State investment standards.

WORKING DRAFT

ORIGINAL HOUSE

BILL

NO.
0063

ENROLLED ACT NO. 78, HOUSE OF REPRESENTATIVES

FIFTY-EIGHTH LEGISLATURE OF THE STATE OF WYOMING
2005 GENERAL SESSION

AN ACT relating to public funds; modifying requirements and standards for the investment of state funds; modifying requirements for managers of state funds; and providing for an effective date.

Be It Enacted by the Legislature of the State of Wyoming:

Section 1.
W.S. 4
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10
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911, 9
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4
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701(a)(intro), (v), (vi), (ix)(intro), (x)(intro) and by creating a new subsection (s), 9
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4
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708(a), (b) and by creating a new subsection (d), 9
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4
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709(b)(vii), (d)(iii) and by creating a new subsection (e), 9
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4
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711(a)(i), (iv), (b), (d)(intro) and 9
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4
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834(c) are amended to read:

4
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10
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911.

Application to public funds of the state of Wyoming.

This article
does not apply
applies
to public funds of the state of Wyoming unless
specific reference is made to this article
a different investment standard is specifically provided for the investment of specified public funds
.

9
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4
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701.

Permissible investments; treasurer's rules and regulations.

(a)

The state treasurer may invest permanent funds w
ith the approval of the state loan and investment board
in the following
:

(v)

And, with the approval of the state loan and investment board, the state treasurer may invest permanent funds
I
n farm loan mortgages in compliance with the laws of this state;

(vi)

Permanent funds may be invested
I
n other securities the legislature authorizes by law;

(ix)

The state treasurer may invest
I
n diversified mutual funds which invest in securities which the state treasurer could not own directly if:

(x)

The state treasurer may invest
I
n a commingled fund held through a trust company or trust department of a bank which holds securities which the state treasurer could not own directly if:

(s)

Except as otherwise provided in this article, when approving, acquiring, investing, reinvesting, exchanging, retaining, selling and managing securities and other property with funds of the state of Wyoming, the state loan and investment board, the state treasurer, a designee of the state treasurer or any other fiduciary appointed by the state treasurer shall exercise the judgment and care of a prudent investor as specified under the Uniform Prudent Investor Act, W.S. 4
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10
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901 to 4
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10
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913.

9
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4
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708.

Investment managers.

(a)

The state treasurer may contract with
registered
investment
advisors
managers
and pay for investment services and investment advice subject to the following conditions:

(i)

All fees and other costs of contracting for and using the services of
a registered
an
investment
advisor
manager
, except transaction costs and custodial fees, shall be paid
earnings
by state warrant and accounted for on at least a quarterly basis;

(ii)

No contract with
a registered
an
investment
advisor
manager
shall permit that
advisor
manager
to manage more than fifteen percent (15%) of the total portfolio of state funds available for investment at the time the contract is executed. No
registered
investment
advisor

manager
under contract with the state
loan and investment board
treasurer
shall be permitted to act as a securities broker with respect to transactions involving state investments,
or to receive any fee or other consideration with respect to any transaction by a broker on behalf of the state
unless the transaction can be made without incurring commission or market impact cost
;

(iii)

The amount of state funds under contract with
a registered
an
investment
advisor
manager
shall not exceed ten percent (10%) of the total assets managed by that investment
advisor
manager
;

(iv)

Registered
I
nvestment
advisors
managers
shall be selected based upon a competitive process and with consideration given to the historical performance of prospective
advisors
managers
. No
registered
investment
advisor
manager
shall be hired unless approved by a majority vote of the state loan and investment board. The contract with
a registered
an
investment
advisor
manager
may be terminated by a majority vote of the state loan and investment board;

(v)

Registered
I
nvestment
advisors
managers
shall be paid on a negotiated flat fee or performance basis based upon net assets invested;

(vi)

Contracts with
registered
investment
advisors
managers
shall be subject to cancellation upon receipt of thirty (30) days notice by either party;

(vii)

