ENGROSSED
Senate Bill No. 563
(By Senator Craigo)
____________
[Originating in the Committee on Finance;
reported April 2, 1997.]
_____________
A BILL to repeal article six-b, chapter forty-four of the code of
West Virginia, one thousand nine hundred thirty-one, as
amended; to repeal sections nine-g and eighteen, article six,
chapter twelve of said code; to amend and reenact section one,
one-a, two, three, four, five, eight, nine-c, nine-e, twelve,
thirteen, fifteen, sixteen and nineteen of said article; and
to further amend said article by adding thereto four new
sections, designated sections six, nine, nine-a and eleven,
all relating to creating a new public body corporate called
the "West Virginia investment management board"; providing
that all functions and assets of the board of investments and
the West Virginia trust fund are transferred to the investment
management board; terminating the board of investments and the
West Virginia trust fund; providing for purposes and objects;
providing legislative findings; providing definitions; providing for appointments; providing that the governor,
treasurer and auditor are members of the board; providing for
filling of vacancies; providing for board meetings and notices
of meetings; providing for beneficiary representatives;
providing for management and control of funds; providing for
liability of trustees; providing for powers of the board;
providing for audits and reports; establishing investment
funds; providing for fees for services; providing for
continuation of existing trust; authorizing investments;
providing standards for investments; providing for loans for
industrial development; providing for standards of care in
investment management; providing for duties of the board;
providing for transfers of funds to the board; and providing
for loans by the board.
Be it enacted by the Legislature of West Virginia:
That article six-b, chapter forty-four of the code of West
Virginia, one thousand nine hundred thirty-one, as amended, be
repealed; that sections nine-g and eighteen, article six, chapter
twelve of said code be repealed; that sections one, one-a, two,
three, four, five, eight, nine-c, nine-e, twelve, thirteen,
fifteen, sixteen, and nineteen of said article be amended and
reenacted; and that said article be further amended by adding
thereto four new sections, designated sections six, nine, nine-a
and eleven, all to read as follows:
ARTICLE 6. WEST VIRGINIA INVESTMENT MANAGEMENT BOARD.
§12-6-1. Purposes and objects; how article cited.
This article, which may be cited as the "West Virginia
Investment Management Law Act" is enacted to modernize the
procedures for the investment of funds of the state and its
political subdivisions for the purpose of increasing the investment
return of such funds.
§12-6-1a. Legislative findings.
(a) The Legislature hereby finds and declares that all the
public employees covered by the public employees retirement system,
the teachers retirement system, the West Virginia state police
retirement system, the death, disability and retirement fund of the
division of public safety and the judges' retirement system should
benefit from a prudent and conscientious staff of financial
professionals dedicated to the administration, investment and
management of those employees' and employer's financial
contributions and that an independent board and staff should be
immune to changing political climates and should provide a stable
and continuous source of professional financial investment and
management.
(b) The Legislature finds and declares that teachers and other
public employees throughout the state are experiencing economic
difficulty and that in order to reduce this economic hardship on
these dedicated public employees, and to help foster sound financial practices, the West Virginia investment management board
of investments is given the authority to develop, implement and
maintain an efficient and modern system for the collection,
disbursement, investment and management of the state's money. The
Legislature further finds that in order to implement these sound
fiscal policies, the West Virginia investment management board of
investments shall operate as an independent board with its own
full-time staff of financial professionals immune to changing
political climates, in order to provide a stable and continuous
source of professional financial management.
(c) The Legislature hereby finds and declares further that
experience has demonstrated that prudent investment provides
diversification and beneficial return not only for public employees
but for all citizens of the state and that in order to have access
to this sound fiscal policy, public employee and employer
contributions are declared to be an irrevocable trust, available
for no use or purpose other than for the benefit of those public
employees.
(d) The Legislature hereby finds and declares further that the
workers' compensation funds and coal-workers' pneumoconiosis fund
are trust funds to be used exclusively for those workers, miners
and their beneficiaries who have sacrificed their health in the
performance of their jobs, and further finds that the assets
available to pay awarded benefits should be prudently invested so that awards may be paid.
(e) The Legislature hereby finds and declares further that a
an independent public body corporate with appropriate governance
shall be the best means of assuring prudent financial management of
these funds under rapidly changing market conditions and
regulations.
(f) The Legislature hereby finds and declares further that in
accomplishing this purpose, the West Virginia investment management
board, created and established by this article, is acting in all
respects for the benefit of the state's public employees and
ultimately the citizens of the state, and the West Virginia
investment management board is empowered by this article to act as
trustee for an irrevocable trust created by this article, and to
manage and invest other state funds.
