BP BHEAD INT H

AN ACT Relating to conflicts of interest and ethical conduct by members and employees of the state investment board; adding new sections to chapter 43.33A RCW; and prescribing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that the trusteeship and investment management of the state's trust and retirement funds demand the highest degree of confidence from the beneficiaries of the funds and the public in general, that the state investment board has made significant progress in restoring public trust in its operation, and that the establishment of statutory standards regarding conflict of interest and ethical conduct will further promote and sustain public trust and maintain integrity in government.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Board" means the state investment board created under RCW 43.33A.020.

(2) "Member" means those individuals appointed to the state investment board.

(3) "Staff" means those persons employed by the state investment board under RCW 43.33A.100.

(4) "Permissible investments" means any mutual fund, deposit account, certificate of deposit, or money market fund maintained with a bank, broker, or other financial institution, any security publicly traded in an organized market, or an interest in real estate unless such interest involves a related party transaction.

(5) "Other investment" means any investment not defined as a permissible investment.

(6) "Immediate family" means the spouse, dependent children, other dependent relatives if living in the household, and any other household member, whether or not related.

NEW SECTION. Sec. 3. (1) No member or staff may receive, accept, seek, or solicit, directly or indirectly, any thing of economic value, defined in RCW 42.18.140, as a gift, except as permitted by Executive Order 93-02, 1993, if the member or staff has reason to believe that the donor:

(a) Would not have given the gift but for the member's or staff's office or position with the board;

(b) Has or is seeking to obtain a contractual or other business or financial relationship with the board; or

(2) Members and staff may purchase permissible investments without prior approval.

(3) No staff may or may permit any member of his or her immediate family to purchase or sell any other investment without the prior approval of the executive director or his or her designee. The executive director shall not purchase or sell or permit any member of his or her immediate family to purchase or sell any other investment without the prior approval of the audit committee of the board. No member may or may permit any member of his or her immediate family to purchase or sell any other investment without the prior approval of the audit committee of the board.

(4) No staff or member may participate in a leveraged buyout or venture capital initial public offering as to which the board has an interest until such shares are available to the general public.

(5) No member or staff may participate in any discussion or shall vote in a matter before the board which involves a business, contract, property, or other substantial investment, directly or indirectly, held by such person if it is reasonably foreseeable that board action on the matter would confer a benefit to such person by or through the business, contract, property, or investment.

(6) No member or staff may participate in any discussion or may vote in a matter before the board if such participation is motivated by something other than the best interests of the board, its members, and beneficiaries, in violation of that person's duty of loyalty.

(7) No member or staff may borrow from investment managers, outside service providers, professional advisors or consultants, banks, or other financial institutions with which the board has a business relationship, except and unless such entities are normally engaged in such lending in the usual course of their business, and then only on terms offered to others under similar circumstances.

(8) Confidential information shall be used solely for the board's purposes and under no circumstances revealed to unauthorized persons, except as may otherwise be required to be disclosed as a public record under the requirements of chapter 42.17 RCW.

(9) No member or staff may divulge state agency or board information or proprietary information in the board's possession, whether labeled confidential or not, to any unauthorized person or in advance of the time prescribed for its authorized issuance, or otherwise make use of, or permit others to make use of, information not available to the general public.

(10) No member or staff may use his or her position or employment with the board, or use board facilities, equipment, or supplies, to obtain or attempt to obtain private gain or advantage, especially if a detriment to the board will result.

(11) No member or staff may use his or her position or employment with the board, or use board facilities, equipment, or supplies, to assist another in a transaction involving the board, or use his or her influence over the board to obtain or attempt to obtain a gain or advantage for the person or entity seeking to transact business with the board.

(12) No member or staff may, within a period of two years after termination of such service or employment, appear before the board or receive compensation for any services rendered for or on behalf of any person, firm, corporation, or association in relation to any case, proceeding, or application with respect to which such person was directly concerned and in which that person personally participated during the period of his or her service or employment.

(13) No member or staff may accept employment or engage in business or professional activity which he or she might reasonably expect would require or induce him or her to disclose confidential information acquired by him or her by reason of his or her official position.

(14) No member or staff may have an account with an institutional salesperson serving the state.

NEW SECTION. Sec. 4. The attorney general of the state of Washington may bring a civil action in the superior court of the county in which the violation was alleged to have occurred against any member or staff, or former member or staff, who has knowingly violated any provision of section 3 of this act and in such action may recover the following damages on behalf of the state of Washington: (1) From each person a civil penalty of either ten thousand dollars or an amount not exceeding three times the economic value of anything received or sought in violation of section 3 of this act; (2) any damages sustained by the state that are caused by the conduct constituting the violation; and (3) costs, including reasonable attorneys' fees.

NEW SECTION. Sec. 5. Any action taken under section 4 of this act, to enforce any provision of section 3 of this act, shall be commenced within the later of: (1) Five years from the date of the alleged violation; or (2) two years from the date the alleged violation was discovered or reasonably should have been discovered by the board.

NEW SECTION. Sec. 6. Nothing in sections 1 through 5 of this act may be interpreted to prevent a member required or permitted to be appointed from any identifiable group or interest from serving on the board in accordance with the intent of the legislature in establishing the board under this chapter.

NEW SECTION. Sec. 7. Sections 1 through 6 of this act are each added to chapter 43.33A RCW.