The state treasurer shall not contract with any person as
a registered
an
investment
advisor
manager
under this subsection unless that person
and
or
that person's firm
have
has
prior to the execution of the contract, a verifiable
Association of Investment Managers Research (AIMR)
CFA Institute (Chartered Financial Analyst Institute)
compliant track record of at least five (5) years with respect to the type of investments regarding which the
advisor
investment manager
will provide services or the
registered
investment
advisor
manager
is employed by an organized and chartered bank trust company with trust assets in excess of one billion dollars ($1,000,000,000.00). Any prospective
advisor
manager
shall submit to the state treasurer audited financial statements in accordance with the treasurer's rules and regulations and a certified record of the
advisor's
manager's
past investment performance prepared by an independent entity;

(viii)

Each
registered
investment
advisor

manager
shall at least quarterly provide a report to the state treasurer describing the
advisor's
manager's
performance relative to mutually agreed upon industry indices and reflecting all brokerage fees and other fees or expenses paid by or fees earned by the
advisor
manager
which are paid by the state under the contract.

(b)

With the approval of the state loan and investment board, the state treasurer may contract for services to select
an advisor
an investment manager
.

(d)

Investment managers retained for management of traditional assets shall be a registered investment advisor under the Investment Advisor's Act of 1940 as amended. Investment managers retained for management of alternative assets are not required to be a registered investment advisor under the Investment Advisor's Act of 1940 as amended.

9
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4
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709.

State investment policy; evaluation.

(b)

The investment policy statements shall include the following:

(vii)

Procedures for selecting and dismissing
registered
investment
advisors
managers
when utilized;

(d)

The state loan and investment board:

(iii)

Shall receive an appropriation directed to the office of state lands and investments to be used to compensate the
consultant
entity retained under paragraph (i) of this subsection
for its services.

(e)

The state treasurer shall obtain the approval of the state loan and investment board prior to the investment of funds in alternative assets, provided:

(i)

The approval of the state loan and investment board shall be complete upon the review and written acceptance of the material terms of the instruments governing the investment;

(ii)

Any material adverse change to the terms of instruments governing investments, previously approved by the state loan and investment board, at any time while the investments are held by the state of Wyoming shall require the renewal of approval of such investments by the board.

9
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4
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711.

Permissible investments of state funds.

(a)

Any funds of the state of Wyoming may be invested by the state treasurer, or his designee under W.S. 9
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4
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834(a), in any one (1) or more of the following securities:

(i)

Investments authorized by W.S. 9
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4
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831
;
, except for W.S. 9
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4
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831(a)(xxvi) regarding commercial paper which is subject to paragraph (iii) of this subsection;

(iv)

In addition to
A
ny other
security or
securities the legislature authorizes or has authorized by law,
or
any security
or investment
which has
otherwise
been approved by the state loan and investment board
. In approving securities for the investment and management of state funds, the board shall exercise the judgment and care that a prudent investor would, in light of the purposes, terms, distribution requirements and all other circumstances regarding state funds, including risk and return objectives established by the board which are reasonably suitable to the purpose of the investment and management of Wyoming state funds

pursuant to W.S. 9
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4
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709(e)
;

(b)

Trustee's investment and management decisions respecting
The provisions of W.S. 9
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4
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701(s) shall apply to investments made under this section subject to the following:

(i) Without limiting the foregoing,
individual
assets
investments or groups of investments made under this section
shall
not
be evaluated
not
in isolation but in the context of the
trust
entire investment
portfolio
as a whole
and as
a
part of an overall investment strategy
having risk and return objectives reasonably suited to
of
the trust
.

or fund from which the investment is derived, consistent with the policies for such trust or fund established under W.S. 9
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4
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709 by the state loan and investment board;

(ii)

Notwithstanding paragraph (i) of this subsection, the purchase of a security or the making of any direct investment by the state treasurer or his designee in a security shall not constitute a delegation of his duties under this article or under any rule promulgated under this article.

(d)

For purposes of approving additional
securities for investment
investments
under paragraph (a)(iv) of this section:

9
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834.

Investment of permanent funds.

(c)

The state treasurer may contract with
registered
investment
advisors
managers
as provided in W.S. 9
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4
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708.

Section 2.
W.S. 9
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4
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707(b), 9
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4
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708(c) and 9
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4
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711(c) are repealed.

Section 3.
This act is effective July 1, 2005.

(END)

Speaker of the House

President of the Senate

Governor

TIME APPROVED: _________

DATE APPROVED: _________

I hereby certify that this act originated in the House.

Chief Clerk

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