(g) The Legislature hereby finds and declares further that the
standard of care and prudence applied to trustees, the conduct of
the affairs of the irrevocable trust created by this article and
the investment of other state funds is intended to be that applied
to the investment of funds as described in the "uniform prudent
investor act" codified as article six-c of this chapter.
(h) The Legislature further finds and declares that the West
Virginia supreme court of appeals declared the "West Virginia Trust
Fund Act" unconstitutional in its decision rendered on the twenty- eighth day of March, one thousand nine hundred ninety-seven, to the extent that it authorized investments in corporate stock but the
court also recognized that there were other permissible
constitutional purposes of the "West Virginia Trust Fund Act", and
that it is the role of the Legislature to determine those purposes
consistent with the court's decision and the constitution of West
Virginia.
(i) The Legislature hereby further finds and declares that it
is in the best interests of the state and its citizens to create a
new investment management board in order to: (1) Be in full
compliance with the provisions of the constitution of West
Virginia; and (2) protect all existing legal and equitable rights
of person who have entered into contractual relationships with the
West Virginia board of investments and the West Virginia trust
fund.
§12-6-2. Definitions.
As used in this article unless a different meaning clearly
appears from the context:
(1) "Beneficiaries" means those individuals entitled to
benefits from the consolidated pension plan;
(2) "Board" means the governing body for the West Virginia
investment management board, and any reference elsewhere in this
code to board of investments or West Virginia trust fund means the
board as defined herein;
(3) "Consolidated fund" means the investment fund managed by the board and established pursuant to subsection (a), section eight
of this article;
(4) "Consolidated pension plan" means the public employees
retirement system established in article ten, chapter five of this
code, the teachers retirement system established in article seven- a, chapter eighteen of this code, the West Virginia state police
retirement system established in article two-a, chapter fifteen of
this code, the death, disability and retirement fund of the
department of public safety established in article two, chapter
fifteen of this code, the judges' retirement system established in
article nine, chapter fifty-one of this code, the workers'
compensation fund established in article three, chapter twenty- three of this code, and the coal-workers' pneumoconiosis plan
established in article four-b, chapter twenty-three of this code;
(5) "Local government funds" means the moneys of a political
subdivision, including policemen's pension and relief funds,
firemen's pension and relief funds and volunteer fire departments,
transferred to the board for deposit;
(6) "Participant plan" means any component system, plan or
fund of the consolidated pension plan within the definition set
forth in subdivision (c) of this section;
(7) "Political subdivision" means and includes a county,
municipality or any agency, authority, board, county board of
education, commission or instrumentality of a county or municipality and regional councils created pursuant to the
provisions of section five, article twenty-five, chapter eight of
this code;
(8) "Trustee" means any member serving on the West Virginia
investment management board: Provided, That in section nine-a of
this article wherein the terms of the trust indenture are set
forth, "trustee" means the West Virginia investment management
board;
(9) "Securities" means all bonds, notes, debentures or other
evidences of indebtedness, and other lawful investment instruments;
and
(10) "State funds" means all moneys of the state which may be
lawfully invested except the "school fund" established by section
four, article XII of the state constitution.
(7) "West Virginia trust fund" means the entity created by the
provisions of article six-b, chapter forty-four of this code.
§12-6-3. West Virginia management investment board created; body
corporate; board created; trustees; nomination and
appointment of trustees, qualifications and terms of
appointment, advice and consent; annual and other
meetings; designation of representatives and
committees; board meetings with committees regarding
investment policy statement required; open meetings,
qualifications.
(a) There is hereby created the West Virginia investment management board. The board is created as a public body corporate
and established to provide prudent fiscal administration,
investment and management for the pension funds, workers'
compensation and coal workers pneumoconiosis funds and other state
funds.
(b) The board shall be governed by a board of trustees,
consisting of thirteen members:
(1) Nominations originally made to the West Virginia trust
fund board and the West Virginia board of investments shall remain
in effect and are hereby specifically reauthorized and said members
shall be members of the board who shall serve out the remainder of
their respective terms subject to the advice and consent of the
Senate: Provided, That appointments which have been confirmed by
the Senate are hereby specifically reauthorized without further
action of the Senate.
(2) Any appointment made by the governor subject to the advice
and consent of the Senate is effective immediately upon appointment
by the governor with respect to voting, constituting a quorum,
receiving compensation and expenses, and all other rights and
privileges of the trustee position. All appointees must have
experience in pension management, institutional management or
financial markets, and one trustee must be an attorney experienced
in finance and investment matters, and one trustee must be a
certified public accountant.
