Notwithstanding subsection (a), the commission is authorized and empowered to

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execute the disposition and investment of the funds which are within its control in accordance

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with the prudent person standard as defined in this subsection. The commission shall adopt a

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statement of investment objectives and policies consistent with the prudent person standard.

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Management and professional expenses incurred by the commission in the furtherance of this

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section shall be paid from the funds in an amount required for these expenses. For purposes of

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this subsection, the prudent person standard shall be that standard of care employed solely in the

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interest of the participants and beneficiaries of the funds and:

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      (1) For the exclusive purpose of:

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      (i) Providing benefits to participants and their beneficiaries; and

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      (ii) Defraying reasonable expenses of administering the funds;

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      (2) With the care, skill, prudence, and diligence under the circumstances then prevailing

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that a prudent person acting in a like capacity and familiar with these matters would use in the

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conduct of an enterprise of a like character and with like aims; and

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      (3) By diversifying the investments of the fund so as to minimize the risk of large losses,

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unless under the circumstances it is clearly prudent not to do so.

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      (c) The state controller is authorized and directed to draw his or her orders upon the

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general treasurer governor for the purchase of investments, upon receipt by him or her of properly

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authenticated vouchers signed by the chairperson, or a deputy treasurer his or her designee in the

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event of the chairperson's absence or illness, and by the secretary of the commission. The

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proceeds from the sale of investments shall be paid to the general treasurer governor for the

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benefit of the several funds on the forms prescribed and duly signed by the chairperson and

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secretary of the commission.

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     35-10-14. Investment in corporations doing business in Northern Ireland. -- (a)

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Notwithstanding any general or special law or regulation to the contrary, the general treasurer,

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acting as the treasurer/custodian of the state employees' retirement system and the teachers'

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retirement system, and as the chairperson of the state investment commission, is authorized and

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directed to monitor, by reference to reports of the investor responsibility research center or such

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other sources as he or she may deem useful and appropriate, the extent to which corporations

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organized under the laws of the United States or the several states and operating in Northern

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Ireland, in which the assets of the retirement systems or of the pension reserves investment trust

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fund are invested, adhere to principals of nondiscrimination in employment and freedom of

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workplace opportunity. In conducting the survey, the general treasurer may utilize any

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information presently available relative to similar pension plans. In making this determination,

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the general treasurer shall consider, without limitation, the following standards for corporate

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activity:

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      (1) Equal access to employment, promotion, and job-preservation without regard to

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religious affiliation or other minority status;

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      (2) The promotion of religious tolerance within the workplace, and the eradication of any

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manifestations of religious and other illegal discrimination;

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      (3) Adherence to other legal and regulatory guidelines for nondiscrimination and

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equality of opportunity existing in Northern Ireland; and

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      (4) Adherence to the MacBride Principles for Northern Ireland, so-called.

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      (b) The general treasurer governor shall set forth the results of the investigation by filing

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a report with the clerks of the house of representatives and of the senate not later than December

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31 of each year. The report shall include, but not be limited to, the names and addresses of all

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United States corporations operating in Northern Ireland in which the assets of the retirement

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systems or trust fund are invested, and the findings of the general treasurer relative to these

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corporations' adherence to the standards for corporate activity as set forth in subsection (a). The

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general treasurer governor shall also report his or her recommendations, if any, consistent with

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prudent fiduciary practice, based upon the findings of the investigation. The report shall be

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available for public inspection in the offices of the clerks of the house of representatives and of

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the senate, and in the office of the general treasurer governor.

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      (c) The general treasurer governor, subject to the approval of the commission, shall,

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where necessary, appropriate, and consistent with prudent standards for fiduciary practice,

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support shareholder petitions or initiatives requiring corporate action in compliance with the

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standards for nondiscrimination set forth in this section.

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      (d) It is not the intent of this section to diminish the present portfolio and it is not the

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intent of this section to injure the fragile economy of Northern Ireland. The general treasurer

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governor, in accordance with sound investment criteria, is encouraged to make future pension

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fund investments in United States firms which conduct business in Northern Ireland and which

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abide by the MacBride Principles of fair employment. Should all or any of the United States firms

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in which Rhode Island state pension funds are invested refuse to comply with the MacBride

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Principles, the general treasurer governor, in accordance with sound investment criteria, does

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have the option and is encouraged to remove these funds and invest them in United States firms

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which conduct business in Northern Ireland and which abide by the MacBride Principles of fair

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employment.

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     SECTION 2. This act shall take effect upon passage.

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LC02571

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO PUBLIC FINANCE - STATE INVESTMENT COMMISSION

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     This act would transfer the state investment commission from the office of the general

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treasurer to the office of the governor, remove the general treasurer as a member of the

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commission, reduce the commission membership from twelve (12) to ten (10) members and

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transfer all duties of the general treasurer relating to investment of commission assets to the

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governor.

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     This act would take effect upon passage.

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LC02571

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