Investment board operations

1. Employ special legal or investment counsel in any matters arising out of the scope of its investment authority, notwithstanding certain other statutory provisions relating to state procurement and state agency employment of attorneys, but employment of special legal counsel paid by SWIB must be with the consent of the attorney general.

2. Execute certain indemnification agreements related to securities.

3. Secure insurance against risks relating to SWIB's investments or properties.

4. Liquidate any corporation wholly owned by SWIB or operate the corporation for up to five years until it can be liquidated.

5. Take necessary action to make investments in mortgage loans or purchase real estate interests.

6. Maintain and repair any building that SWIB owns in fee or in which SWIB owns the beneficial interest and, notwithstanding certain other statutory provisions relating to state procurement or engineering, have exclusive authority to contract as SWIB deems necessary for this purpose.

7. Engage in certain types of securities lending and repurchase agreement transactions.

8. Sell securities that SWIB has the right to acquire by exercising conversion rights.

9. Employ professionals, contractors, or other agents necessary to evaluate or operate any property if a fund managed by SWIB has an interest in, or is considering purchasing or lending money based upon the value of, that property, notwithstanding certain other statutory provisions relating to state procurement.

10. For specified purposes, enter into certain swap transactions.

11. Invest assets of the permanent endowment fund in any investment that is authorized for Wisconsin Retirement System accounts or in certain other investments related to tobacco settlement revenues.

This bill specifies that SWIB's authorization, as provided in items 1 to 11, above, applies notwithstanding any other statute except one restricting SWIB's investment in certain derivatives and reverse repurchase agreements. The bill also modifies this authorization as follows: with respect to item 1, it removes the attorney general consent requirement and authorizes SWIB to employ special legal or investment counsel in any matters arising out of the scope of its operations, not just investment authority; with respect to item 6, it expands the authorized activities to include a leasehold interest and to include, among others, improving, occupying, and furnishing the building; and it repeals the provisions creating the authorization under item 11.

The bill also makes changes related to SWIB's funding of operating expenses.

Current law defines, for certain purposes, SWIB's “operating expenditures" to include all costs and expenses incurred by SWIB for the purpose of operating SWIB and managing the assets of each fund for which SWIB has management responsibility, but excludes certain costs or expenses such as those related to the following: employing special legal or investment counsel; securing insurance against certain risks; and contracting with external managers to manage SWIB's assets.

These costs and expenses excluded from the definition of “operating expenditures” and are paid from the fund for which the costs or expenses are incurred.

The bill narrows the definition of “operating expenditures" by adding as exclusions from the definition the following costs and expenses: information technology purchases; business travel; recruitment of job applicants; subscriptions to relevant news or industry publications; and office management expenses. The bill also specifies that SWIB's expenditure of operating expenditures is not subject to statutory provisions relating to state procurement but that SWIB may coordinate purchases with the Department of Administration.

The bill further requires SWIB to adopt policies and procedures that specify all of the following: when SWIB must publicly solicit proposals from multiple vendors of goods or services; how SWIB is to evaluate proposals from multiple vendors; and how SWIB is to assess any conflict of interest a vendor may have if the vendor sells goods or services to SWIB. The bill also requires SWIB to establish travel policies for SWIB employees and job applicants and a schedule for travel expense reimbursement that takes into account the maximum rate for lodging expenses under the uniform travel schedule for state officers and employees.

The bill makes additional changes, including the following:

1. Under current law, SWIB's executive director and internal auditor, certain SWIB personnel appointed by the executive director, and other SWIB employees may not have any financial interest, either directly or indirectly, in any firm engaged in the sale or marketing of real estate or investments of any kind. The bill qualifies this prohibition so that these individuals may not have such a financial interest if it would create a conflict of interest for SWIB.

2. The bill removes a limit on the number of investment directors that may be appointed by the executive director.

3. The bill makes clarifying changes related to the duties of SWIB's executive director and chief investment officer when both titles are held by the same person.

4. The bill specifies that SWIB's biennial plan for investment in Wisconsin must address potential investments in the next four years, rather than five years.

5. The bill changes a SWIB position title from executive assistant to the executive director to deputy executive director.

6. The bill specifies that the SWIB internal auditor's compliance monitoring duty is accomplished through periodic internal audits.

7. The bill makes minor changes relating to SWIB's investment authority with respect to unsecured notes and commercial paper.

8. The bill specifies that current restrictions on reverse repurchase agreements apply only in the state investment fund.