(3) The governor, the state auditor and the state treasurer or their designees shall serve as members of the board. They shall
serve by virtue of their office and are not entitled to
compensation under the provisions of this article. The governor,
the auditor and the treasurer or their designees shall be subject
to all duties, responsibilities and requirements of the provisions
of this article, including, but not limited to, the provisions of
subsections (e) and (f), section four of this article.
(c)At the end of each trustee's term, the governor may
reappoint or appoint a successor who shall serve for six-year
terms. No more than six of the ten appointed trustees may belong
to the same political party.
(d) In the event of a vacancy among the trustees, an
appointment shall be made by the governor to fill the unexpired
term.
(e) The governor may remove any trustee, other than trustees
who serve by virtue of their elective office, in case of gross
negligence or misfeasance and may declare that position vacant and
may appoint a person for the vacancy as provided in subsection (d)
of this section.
(f) Each trustee, other than those enumerated in subsection
(b), subdivision (3) of this section, shall be entitled to receive,
and, at the trustee's option, the board shall pay to the trustee,
compensation in the amount of five thousand dollars per year and
additional compensation in the amount of five hundred dollars per
meeting attended by the trustee in excess of the four quarterly meetings required by this section. In addition, all trustees shall
receive reasonable and necessary expenses actually incurred in
discharging trustee duties pursuant to this article.
(g) The board shall meet quarterly and may include in its
bylaws procedures for the calling and holding of additional
meetings. For any quarterly or additional meeting in which the
board shall review or modify its securities list or its investment
objectives pursuant to subsection (f), section twelve of this
article, the board shall give ten days notice in writing to the
designated representative of each participant plan selected
pursuant to subdivision one, subsection two of this section, and
the meeting shall be open to the members and beneficiaries of the
participant plans for that portion of the meeting in which the
board undertakes the review or modification.
(h) The board shall hold an annual meeting within forty-five
days after the issuance of the year-end financial report. The
annual meeting may also serve as a quarterly meeting. The annual
meeting shall be open to the public, and the board shall receive
oral and written comments from representatives, members and
beneficiaries of the participant plans and from other citizens of
the state. At the annual meeting, the board shall adopt a fee
schedule and a budget reflecting fee structures for the year.
(i) Pursuant to subsection (j) of this section, the board
shall meet with committees representing the participant plans to
discuss the board's drafting, reviewing or modifying the written investment policy of the trust with respect to that committee's
participant plan pursuant to section twelve of this article.
Representatives and committees shall be designated as follows:
(1) The West Virginia consolidated public retirement board
shall promulgate procedural rules by which each pension system
named in paragraphs one through five, subsection (c), section
nine-a of this article, shall designate an individual
representative of each said pension system, and the West Virginia
workers' compensation commission shall promulgate procedural rules
by which the pneumoconiosis fund and the workers' compensation fund
named in subdivisions six and seven, subsection (c), section nine-a
of this article, shall designate an individual representative of
each said fund.
(2) On or before the first day of June each year, the
consolidated public retirement board shall submit in writing to the
board the names of the five designated representatives, and the
workers' compensation commission shall so submit the names of the
two representatives.
(3) Each designated representative shall provide to the board
his or her current address, updated each year on or before the
first day of July, to which address the board shall provide notice
of meetings of the board pursuant to subsection (g) of this
section.
(4) Each designated representative shall submit in writing to
the board on or before the first day of July of each year, the names of no more than three persons comprising a committee
representing the beneficiaries of that representative's participant
plan.
(j) At its annual meeting, the board shall meet with each of
the seven committees, formed pursuant to subdivision (1),
subsection (i) of this section, for the purpose of receiving input
from the committees regarding the board's drafting, reviewing or
modifying its written investment policy statement for investment of
the consolidated pension plan funds. In developing the investment
policy statement, the trustees shall receive each committee's
stated objectives and policies regarding the risk tolerances and
return expectations of each participant plan, with attention to the
factors enumerated in subsection (g), section twelve of this
article, in order to provide for the continuing financial security
of the trust and its participant plans. The board may meet with
the said committees or any of them at its quarterly and additional
meetings for the same purpose.
(k) All meetings of the board shall be open to the
representatives of the participant plans as appointed pursuant to
subdivision (1), subsection (i) of this section. The
representatives shall be subject to any rules, bylaws, guidelines,
requirements and standards promulgated by the board. The
representatives shall observe standards of decorum established by
the board. The representatives shall be subject to the same code
of conduct applicable to the trustees and shall be subject to all board rules and bylaws. The representatives shall also be subject
to any requirements of confidentiality applicable to the trustees.
