Florida Senate - 2006 COMMITTEE AMENDMENT
Bill No. SB 1308
Barcode 210480
CHAMBER ACTION
Senate House
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03/15/2006 06:03 PM .
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11 The Committee on Governmental Oversight and Productivity
12 (Garcia) recommended the following amendment:
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14 Senate Amendment (with title amendment)
15 Delete everything after the enacting clause
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17 and insert:
18 Section 1. Paragraph (c) is added to subsection (8) of
19 section 215.44, Florida Statutes, to read:
20 215.44 Board of Administration; powers and duties in
21 relation to investment of trust funds.--
22 (8)
23 (c)1. As used in this paragraph, the term:
24 a. "Alternative investment" means an investment by the
25 State Board of Administration in a private equity fund,
26 venture fund, hedge fund, or distress fund or a direct
27 investment in a portfolio company through an investment
28 manager.
29 b. "Alternative investment vehicle" means the limited
30 partnership, limited liability company, or similar legal
31 structure or investment manager through which the State Board
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Florida Senate - 2006 COMMITTEE AMENDMENT
Bill No. SB 1308
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1 of Administration invests in a portfolio company.
2 c. "Portfolio company" means a corporation or other
3 issuer, any of whose securities are owned by an alternative
4 investment vehicle or the State Board of Administration and
5 any subsidiary of such corporation or other issuer.
6 d. "Portfolio positions" means individual investments
7 in portfolio companies which are made by the alternative
8 investment vehicles, including information or specific
9 investment terms associated with any portfolio company
10 investment.
11 e. "Proprietor" means an alternative investment
12 vehicle, a portfolio company in which the alternative
13 investment vehicle is invested, or an outside consultant,
14 including their respective authorized officers, employees,
15 agents, or successors in interest, which controls or owns
16 information provided to the State Board of Administration.
17 f. "Proprietary confidential business information"
18 means information that has been designated by the proprietor
19 when provided to the State Board of Administration as
20 information that is owned or controlled by a proprietor; that
21 is intended to be and is treated by the proprietor as private,
22 the disclosure of which would harm the business operations of
23 the proprietor and has not been intentionally disclosed by the
24 proprietor unless pursuant to a private agreement that
25 provides that the information will not be released to the
26 public except as required by law or legal process, or pursuant
27 to law or an order of a court or administrative body; and that
28 concerns:
29 (I) Trade secrets as defined in s. 688.002.
30 (II) Information provided to the State Board of
31 Administration regarding a prospective investment in a private
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Florida Senate - 2006 COMMITTEE AMENDMENT
Bill No. SB 1308
Barcode 210480
1 equity fund, venture fund, hedge fund, distress fund, or
2 portfolio company which is proprietary to the provider of the
3 information.
4 (III) Financial statements and auditor reports of an
5 alternative investment vehicle.
6 (IV) Meeting materials of an alternative investment
7 vehicle relating to financial, operating, or marketing
8 information of the alternative investment vehicle.
9 (V) Information regarding the portfolio positions in
10 which the alternative investment vehicles invest.
11 (VI) Capital call and distribution notices to
12 investors of an alternative investment vehicle.
13 (VII) Alternative investment agreements and related
14 records.
15 (VIII) Information concerning investors, other than
16 the State Board of Administration, in an alternative
17 investment vehicle.
18 g. "Proprietary confidential business information"
19 does not include:
20 (I) The name, address, and vintage year of an
21 alternative investment vehicle and the identity of the
22 principals involved in the management of the alternative
23 investment vehicle.
24 (II) The dollar amount of the commitment made by the
25 State Board of Administration to each alternative investment
26 vehicle since inception.
27 (III) The dollar amount and date of cash contributions
28 made by the State Board of Administration to each alternative
29 investment vehicle since inception.
30 (IV) The dollar amount, on a fiscal-year-end basis, of
31 cash distributions received by the State Board of
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Florida Senate - 2006 COMMITTEE AMENDMENT
Bill No. SB 1308
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1 Administration from each alternative investment vehicle.
2 (V) The dollar amount, on a fiscal-year-end basis, of
3 cash distributions received by the State Board of
4 Administration plus the remaining value of alternative-vehicle
5 assets that are attributable to the State Board of
6 Administration's investment in each alternative investment
7 vehicle.
