TREASURER'S 2016 INVESTMENT ADMIN. CHANGES.-AB

View NCGA Bill Details2015-2016 Session
House Bill 1137 (Public) Filed Thursday, May 19, 2016
AN ACT TO ENACT THE TREASURER'S 2016 INVESTMENT AND ADMINISTRATIVE CHANGES ACT.
Intro. by Ross, Lambeth, Adcock, Hamilton.

Status: Ch. SL 2016-55 (House Action) (Jun 30 2016)
H 1137/S.L. 2016-55

Bill Summaries:

  • Summary date: Jun 30 2016 - More information

    AN ACT TO ENACT THE TREASURER'S 2016 INVESTMENT AND ADMINISTRATIVE CHANGES ACT. Enacted June 30, 2016. Section 5 is effective June 30, 2016. The remainder is effective January 31, 2017, except as otherwise provided.


  • Summary date: May 31 2016 - More information

    House committee substitute makes the following changes to the 1st edition.

    Amends GS 147-69.2A, concerning the Special Fund created within the Escheats Fund, to correct a statutory reference replacing  GS 147-69.2(12)(c) with GS 147-69.2(b)(12)(c).

    Makes clarifying changes to Section 4.4, providing that Sections 4.1, 4.2, 4.3, and 4.4 all become effective July 1, 2016, applying to all reporting (previously, stated that Section 4 became effective July 1, 2016, applying to all reporting) periods beginning on or after that date. 


  • Summary date: May 19 2016 - More information

    Section 1.1

    Amends GS 147-66 to clarify that the mandated office hours of the Treasurer shall also not include Saturdays and periods of travel. Amends language to make it gender neutral.

    Section 1.2

    Amends GS 147-69.1(c) to make changes to the Treasurer’s authority to invest General Fund, Highway Fund, and Highway Trust Fund funds.  Amends subdivision (c)(2) to delete Federal Financing Bank, Federal Housing Administration, Farmers Home Administration, US Postal Service, Export Import Bank, and Student Loan Marketing Association bonds from the list of authorized investment options.  Amends subdivision (7) to require that prime quality commercial paper investments must be made with those that bear the highest rating of a nationally recognized rating service designated by the US Securities and Exchange Commission and not below the highest rating of any nationally recognized rating service.  Amends subdivisions (8), (9), and (10) making identical changes to those made in subdivision (7) for bills or exchange or time drafts drawn on and accepted by commercial banks, asset-backed securities, and corporate bonds and notes.

    Section 1.3

    Amends GS 147-69.2 to make changes to the Treasurer’s authority to invest funds held in various retirement systems and other special funds.   Amends subsection (a) to make technical changes to the names of various retirement systems and funds under the control of the Treasurer and to delete reference to obsolete funds.  Amends subsection (b) to require that investments in bonds and asset-backed securities must be made with those that bear the highest rating of a nationally recognized rating service designated by the US Securities and Exchange Commission; authorize investment of retirement system assets within or outside the United States excluding asset-backed financing in real property or timberland; add the Registers of Deeds’ Supplemental Pension to the list of retirement funds under the Treasurer’s investment authority; and limit retirement system investments in securities to no more than 65% of the market value of all invested assets of the retirement systems and investments through investment companies to no more than 8.5%, and investments in tangible and intangible real assets within and outside of the United States to no more than 7.5%. Allows fees assessed by the Treasurer to be used to defray fund administration costs and authorized expenditures. Establishes new subsection (e) setting out conditions for internally managed and third-party investment management arrangements as follows: (1) requiring that internally managed portfolios must be managed under industry standard portfolio guidelines; (2) setting out factors to be considered by the Treasurer when determining whether to manage funds internally or through third-party arrangements; (3) setting a minimum asset threshold of $100 million for any third-party arrangement; (4) identifying the categories of third-party investment management arrangements the Treasurer may enter into for management of state funds and retirement system assets; (5) requiring investment companies to provide annual audited financial statements; and (6) authorizing the Treasurer to enter into indemnification agreements for any investments.  Makes other technical and conforming changes.

    Section 1.4

    Amends GS 147-69.2A to clarify that this section relates to the Special Fund created within the Escheats Fund pursuant to GS 147-69.2(12)(c), and that the Treasurer’s fiduciary duties for this fund are set forth in GS 147-69.7.  Changes the requirement for conducting a valuation of the Escheats Fund to conducting a financial status assessment which includes current and projected legislative appropriations and authorized expenses.

    Section 1.5

    Makes technical changes to a deputy treasurer’s signature authority under GS 147-75.

    Section 1.6

    Makes technical changes to the Treasurer’s general authority to select a master trustee bank under GS 147-78.1.

