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A03442
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
1964
Session of
2019
INTRODUCED BY B. MILLER, RYAN, GREINER, GROVE, SCHEMEL, TOBASH,
HICKERNELL, OWLETT, IRVIN, BERNSTINE, DUSH, KAUFFMAN, MOUL,
FEE, MILLARD, GILLEN, KEEFER, COX, ZIMMERMAN, MENTZER,
NELSON, GLEIM, LAWRENCE, ROAE, DIAMOND, BENNINGHOFF, RADER,
WENTLING, COOK, GREGORY, SCHMITT, WHEELAND, EMRICK, KLUNK,
ECKER, METCALFE, FRITZ, SOLOMON, SCHLEGEL CULVER, O'NEAL,
SAYLOR, HERSHEY, ROTHMAN, FREEMAN, RAPP, STAATS, LEWIS,
SANCHEZ, TOPPER, EVERETT, GAYDOS, DUNBAR, MALONEY, KORTZ,
DAY, REESE, JAMES, GABLER, JONES, CALTAGIRONE, MACKENZIE,
DOWLING, KAUFER AND WARNER, OCTOBER 18, 2019
AS REPORTED FROM COMMITTEE ON STATE GOVERNMENT, HOUSE OF
REPRESENTATIVES, AS AMENDED, OCTOBER 22, 2019
AN ACT
Amending Titles 24 (Education) and 71 (State Government) of the
Pennsylvania Consolidated Statutes, in administration and
miscellaneous provisions, further providing for
administrative duties of the Public School Employees'
Retirement Board; and, in administration, funds, accounts and
general provisions, further providing for administrative
duties of the State Employees' Retirement Board.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 8502(e)(1), (2), (3), (4) and (5) of
Title 24 of the Pennsylvania Consolidated Statutes are amended
and the section is amended by adding a subsection to read:
§ 8502. Administrative duties of board.
* * *
(e) Records.--
(1) The board shall [keep a] livestream its board
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meetings and post an unedited video and written record of all
its proceedings which shall be accessible [to the public] on
its publicly accessible Internet website, including materials
presented to the board, except as otherwise provided in this
part or by other law. Video, written records and materials
shall remain online for a period of seven years.
(2) Any record, material or data received, prepared,
used or retained by the board or its employees, investment
professionals or agents relating to an investment, to the
extent not otherwise excluded from access, shall [not]
constitute a public record subject to public access under the
act of February 14, 2008 (P.L.6, No.3), known as the Right-
to-Know Law, [if] unless, in the reasonable judgment and
majority vote of the board, [the] it is found that access
would:
[(i) in the case of an alternative investment or
alternative investment vehicle involve the release of
sensitive investment or financial information relating to
the alternative investment or alternative investment
vehicle which the fund or trust was able to obtain only
upon agreeing to maintain its confidentiality;]
(ii) cause substantial competitive harm to the
person from whom sensitive investment or financial
information relating to the investment was received; or
(iii) have a substantial detrimental impact on the
value of an investment to be acquired, held or disposed
of by the fund or trust, or would cause a breach of the
standard of care or fiduciary duty set forth in this
part.
(3) The following apply:
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[(i) The sensitive investment or financial
information excluded from access under paragraph (2)(i),
to the extent not otherwise excluded from access, shall
constitute a public record subject to public access under
the Right-to-Know Law once the board is no longer
required by its agreement to maintain confidentiality.]
(ii) The sensitive investment or financial
information excluded from access under paragraph (2)(ii),
to the extent not otherwise excluded from access, shall
constitute a public record subject to public access under
the Right-to-Know Law once:
(A) the access no longer causes substantial
competitive harm to the person from whom the
information was received; or
(B) the entity in which the investment was made
is liquidated;
whichever is later.
(iii) The sensitive investment or financial
information excluded from access under paragraph (2)
(iii), to the extent not otherwise excluded from access,
shall constitute a public record subject to public access
under the Right-to-Know Law once:
(A) the access no longer has a substantial
detrimental impact on the value of an investment of
the fund or trust and would not cause a breach of the
standard of care or fiduciary duty set forth in this
part; or
(B) the entity in which the investment was made
is liquidated;
whichever is later.
