Monday, November 30, 2009

Senator wants to reshape state investment council

Sen. Tim Keller (D-ABQ)

On Monday, lawmakers on the Investment Oversight Committee will meet for the last time this before the start of next January’s 30-day session to consider three bills crafted by freshman Sen. Tim Keller (D-Albuquerque) that could dramatically reform the make up and structure of the New Mexico State Investment Council (SIC) and other state money funds, which have been heavily scrutinized after losing millions of dollars.

“These funds, the ERB [the New Mexico Education Retirement Board], PERA [Public Employees Retirement Association], and SIC collectively manage tens of billions of dollars in tax payer money and have been involved in federal investigations regarding third party marketers, pay to play, financial fraud and under performance issues,” Keller said. “My intention working on many of these bills is to address the glaring structural problems relating to oversight, accountability and expertise in fund operation.”

Keller spoke out after a recent Revenue Stabilization meeting in Albuquerque. He said his bills “are critical to restoring the investment community’s faith in our state, assuring them that we have reasonable controls and qualified governing bodies.”

“After a long difficult interim with respect to the problems and performance of our state investment funds, I’m pleased the Investment Oversight Committee will be considering several proposals to help address the lack of confidence in the governance of our state investment funds,” Sen. Tim Keller said. “These bills basically say that if we are going to invest billions of tax money in ‘alternative investments’ we have to have some expertise on board to oversee the transactions and third parties.”

State's investments put under the microscope

The state investment process is under scrutiny because of a third-party marketer scandal that started in New York and has spread to at least 30 other states, most notably New Mexico.

The first of Keller’s bills, which is similar to last years SB460, would add council seats appointed by lawmakers — not by Gov. Bill Richardson which chairs the council.

Keller also hopes to address structural concerns regarding alternative investments, reporting relationship inside the chief investment office (CIO), and the hiring and firing of 3rd parties responsibilities. Keller believes it is time for legislators to providing adequate oversight for CIO hirings and the appointment of advisory committee members now controlled by the governor.

Currently in New Mexico any fund that intends to invest more than 10% in an “alternative investment” are required to create an advisory committee that then reviews all the funds transactions.

“The idea here,” Keller said, “is to ensure that there is someone in the room with relevant asset class experience to provide oversight to the hiring of third parties and investments in alternative investments.”

Bills will give Attorney General more investigative power

He wants anyone appointed to a fund review committee to have at least 10 years experience in that particular asset class. Keller said his bill would dissolve a committee if an funds investment allocation drops below 5%.

Keller’s third bill will authorize the state attorney general’s office to investigate financial fraud and changes the definition of fraud to include financial related activities.

In June, Keller released a policy memo, comparative analysis chart and another analysis document related to his proposal.

He told us that the governor’s office has assured him that they also want to consider measure that will provide additional oversight on the state’s investments.

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