8 (VI) The net internal rate of return of each
9 alternative investment vehicle since inception.
10 (VII) The investment multiple of each alternative
11 investment vehicle since inception.
12 (VIII) The dollar amount of the total management fees
13 and costs paid on an annual fiscal-year-end basis by the State
14 Board of Administration to each alternative investment
15 vehicle.
16 (IX) The dollar amount of cash profit received by the
17 State Board of Administration from each alternative investment
18 vehicle on a fiscal-year-end basis.
19 2. Proprietary confidential business information held
20 by the State Board of Administration regarding alternative
21 investments is confidential and exempt from s. 119.07(1) and
22 s. 24(a), Art. I of the State Constitution for 10 years after
23 the termination of the alternative investment.
24 3. Notwithstanding the provisions of subparagraph 2.,
25 a request to inspect or copy a record under s. 119.07(1) which
26 contains proprietary confidential business information shall
27 be granted if the proprietor of the information fails, within
28 a reasonable period of time after the request is received by
29 the State Board of Administration, to verify the following to
30 the State Board of Administration through a written
31 declaration in the manner provided by s. 92.525:
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Florida Senate - 2006 COMMITTEE AMENDMENT
Bill No. SB 1308
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1 a. The identity of the proprietary confidential
2 business information and its specific location in the
3 requested record;
4 b. If the proprietary confidential business
5 information is a trade secret, a verification that it is a
6 trade secret as defined in s. 688.002;
7 c. That the proprietary confidential business
8 information is intended to be and is treated by the proprietor
9 as private, is the subject of efforts of the proprietor to
10 maintain its privacy, and is not readily ascertainable or
11 publicly available from any other source; and
12 d. That the disclosure of the proprietary confidential
13 business information to the public would harm the business
14 operations of the proprietor.
15 4. Any person may petition a court of competent
16 jurisdiction for an order for the public release of those
17 portions of any record made confidential and exempt by
18 subparagraph 2. Any action under this subparagraph must be
19 brought in Leon County, Florida, and the petition or other
20 initial pleading shall be served on the State Board of
21 Administration and, if determinable upon diligent inquiry, on
22 the proprietor of the information sought to be released. In
23 any order for the public release of a record under this
24 subparagraph, the court shall make a finding that the record
25 or portion thereof is not a trade secret as defined in s.
26 688.002, that a compelling public interest is served by the
27 release of the record or portions thereof which exceed the
28 public necessity for maintaining the confidentiality of such
29 record, and that the release of the record will not cause
30 damage to or adversely affect the interests of the proprietor
31 of the released information, other private persons or business
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Florida Senate - 2006 COMMITTEE AMENDMENT
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1 entities, the State Board of Administration, or any trust fund
2 the assets of which are invested by the State Board of
3 Administration. /ob 5. This paragraph is subject to the Open
4 Government Sunset Review Act in accordance with s. 119.15, and
5 shall stand repealed on October 2, 2011, unless reviewed and
6 saved from repeal through reenactment by the Legislature.
7 Section 2. The Legislature finds that it is a public
8 necessity that proprietary confidential business information
9 held by the State Board of Administration regarding
10 alternative investments be held confidential and exempt from
11 s. 119.07(1), Florida Statutes, and s. 24(a), Art. I of the
12 State Constitution for 10 years after the termination of the
13 alternative investment. Disclosing proprietary confidential
14 business information, including trade secrets as defined in s.
15 688.002, Florida Statutes, used in determining how private
16 equity investments are made or managed by private partnerships
17 investing assets on behalf of the state Board of
18 Administration would negatively affect the business interests
19 of private partnerships that rely heavily on their information
20 advantage to generate investment returns, and competitor
21 partnerships could gain an unfair competitive advantage if
22 provided access to such information. Maintaining the
23 information advantage of highly skilled private equity
24 investment managers is necessary in order for the State Board
25 of Administration to generate an adequate return from its
26 assets committed to this high-risk segment of the market,
27 since only those managers having a strong information
28 advantage have generated adequate risk-adjusted returns.