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(4) [Except for the provisions of paragraph (3), nothing
in this subsection shall be construed to designate any
record, material or data received, prepared, used or retained
by the board or its employees, investment professionals or
agents relating to an investment as a public record subject
to public access under the Right-to-Know Law.] The board
shall be prohibited from entering into any investment
management contract or agreement that contains any term or
provision that is contrary to this section.
(5) Notwithstanding the provisions of this subsection,
the following information regarding an alternative investment
vehicle shall [be subject to public access] CONSTITUTE A
PUBLIC RECORD under the Right-to-Know Law:
(i) The name, address and vintage year of the
alternative investment vehicle.
(ii) The identity of the manager of the alternative
investment vehicle.
(iii) The dollar amount of the commitment made by
the system or plan to the alternative investment vehicle.
(iv) The dollar amount of cash contributions made by
the system or plan to the alternative investment vehicle
since inception.
(v) The dollar amount of cash distributions received
by the system or plan from the alternative investment
vehicle since inception.
(vi) The gross and net internal rate of return of
the alternative investment vehicle since inception,
provided that the system or plan shall not be required to
disclose the gross or net internal rate of return under
circumstances in which, because of the limited number of
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portfolio assets remaining in the alternative investment
vehicle, the disclosure could reveal the values of
specifically identifiable remaining portfolio assets to
the detriment of the alternative investment.
(vii) The aggregate value of the remaining portfolio
assets attributable to the system's or plan's investment
in the alternative investment vehicle, provided that the
system or plan shall not be required to disclose the
value under circumstances in which, because of the
limited number of portfolio assets remaining in the
alternative investment vehicle, the disclosure could
reveal the values of specifically identifiable remaining
portfolio assets to the detriment of the alternative
investment.
(viii) The dollar [amount] amounts of total
management fees [and], costs and expenses paid to or
retained from the alternative investment vehicle by the
system or plan on an annual fiscal year-end basis[.],
itemized by gross management, carried interest and other
expenses.
(ix) Unredacted marketing materials, including,
without limitation, proposed fee terms, prospectuses,
staff and consultant investment memorandum, subscription
agreements, investment management agreements, contracts,
side letters and annual investor reports of the
alternative investment vehicle.
* * *
(s) Additional reporting requirements.--The following shall
apply:
(1) In addition to the requirements set forth in this
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section, the board shall prepare and have published on its
publicly accessible Internet website, and electronically
submit copies to all members of the General Assembly, the
following information within six months after the end of the
system's fiscal year:
(i) The net of fees performance of all investments
over the most recent 1-, 3-, 5-, 7-, 10-, 15- and 20-year
periods.
(ii) The performance of all investments by asset
class and manager over each time horizon, both gross and
net of fees compared to benchmarks being reported for all
investments made commencing prospectively from the
effective date of this subsection and with the gross
returns for all investments made retroactively for the
five-year period from the effective date of this
subsection using best efforts, unless the records are no
longer available.
(iii) An itemized listing of the fees and expenses
paid to or retained by all investment managers for the
applicable reporting years, separated by base management
fee and profit share, including performance fees, carried
interest and incentive fees, including the net asset
value, and informed by the best practices as recommended
by recognized industry standards, including, but not
limited to, the Institutional Limited Partners
Association Fee Transparency Initiative. The board shall
disclose in the report which industry standards were used
and whether any changes to industry standards have been
made.
(iv) All travel or other expenses incurred by staff
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and paid for by an external investment manager, fund or
consultant.
(v) Internal control representations relative to
significant deficiencies or material weaknesses in the
systems of internal control, including the number of
significant deficiencies or material weaknesses and the
significant deficiencies or material weaknesses that have
continued from one reporting period to the next or that
have been recurring in nature for the past three
reporting periods made by:
(A) auditors hired by the board and referenced
in the board's financial statements filed in
accordance with subsection (n); and
(B) an independent certified public accounting
firm specified in subsection (o).
(2) As used in this subsection, the following words and
phrases shall have the meanings given to them in this
paragraph unless the context clearly indicates otherwise:
"Carried interest." Any share of profits from an
alternative investment vehicle that is distributed to a fund
manager, general partner or related party, including
allocations of alternative investment vehicle profits
received by a fund manager in consideration of having waived
fees that the fund manager might otherwise have been entitled
to receive.
"Institutional Limited Partners Association Fee
Transparency Initiative." An initiative created by the
Institutional Limited Partners Association to establish
guidelines for reporting fees, expenses and compliance
disclosures regarding investments.