Each representative shall be liable for any act which he or she
undertakes which violates any rule, bylaw or statute governing
ethical standards, confidentiality or other standard of conduct
imposed upon the trustees or the representatives. Any meeting of
the board may be closed, upon adoption of a motion by any trustee,
when necessary to preserve the attorney-client privilege, to
protect the privacy interests of individuals, to review personnel
matters, or to maintain confidentiality when confidentiality is in
the best interest of the beneficiaries of the trust.
§12-6-4. Management and control of fund; officers; staff; fiduciary
or surety bonds for trustees; liability of trustees.
(a) The management and control of the board shall be vested
solely in the trustees in accordance with the provisions of this
article.
(b) The governor shall be the chairman of the board and the
trustees shall elect a vice-chairman who may not be a
constitutional officer or his or her designee to serve for a term
of two years. Effective with any vacancy in the vice-chairmanship,
the board shall elect a vice-chairman to a new two-year term. The
vice-chairman shall preside at all meetings in the absence of the
chairman. Annually, the trustees shall elect a secretary, who need
not be a member of the board, to keep a record of the proceedings
of the board.
(c) The trustees shall appoint a chief executive officer of
the board and shall fix his or her duties and compensation. The
chief executive officer shall have five years experience in
investment management with public or private funds within the ten
years next preceding the date of appointment. The chief executive
officer additionally shall have academic degrees, professional
designations and other investment management or investment
oversight or institutional investment experience in such
combination as the trustees consider necessary to carry out the
responsibilities of the chief executive officer position as defined
by the trustees.
(d) The trustees shall retain an internal auditor to report
directly to the trustees and shall fix his or her compensation.
The internal auditor shall be a certified public accountant with at
least three years experience as an auditor. The internal auditor
shall develop an internal audit plan, with board approval, for the
testing of procedures and the security of transactions.
(e) Each trustee shall give a separate fiduciary or surety
bond from a surety company qualified to do business within this
state in a penalty amount of one million dollars for the faithful
performance of his or her duties as a trustee of the fund. The
board shall purchase a blanket bond for the faithful performance of
its duties, in the amount of fifty million dollars or in an amount
equivalent to one percent of the assets under management, whichever
is greater. The amount of the blanket bond shall be in addition to the one million dollar individual bond required of each trustee by
the provisions of this section. The board may require a fiduciary
or surety bond from a surety company qualified to do business in
this state for any person who has charge of, or access to, any
securities, funds or other moneys held by the board, and the amount
of the fiduciary or surety bond shall be fixed by the board. The
premiums payable on all fiduciary or surety bonds shall be an
expense of the board.
(f) The trustees and employees of the board are not liable
personally, either jointly or severally, for any debt or obligation
created by the board: Provided, That the trustees and employees of
the board are liable for acts of misfeasance or gross negligence.
(g) The board shall be exempt from the provisions of sections
seven and eleven, article three, chapter twelve of this code and
article three, chapter five-a of said code: Provided, That the
trustees and employees of the board shall be subject to purchasing
policies and procedures which shall be promulgated by the board.
The purchasing policies and procedures may be promulgated as
emergency rules pursuant to section fifteen, article three, chapter
twenty-nine-a of this code.
(h) Any employee of the West Virginia trust fund who
previously was an employee of another state agency may return to
the public employees retirement system pursuant to section twenty- one, article ten, chapter five of this code, and may elect to
either: (1) Transfer to the public employee retirement system his or her employee contributions, with accrued interest, and, if
vested, his or her employer contributions, with accrued interest
and retain as credited state service all time served as an employee
of the West Virginia trust fund; or (2) retain all employee
contributions with accrued interest and, if vested, his or her
employer contributions with interest, and forfeit all service
credit for the time served as an employee of the West Virginia
trust fund.
§12-6-5. Powers of the board.