29 Research shows that 60 percent of all private equity
30 partnerships have delivered a return less than that of the
31 lower-risk public markets. Only 30 percent of all private
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Florida Senate - 2006 COMMITTEE AMENDMENT
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1 equity partnerships have been able to produce the State Board
2 of Administration's required premium over public-market
3 returns to justify incurring the risks associated with these
4 investments. The ninth and tenth deciles of private equity
5 managers are those having a substantial information advantage
6 and they have generated sizable premiums over the public
7 markets, with net returns of 19.4 percent and 29.7 percent,
8 respectively. The Legislature finds that the exemption or
9 proprietary confidential business information used in or
10 implying how private equity investments are made or managed is
11 necessary for the effective and efficient administration of
12 the State Board of Administration's asset-management program.
13 Assets of the Florida Retirement System must grow rapidly in
14 order to keep pace with growth in the system's liabilities and
15 to manage the costs of employer contributions. In order to
16 meet its investment objectives, the State Board of
17 Administration must invest in diversified asset types,
18 including high-return, high-risk private equity partnerships.
19 Those partnerships that have and are able to maintain a
20 substantial information advantage over their competitors are
21 likely to provide an adequate return. The release of
22 proprietary confidential business information, including trade
23 secrets, revealing how private equity investments are made or
24 managed could result in inadequate returns and ultimately
25 frustrate attainment of the investment objective of the State
26 Board of Administration, subsequently increasing contribution
27 costs for employers in the Florida Retirement System and
28 lowering the system's funded ratio. It is the Legislature's
29 intent to allow the public access to sufficient information in
30 order to be informed regarding the alternative investments of
31 the State Board of Administration and to balance the public's
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Florida Senate - 2006 COMMITTEE AMENDMENT
Bill No. SB 1308
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1 right to information against the right of private business
2 entities to be protected from harmful disclosure of
3 confidential and exempt proprietary confidential business
4 information, the disclosure of which would injure them in the
5 marketplace, impair the ability of the State Board of
6 Administration to invest in the best performing alternative
7 investment vehicles, and diminish investment earnings in the
8 Florida Retirement System Trust Fund. It is also the
9 Legislature's intent to establish consistency with regard to
10 the classification of information relating to alternative
11 investments by the State Board of Administration as either
12 confidential or suitable for public disclosure. In finding
13 that the public records exemption created by this act is a
14 public necessity, the Legislature finds that the public and
15 private harm in disclosing proprietary confidential business
16 information relating to alternative investments by the State
17 Board of Administration significantly outweighs any public
18 benefit derived from disclosure; that the exemption created by
19 this act will enhance the ability of the State Board of
20 Administration to fulfill its duties as an investment
21 fiduciary by making it more effective and competitive in the
22 marketplace as an investor that is able to gain access to the
23 best alternative investment vehicles; and that the public's
24 ability to be informed regarding the alternative investments
25 made by the State Board of Administration is preserved by the
26 disclosure of information excepted from the created exemption.
27 Section 3. This act shall take effect October 1, 2006.
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30 ================ T I T L E A M E N D M E N T ===============
31 And the title is amended as follows:
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Florida Senate - 2006 COMMITTEE AMENDMENT
Bill No. SB 1308
Barcode 210480
1 Delete everything before the enacting clause
2
3 and insert:
4 A bill to be entitled
5 An act relating to public records exemption for
6 alternative investments; amending s. 215.44,
7 F.S.; providing definitions; defining
8 "proprietary confidential business information"
9 and specifying information which does not
10 constitute proprietary confidential business
11 information; creating an exemption from public
12 records requirements for proprietary
13 confidential business information held by the
14 State Board of Administration regarding
15 alternative investments; providing for limited
16 duration of the exemption; authorizing the
17 State Board of Administration to use such
18 information in judicial or administrative
19 proceedings under specified circumstances;
20 providing for retroactive application of the
21 exemption; authorizing a proprietor of a record
22 to certify the record as proprietary
23 confidential business information; providing
24 procedures and requirements with respect
25 thereto; authorizing a court to order the
26 release of portions of confidential and exempt
27 records upon making certain findings; providing
28 for future review and repeal; providing a
29 statement of public necessity; providing an
30 effective date.
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