    Section 2.1

    Amends GS 147-69.3(a) to authorize the Treasurer to invest retirement system funds and other state funds collectively or separately consistent with the Treasurer’s fiduciary duties under GS 147-69.7.  Deletes subsections (h) and (i) requiring various reports by the Treasurer to the Senate and House finance committees (reporting requirements are included in a new GS 147-69.9 established in Section 3 of the bill).

    Section 2.2

    Amends GS 147-69.7 expanding the Treasurer’s general fiduciary duties to include all special funds and investment programs enumerated in GS 147-69.2; requiring that the Treasurer exercise the care, skill, and caution of a prudent investor after considering the purposes, distribution requirements, and other circumstances relating to the funds; clarifying that the circumstances the Treasurer must consider in investing retirement system assets includes all other state pension funds and the purposes of those funds; limiting investment diversification to applicable restrictions; and restricting investment options to only those authorized by law.  Also establishes new subsection (e) providing that the Treasurer has no duty to assist or advise other units of government, agencies, institutions, or boards in those entities’ decisions relating to deposit, withdrawal, allocation, or other matters relating to an entity’s funds held on deposit with the Treasurer.

    Section 3

    Amends Article 6 of Chapter 147 to add new sections codifying certain Department of State Treasurer policies.  Establishes new GS 147-69.9 requiring the Treasurer to prepare a set of independently audited consolidated financial statements on investments of state funds and special funds (retirement and pension systems and other special funds) beginning with the 2015-16 fiscal year.  The financial statements must include a discussion of the investment programs’ risks and returns compared to benchmarks, total management fees and incentives paid, and comparison to peer cost benchmarks.  The Treasurer must provide both the financial statements and audit to the Joint Legislative Commission on Governmental Operations, the House and Senate appropriations committees, and the Fiscal Research Division within six months after the reporting period closes.

    Establishes new GS 147-69.10 requiring the Treasurer to submit an investment policy statement to the Investment Advisory Committee at least biennially.  The statement must include descriptions of investment strategies and objectives, permissible asset classes, allocation targets and ranges, risk management and compliance guidelines, and investment performance measurement criteria.  At least every four years the Treasurer, in consultation with the Investment Advisory Committee, is required to contract with an independent firm to evaluate governance, operations, and investment practices of the Treasurer’s office.  The firm’s report must be submitted to the Joint Legislative Commission on Governmental Operations, the House and Senate appropriations committees, and the Fiscal Research Division within 30 days of receipt.

    Establishes new GS 147-69.11 requiring the Treasurer, after consultation with the Investment Advisory Committee, to adopt a code of ethics for the Investment Management Division, provide training on their fiduciary obligations to all Department employees with investment-related duties, adopt policies governing gifts to Department employees with investment-related duties, place limits on external investment managers’ use of placement agents, and require an independent assessment of undue personal interest regarding potential investment arrangements.

    Section 4.1

    Amends Article 6 of Chapter 147 establishing a new GS 147-69.12 requiring detailed, quarterly reports on all investments for which the Treasurer is responsible.  The quarterly reports must include fees incurred by the State in managing retirement system funds and additional information if the fees increase beyond 3% of the market value of all invested assets; all investments made with certified green managers and companies; bank balances; assets, duration and rate of return on the Treasurer’s cash management programs; total assets, rate of return, and asset class allocation of retirement system investments; the financial condition, investments, revenues, fees, external investment managers, and location on the Treasurer’s website where information is publically available for all investment programs managed by the Treasurer; and similar information relating to all other investments with or on behalf of the State.  Also requires the Treasurer to report annually a detailed list of information on fees and performance of all externally and internally managed investments for all retirement systems.  The Treasurer must submit all reports to the Joint Legislative Commission on Governmental Operations, the House and Senate appropriations committees, House and Senate finance committees, Fiscal Research Division, Governor, Council of State, and Auditor and post them on the Treasurer’s website.  Requires the Treasurer to adopt rules to implement these reporting requirements by December 31, 2016.  Makes other technical and conforming changes.

    Recodifies GS 147-68(d) as GS 147-69.12(c). Makes conforming repeals of GS 147-69.1(e) and GS 147-68(d1), concerning quarterly reports by the Treasurer. 

    Effective July 1, 2016.

    Section 4.2

    Amends GS 147-69.8 allowing the Treasurer to combine or cross-reference the reports required under this section with those of the new GS 147-69.12.

    Effective July 1, 2016.

    Section 4.3

    Makes technical and conforming changes to GS 147-69.2A(b).

    Effective July 1, 2016.

    Section 5

    Unless otherwise indicated, effective January 31, 2017.


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