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Section 2. Section 5902(e)(1), (2), (3), (4) and (5) AND (4)
of Title 71 are amended, subsection (e) is amended by adding a
paragraph and the section is amended by adding a subsection to
read:
§ 5902. Administrative duties of the board.
* * *
(e) Records.--
(1) [The board shall keep a record of all its
proceedings which shall be open to access by the public,
except as otherwise provided in this part or by other law.]
The board shall livestream its board meetings and post an
unedited video and written record of all its proceedings,
which shall be accessible on its publicly accessible Internet
website, including materials presented to the board, except
as otherwise provided in this part or by other law. Video,
written records and materials shall remain online for a
period of seven years.
(2) Any record, material or data received, prepared,
used or retained by the board or its employees, investment
professionals or agents relating to an investment, to the
extent not otherwise excluded from access, shall [not]
constitute a public record subject to public access under the
act of February 14, 2008 (P.L.6, No.3), known as the Right-
to-Know Law, [if] unless, in the reasonable judgment and
majority vote of the board, [the] it is found that access
would:
[(i) in the case of an alternative investment or
alternative investment vehicle, involve the release of
sensitive investment or financial information relating to
the alternative investment or alternative investment
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vehicle which the fund or trust was able to obtain only
upon agreeing to maintain its confidentiality;]
(ii) cause substantial competitive harm to the
person from whom sensitive investment or financial
information relating to the investment was received; or
(iii) have a substantial detrimental impact on the
value of an investment to be acquired, held or disposed
of by the fund or trust or would cause a breach of the
standard of care or fiduciary duty set forth in this
part.
(3) The following apply:
[(i) The sensitive investment or financial
information excluded from access under paragraph (2)(i),
to the extent not otherwise excluded from access, shall
constitute a public record subject to public access under
the Right-to-Know Law once the board is no longer
required by its agreement to maintain confidentiality.]
(ii) The sensitive investment or financial
information excluded from access under paragraph (2)(ii),
to the extent not otherwise excluded from access, shall
constitute a public record subject to public access under
the Right-to-Know Law once:
(A) the access no longer causes substantial
competitive harm to the person from whom the
information was received; or
(B) the entity in which the investment was made
is liquidated;
whichever is later.
(iii) The sensitive investment or financial
information excluded from access under paragraph (2)
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(iii), to the extent not otherwise excluded from access,
shall constitute a public record subject to public access
under the Right-to-Know Law once:
(A) the access no longer has a substantial
detrimental impact on the value of an investment of
the fund or trust and would not cause a breach of the
standard of care or fiduciary duty set forth in this
part; or
(B) the entity in which the investment was made
is liquidated;
whichever is later.
(4) [Except for the provisions of paragraph (3), nothing
in this subsection shall be construed to designate any
record, material or data received, prepared, used or retained
by the board or its employees, investment professionals or
agents relating to an investment as a public record subject
to public access under the Right-to-Know Law.] The board
shall be prohibited from entering into any investment
management contract or agreement that contains any term or
provision that is contrary to this section.
(4.1) Notwithstanding the provisions of this subsection,
the following information regarding an alternative investment
vehicle shall constitute a public record subject to public
access under the Right-to-Know Law:
(i) The name, address and vintage year of the
alternative investment vehicle.
(ii) The identity of the manager of the alternative
investment vehicle.
(iii) The dollar amount of the commitment made by
the system or plan to the alternative investment vehicle.
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(iv) The dollar amount of cash contributions made by
the system or plan to the alternative investment vehicle
since inception.
(v) The dollar amount of cash distributions received
by the system or plan from the alternative investment
vehicle since inception.
(vi) The gross and net internal rate of return of
the alternative investment vehicle since inception,
provided that the system or plan shall not be required to
disclose the gross or net internal rate of return under
circumstances in which, because of the limited number of
portfolio assets remaining in the alternative investment
vehicle, the disclosure could reveal the values of
specifically identifiable remaining portfolio assets to
the detriment of the alternative investment.
(vii) The aggregate value of the remaining portfolio
assets attributable to the system's or plan's investment
in the alternative investment vehicle, provided that the
system or plan shall not be required to disclose the
value under circumstances in which, because of the
limited number of portfolio assets remaining in the
alternative investment vehicle, the disclosure could
reveal the values of specifically identifiable remaining
portfolio assets to the detriment of the alternative
investment.