The board may exercise all powers necessary or appropriate to
carry out and effectuate its corporate purposes. The board may:
(1) Adopt and use a common seal and alter the same at
pleasure;
(2) Sue and be sued;
(3) Enter into contracts and execute and deliver instruments;
(4) Acquire (by purchase, gift or otherwise), hold, use and
dispose of real and personal property, deeds, mortgages and other
instruments;
(5) Promulgate and enforce bylaws and rules for the management
and conduct of its affairs;
(6) Notwithstanding any other provision of law, Retain retain
and employ legal, accounting, financial and investment advisors and
consultants;
(7) Acquire (by purchase, gift or otherwise), hold, exchange,
pledge, lend and sell or otherwise dispose of securities and invest funds in interest earning deposits; and in any other lawful
investments;
(8) Maintain accounts with banks, securities dealers and
financial institutions both within and outside this state;
(9) Engage in financial transactions whereby securities are
purchased by the board under an agreement providing for the resale
of the securities to the original seller at a stated price;
(10) Engage in financial transactions whereby securities held
by the board are sold under an agreement providing for the
repurchase of the securities by the board at a stated price;
(11) Consolidate and manage moneys, securities and other
assets of the other funds and accounts of the state and the moneys
of political subdivisions which may be made available to it under
the provisions of this article;
(12) Enter into agreements with political subdivisions of the
state whereby moneys of the political subdivisions are invested on
their behalf by the board;
(13) Charge and collect administrative fees from political
subdivisions for its services;
(14) Exercise all powers generally granted to and exercised by
the holders of investment securities with respect to management of
the investment securities;
(15) Contract with one or more banking institutions in or
outside the state for the custody, safekeeping and management of
securities held by the board;
(16) Make, and from time to time, amend and repeal bylaws,
regulations and procedures not inconsistent with the provisions of
this article;
(17) Hire its own employees, consultants, managers and
advisors as it considers necessary and fix their compensation and
prescribe their duties;
(18) Develop, implement and maintain its own banking accounts
and investments;
(19) Do all things necessary to implement and operate the
board and carry out the intent of this article; and
(16) (20) Develop and implement a centralized receipts
processing center.
§12-6-6. Annual audits; reports and information to constitutional
and legislative officers, council of finance and
administration, consolidated public retirement board, workers'
compensation fund and coal-workers' pneumoconiosis fund;
statements and reports open for inspection.
(a) The board shall cause an annual financial and compliance
audit of the consolidated pension fund to be made by a certified
public accounting firm having a minimum staff of ten certified
public accountants and being a member of the American institute of
certified public accountants, and, if doing business in West
Virginia, being a member of the West Virginia society of certified
public accountants. The financial and compliance audit shall be
made of the board's books, accounts and records, with respect to its receipts, disbursements, investments, contracts and all other
matters relating to its financial operations. Copies of the audit
report shall be furnished to the governor, state treasurer, state
auditor, president of the Senate, speaker of the House of
Delegates, council of finance and administration and consolidated
public retirement board.
(b) The board shall produce monthly financial statements for
the consolidated pension fund and cause them to be delivered to
each member of the board and the executive secretary of the
consolidated public retirement board as established in sections one
and two, article ten-d, chapter five of this code and to the
commissioner of the bureau of employment programs as administrator
of the workers' compensation fund and coal-workers' pneumoconiosis
fund, as established in section one, article one, chapter twenty- three of this code, and section one, article three of said chapter
and section seven, article four-b of said chapter.
(c) The board shall deliver in each quarter to the council of
finance and administration and the consolidated public retirement
board a report detailing the investment performance of the
retirement plans.
(d) The board shall cause an annual performance audit to be
made by a nationally recognized fiduciary service. The board shall
furnish copies of the audit report to the governor, state
treasurer, state auditor, president of the Senate, speaker of the
House of Delegates, council of finance and administration and consolidated public retirement board.
(e) The board shall provide any other information requested in
writing by the council of finance and administration.
(f) All statements and reports with respect to participant
plans required in this section shall be available for inspection by
the members and beneficiaries and designated representatives of the
participant plans.
§12-6-8. Investment funds established; management thereof.
(a) There is hereby established a special investment fund to
be managed by the board and designated as the "consolidated fund".
(b) Each board, commission, department, official or agency
charged with the administration of state funds is hereby authorized
to make moneys available to the board for investment.
(c) Each political subdivision of this state through its
treasurer or equivalent financial officer is hereby authorized to
enter into agreements with the board for the investment of moneys
of the political subdivision. Any political subdivision may enter
into an agreement with any state agency from which it receives
funds to allow the funds to be transferred to their investment
account with the state board of investments.
(d) Moneys held in the various funds and accounts administered
by the board shall be invested as permitted in section twelve of
this article and subject to the restrictions contained in said
section. The board shall maintain records of the deposits and
withdrawals of each participant and the performance of the various funds and accounts. The board shall also establish such rules and
regulations for the administration of the various funds and
accounts established by this section as it considers necessary for
the administration of the funds and accounts, including, but not
limited to: (1) The specification of minimum amounts which may be
deposited in any fund or account and minimum periods of time for
which deposits will be retained; and (2) creation of reserves for
losses: Provided, That in the event any moneys made available to
the board may not lawfully be combined for investment or deposited
in the consolidated funds established by this section, the board
may create special accounts and may administer and invest those
moneys in accordance with the restrictions specially applicable to
those moneys.
§12-6-9. Fees for service.
