Monday, November 29, 2010

Keller Calls For More Investment Reforms

State Sen. Tim Keller, D-Albuquerque, who was one of the sponsors of bills to reform the troubled State Investment Council early this year, says the Legislature needs to "finish the job."

Thus he's proposing a new package of investment reforms, which is scheduled to be considered Wednesday by the Legislative Investment Oversight Committee.

Keller's top suggestion is removing the governor completely from the SIC. Last year Keller backed legislation that reduced the governor's influence on the board. But now that there's going to be a Republican governor I wonder how many GOP lawmakers will jump on this bandwagon.

Here's all of Keller's proposals from his news release this morning:

Remove Governor from the SIC: The number one recommendation made by the Ennis Knupp research, which was completed in 2010, was to remove the Governor as chair of the SIC. SB 18 in 2010 attempted this but was amended at late stages in the legislative process to keep the Governor on the board. This bill would remove that seat entirely, yet would acknowledge and ratify the executive branch responsibility via several executive appointed seats and representation from the Secretary of the Department of Finance and Administration. As previously mentioned, New Mexico is currently the only state in the country with a Governor personally residing on the state's investment fund board and directly responsible for investment decisions.

Investment Fraud Accountability: Appealing provisions that give the Attorney General investigative authority for securities fraud. Currently the authority rests within the executive branch (inside the licensing and regulations department) creating a structural conflict of interest. This bill also broadens the threshold for prosecution of fraud (N.Y. Gen. Bus. Law Art. 23-A (McKinney)), thus enabling the recovery of a percentage of the estimated $1.3 billion currently under litigation throughout the nation.

Educational Retirement Board (ERB) and Public Employees Retirement Association (PERA) Governance Reform: Enabling the implementation of several necessary governance and best practice changes from the 2009 Ennis Knupp study including: open meetings act, fiduciary duty, transparency and accountability measures. The bill would also address concerns regarding financial expertise by creating a new seat which would require the elected board member to posses a minimum of ten years of professional investing experience.

Economic Targeted Investment Oversight: Proposing the establishment of a formal structure and performance metrics for all the Economic Targeted Investments (ETI) (NM private equity, film fund, etc) to be managed separately by the SIC. Utilizing the current statutory Private Investment Advisory committee (PIAC) structure, the newly established board (SIC PIAC) would be specifically responsible for effective oversight regarding ETI funding as well as any merit based recommendations presented to the SIC. In addition, the bill would separate performance tracking in order to prevent the co-mingling of ETIs with “endowment” funding.

SBIC Governance Reform: The small business investment council (SBIC) is a subsidiary of the SIC that invests an estimated $45 million in New Mexico small businesses. This program has been successful in creating jobs and providing financing to small businesses around the state. However, there is a need to depoliticize the appointment of the SBIC board to ensure that investment principles are prioritized before politics. By incorporating appointees from the legislature the bill would diffuse any one person's potential influence over investment choices and would ensure altruistic decision making.