(viii) The dollar amounts of total management fees,
costs and expenses paid to or retained from the
alternative investment vehicle by the system or plan on
an annual fiscal year-end basis, itemized by gross
management, carried interest and other expenses.
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(ix) Unredacted marketing materials, including,
without limitation, proposed fee terms, prospectuses,
staff and consultant investment memorandum, subscription
agreements, investment management agreements, contracts,
side letters and annual investor reports of the
alternative investment vehicle.
(5) Any record, material or data received, prepared,
used or retained by the board or its employees, or agents
relating to the contributions, account value or benefits
payable to or on account of a participant shall [not]
constitute a public record subject to public access under the
Right-to-Know Law [if] unless, in the reasonable judgment of
the board, the access would disclose any of the following:
(i) The existence, date, amount and any other
information pertaining to the voluntary contributions,
including rollover contributions or trustee-to-trustee
transfers, of any participant.
(ii) The investment option selections of any
participant.
(iii) The balance of a participant's individual
investment account, including the amount distributed to
the participant, investment gains or losses or rates of
return.
(iv) The identity of a participant's designated
beneficiary, successor payee or alternate payee.
(v) The form of distribution of a participant's
account.
* * *
(r) Additional reporting requirements.--The following shall
apply:
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(1) In addition to the requirements set forth in this
section, the board shall prepare and have published on its
publicly accessible Internet website, and electronically
submit copies to all members of the General Assembly, the
following information within six months after the end of the
system's calendar year:
(i) The net of fees performance of all investments
over the most recent 1-, 3-, 5-, 7-, 10-, 15- and 20-year
periods.
(ii) The performance of all investments by asset
class and manager over each time horizon, both gross and
net of fees compared to benchmarks being reported for all
investments made commencing prospectively from the
effective date of this subsection and with the gross
returns for all investments made retroactively for the
five-year period from the effective date of this
subsection using best efforts, unless the records are no
longer available.
(iii) An itemized listing of the fees, costs and
expenses paid to or retained by all investment managers
for the applicable reporting years, separated by base
management fee and profit share, including performance
fees, carried interest and incentive fees, including the
net asset value, and informed by the best practices as
recommended by recognized industry standards, including,
but not limited to, the Institutional Limited Partners
Association Fee Transparency Initiative. The board shall
disclose in the report which industry standards were used
and whether any changes to industry standards have been
made.
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(iv) All travel or other expenses incurred by staff
and paid for by an external investment manager, fund or
consultant.
(v) Internal control representations relative to
significant deficiencies or material weaknesses in the
systems of internal control, including the number of
significant deficiencies or material weaknesses and the
significant deficiencies or material weaknesses that have
continued from one reporting period to the next or that
have been recurring in nature for the past three
reporting periods made by:
(A) auditors hired by the board and referenced
in the board's financial statements filed in
accordance with subsection (m); and
(B) an independent certified public accounting
firm specified in subsection (n).
(2) As used in this subsection, the following words and
phrases shall have the meanings given to them in this
paragraph unless the context clearly indicates otherwise:
"Carried interest." Any share of profits from an
alternative investment vehicle that is distributed to a fund
manager, general partner or related party, including
allocations of alternative investment vehicle profits
received by a fund manager in consideration of having waived
fees that the fund manager might otherwise have been entitled
to receive.
"Institutional Limited Partners Association Fee
Transparency Initiative." An initiative created by the
Institutional Limited Partners Association to establish
guidelines for reporting fees, expenses and compliance
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disclosures regarding investments.
Section 3. This act shall apply as follows:
(1) The amendment of 24 Pa.C.S. § 8502(e)(1) shall apply
to board meetings that occur and video, written records and
materials created MORE THAN 120 DAYS after the effective date
of this section.
(2) The amendment of 24 Pa.C.S. § 8502(e)(4) shall apply
to contracts and agreements entered into, RENEWED, AMENDED OR
EXTENDED after the effective date of this section.
(3) The amendment of 71 Pa.C.S. § 5902(e)(1) shall apply
to board meetings that occur and video, written records and
materials created MORE THAN 120 DAYS after the effective date
of this section.
(4) The amendment of 71 Pa.C.S. § 5902(e)(4) shall apply
to contracts and agreements entered into, RENEWED, AMENDED OR
EXTENDED after the effective date of this section.
Section 4. This act shall take effect in 60 days.
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