The board shall charge fees, as adopted at the annual meeting,
for the reasonable and necessary expenses incurred by the trust
fund in rendering services to the participant plans. The fees
shall be subtracted from the total return of the board, and the net
return shall be credited to each of the participant plans. All
fees which are dedicated or identified or readily identifiable to
an individual participant plan shall be charged against that plan,
and all other fees shall be charged as a percentage of assets under
management. At its annual meeting, the board shall adopt a fee
schedule and a budget reflecting fee structures.
§12-6-9a. Trust indenture.
On the effective date of this section, all assets of the
irrevocable trust entered into by the governor on the first day of
July, one thousand nine hundred ninety-six, with the West Virginia
trust fund, inc. acting as the trustee shall constitute the corpus
of an irrevocable trust with the board as its trustee: Provided,
That the trust shall continue to be subject to the following
provisions:
(a) The Legislature hereby reserves the following rights and
powers:
(1) The right by supplemental agreement to amend, modify or
alter the terms of this trust without consent of the trustee, or
any beneficiary; and
(2) The right to request and receive additional information
from the trustee at any time.
(b) The trustee shall establish a trust for the participant
plans specified by this article with the earnings and losses
accounted for and charged individually to each participant plan,
including, but not limited to, the following:
(1) The public employees retirement system;
(2) The teachers retirement system;
(3) The West Virginia state police retirement system;
(4) The death, disability and retirement fund of the
department of public safety;
(5) The judges' retirement system;
(6) The pneumoconiosis fund; and
(7) The workers' compensation fund.
(c) In the administration of the trust created by the trust
indenture, the trustee has the following powers:
(1) To purchase, retain, hold, transfer and exchange, and to
sell, at public or private sale, the whole or any part of the trust
estate upon such terms and conditions as it considers advisable;
(2) To invest and reinvest the trust estate or any part
thereof, in any kind of property, real or personal, including, but
not limited to, mortgage or mortgage participations, common stocks,
preferred stocks, common trust funds, bonds, notes or other
securities, notwithstanding the provisions of articles five and
six, chapter forty-four of this code: Provided, That
notwithstanding the provisions of this act to the contrary, the
board shall not become a stockholder or owner of any company or
association for any purpose whatsoever unless and until the
provisions of section six, article X, of the constitution of West
Virginia are amended to permit those investments;
(3) To carry the securities and other property held under the
trust indenture either in the name of the trustee or in the name of
its nominee;
(4) To vote, in person or by proxy, all securities held under
the trust indenture, to join in or to dissent from and oppose the
reorganization, recapitalization, consolidation, merger,
liquidation or sale of corporations or property; to exchange
securities for other securities issued in connection with or resulting from any transaction; to pay any assessment or expense
which the trustee considers advisable for the protection of its
interest as holder of any such securities; to deposit securities in
any voting trust or with any protective or like committee, or with
a trustee depository; to exercise any option appurtenant to any
securities for the conversion of any securities into other
securities; and to exercise or sell any rights issued upon or with
respect to the securities of any corporation, all upon terms the
trustee considers advisable;
(5) To prosecute, defend, compromise, arbitrate or otherwise
adjust or settle claims in favor of or against the trustee or other
trust estate;
(6) To employ and pay from the trust estate legal and
investment counsel, brokers and such other assistants and agents as
the trustee considers advisable; and
(7) To develop, implement and modify an asset allocation plan
for each participant plan. The asset allocation plans shall be
implemented within the management and investment of the trust fund.
(d) All trust income shall be free from anticipation,
alienation, assignment or pledge by, and free from attachment,
execution, appropriation or control by or on behalf of, any and all
creditors of any beneficiary by any proceeding at law, in equity,
in bankruptcy or insolvency.
(e) The trustee may receive any other property, real or
personal, tangible or intangible, of any kind whatsoever, that may be granted, conveyed, assigned, transferred, devised, bequeathed or
made payable to it by the state, or by any other person or entity,
for the purposes of the trust created by the trust indenture, and
all such properties shall be held, managed, invested and
administered by the trustee as provided in the trust indenture and
in the "West Virginia Investment Management Act".
(f) The trustee shall promptly cause to be paid to the state
the amounts certified by the governor as necessary for the monthly
payment of benefits to the beneficiaries of the trust.
(g) The trustee shall render an annual accounting to the
governor not more than one hundred twenty days following the close
of the fiscal year of the trust.
(h) The trust will not be invalid by reason of any existing
law or rule against perpetuities or against accumulations or
against restraints upon the power of alienation, but the trust may
continue for such time as necessary to accomplish the purposes for
which it is established.
(i) If any provision of the trust indenture is void, invalid
or unenforceable, the remaining provisions are nevertheless valid
and shall be carried into effect.
§12-6-9c. Authorization of additional investments.
Notwithstanding the restrictions which may otherwise be
provided by law with respect to the investment of funds, the state
board of investments, all administrators, custodians or trustees of
pension funds, each political subdivision of this state and each county board of education is authorized to invest funds in the
securities of or any other interest in any investment company or
investment trust registered under the Investment Company Act of
1940, 15 U.S.C. §80a, the portfolio of which is limited: (i) To
obligations issued by or guaranteed as to the payment of both
principal and interest by the United States of America or its
agencies or instrumentalities; and (ii) to repurchase agreements
fully collateralized by obligations of the United States government
or its agencies or instrumentalities: Provided, That the
investment company or investment trust takes delivery of the
collateral either directly or through an authorized custodian:
Provided, however, That the investment company or investment trust
is rated within one of the top two rating categories of any
nationally recognized rating service such as Moody's or Standard
and Poor's.
§12-6-9e. Legislative findings; loans for industrial development;
availability of funds and interest rates.
(a) The Legislature hereby finds and declares that the
citizens of the state benefit from the creation of jobs and
businesses within the state; that an industrial development loan
program will provide for economic growth and stimulation within the
state; and that loans from pools established in the consolidated
fund will assist in providing the needed capital to assist
industrial development. This section is enacted in view of these
findings.
(b) The board of investments may make available, on a
revolving basis, up to fifteen million dollars from the
consolidated fund to loan the West Virginia economic development
authority for industrial development projects authorized by section
seven, article fifteen, chapter thirty-one of this code: Provided,
That the West Virginia economic development authority may not loan
more than two million dollars for any one industrial development
project. The loans shall be secured by notes, security interests
or bonds issued by the West Virginia economic development authority
evidencing the indebtedness of the economic development authority
to the board.
The notes, security interests or bonds issued by the economic
development authority shall be secured by security equal to or
better than one of the three highest rating grades by an agency
which is nationally known in the field of rating corporate
securities or by a letter of credit guarantee issued by a bank
having an unsecured legal lending limit greater than two million
dollars.
(c) The interest rates and maturity dates on the loans to the
West Virginia economic development authority shall be at
competitive rates and maturities as determined by the board. The
board shall determine the financial condition of pools within the
consolidated fund and shall determine if there is sufficient
liquidity within the pools to make the loans specified in this
section.
§12-6-11. Standard of care.
Any investments made under this article shall be made in
accordance with the provisions of the "Uniform Prudent Investor
Act" codified as article six-c of this chapter and shall be further
subject to the following requirements:
(a) Trustees shall discharge their duties with respect to the
consolidated pension plan for the exclusive purpose of providing
benefits to participants and their beneficiaries;
(b) Trustees shall diversify fund investment so as to minimize
the risk of large losses unless, under the circumstances, it is
clearly prudent not to do so;
(c) Trustees shall defray reasonable expenses of investing and
operating the fund; and
(d) Trustees shall discharge their duties in accordance with
the documents and instruments governing the funds under management
insofar as such documents and instruments are consistent with the
provisions of this article.
§12-6-12. Limitations on investments.
The board shall establish policy guidelines for the investment
of moneys on deposit in each of the funds managed by the board
based on the needs of the participants in the various funds. The
board shall review the investments at least every three months and
may require the purchase or sale of any investments. In order to
effectuate its investment policies, the board shall require from
each participant a schedule, on an annual or more frequent basis, of anticipated deposits and withdrawals.
Any investments made under this article shall be made with the
care, skill, prudence and diligence under the circumstances then
prevailing that a prudent person acting in a like capacity and
familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims. Fiduciaries
shall diversify plan investments so as to minimize the risk of
large losses, unless under the circumstances it is clearly prudent
not to do so.
(a) The board shall not become a stockholder or owner of any
company or association for any purpose whatsoever unless and until
the provisions of section six, article X of the constitution of
West Virginia are amended to provide for those investments. If at
some time, after the effective date of this section, the provisions
of section six, article X of the constitution of West Virginia are
amended to allow the state to become a stockholder in a
corporation, the board shall limit its asset allocation and types
of securities to the following:
(1) For the first twelve months following authorization of the
state to become a stockholder or owner of any corporation, the
board shall hold in equity investments no more than twenty percent
of its total portfolio and no more than twenty percent of the
assets of any individual participant plan; during the thirteenth
through and including the twenty-fourth month following the
authorization, the board shall hold in equity investments no more than forty percent of its total portfolio and no more than forty
percent of the assets of any individual participant plan; and
thereafter, the board shall hold in equity investments no more than
sixty percent of its total portfolio and no more than sixty percent
of the assets of any individual participant plan.
(2) The board shall hold in international securities no more
than twenty percent of its portfolio and no more than twenty
percent of the assets of any individual participant plan.
(3) The board may not at the time of purchase hold more than
five percent of its equity portfolio 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.
(b) 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 its
portfolio 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 its portfolio in corporate debt. Any corporate debt
security at the time of its acquisition shall be rated in one of
the four highest rating categories by a nationally recognized rating agency.
(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 must give notice of
that action pursuant to subsection (g), section three of this
article, and must review the list at its annual meeting.
(c) 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.
§12-6-13. Board as sole agency for investments; exceptions.
All duties vested by law in any agency, commission, official
or other board of the state relating to the investment of moneys,
and the acquisition, sale, exchange or disposal of securities or any other investment are hereby transferred to the board:
Provided, That the West Virginia trust fund, is the sole entity for
the investment of the consolidated pension plan funds in accordance
with article six-b, chapter forty-four of this code: Provided,
however, That neither this section nor any other section of this
article applies to the "board of the school fund" and the "school
fund" established by section 4, article XII of the state
constitution: Provided further however, That funds under the
control of the municipal bond commission may, in the discretion of
the commission, be made available to the board for investment to be
invested by the commission as provided in article three, chapter
thirteen of this code.
§12-6-15. Consolidated fund audits.
The board shall cause to be conducted an annual external audit
of all investment transactions of the consolidated fund, by a
nationally recognized accounting firm in conjunction with the
annual federal audit and the annual audit of the consolidated
pension fund:, of all investment transactions of the board:
Provided, That the board shall on a monthly basis provide to each
state agency and any other entity investing moneys in the
consolidated fund an itemized statement of the agency's or the
entity's account in the consolidated fund. The statement shall
include the beginning balance, contributions, withdrawals, income
distributed, change in value and ending balance.
§12-6-16. Existing investments.
The board shall not be required to dispose of any be vested
with ownership of all securities or other investments lawfully held
by it the board of investments or the West Virginia trust fund as
of the effective date of this article.
§12-6-19. Authorization for loans by the board.
(a) The state board of investments, upon request of the state
building commission, shall transfer moneys as a loan to the state
building commission in an amount not to exceed in the aggregate
twenty-one million dollars for the purposes of financing or
refinancing the projects specified in subsections (b) and (d),
section eight, article six, chapter five of this code. The money
borrowed shall bear interest during the term of the loan at a fixed
rate not to exceed the interest rate on treasury notes, bills or
bonds of the same term as the term of the loan the week of closing
on the loan as reported by the treasury of the United States.
Loans made under this subsection shall be repaid in regular monthly
or semiannual payments and shall be paid in full not later than
twenty-five years from the date the loans are made with terms and
conditions mutually agreed upon by the state building commission
and the state board of investments.
(b) The state board of investments shall upon request of the
state building commission transfer moneys as a loan to the state
building commission in an amount not to exceed in the aggregate
eighty million dollars for the purposes of financing construction
of regional jails, correctional facilities, or building extensions or improvements to regional jails and correctional facilities.
Prior to the expenditure of any loan proceeds, the regional jail
and correctional facility authority shall certify a list of
projects to the state building commission and the joint committee
on government and finance that are to be funded from loan proceeds.
This certified list cannot thereafter be altered or amended other
than by legislative enactment. Upon receipt of the certified list
of projects, the state building commission shall transfer the loan
proceeds to the regional jail and correctional facility authority.
The money borrowed shall bear interest during the term of the loan
at a fixed rate not to exceed the interest rate on treasury notes,
bills or bonds of the same term as the term of the loan the week of
closing on the loan as reported by the treasury of the United
States.
(c) Loans made under this section for the projects specified
in subsection (b) of this section and in subsection (d), section
eight, article six, chapter five of this code, shall be repaid in
annual payments of not less than twelve million dollars per year by
appropriation of the Legislature to the board of investments. The
amount transferred for loans under subsection (a) or (b) of this
section shall not exceed that amount which the board of investments
determines is reasonable given the cash flow needs of the
consolidated fund. The board shall make transfers for loans first
for the project specified in subsection (d), section eight, article
six, chapter five of this code, second for the projects specified in subsection (b) of this section and third for projects specified
in subsection (b), section eight, article six, chapter five of this
code, which are in imminent danger of default in payment. The
board shall take the steps necessary to increase the liquidity of
the consolidated fund over a period of the next five years to allow
for the loans provided in this section without increasing the risk
of loss in the consolidated fund.