2019 New Mexico Statutes
Chapter 6 - Public Finances
Article 8 - Investment of Public Money
Section 6-8-7 - Powers and duties of the state investment council and state investment officer; investment policy; investment managers.
A. Subject to the limitations, conditions and restrictions contained in policymaking regulations or resolutions adopted by the council, the council may make purchases, sales, exchanges, investments and reinvestments of the assets of all funds in accordance with the Uniform Prudent Investor Act [45-7-601 to 45-7-612 NMSA 1978]. The state investment officer and the council are trustees of all funds under their control and shall see that money invested is at all times handled in the best interests of the state. The council may delegate administrative and investment-related functions to the state investment officer.
B. The state investment officer shall formulate and recommend to the council for approval investment regulations or resolutions pertaining to the kind or nature of investments and limitations, conditions and restrictions upon the methods, practices or procedures for investment, reinvestment, purchase, sale or exchange transactions that should govern the activities of the investment office.
C. The council shall meet at least ten times per year, and as often as exigencies may demand, to consult with the state investment officer concerning the work of the investment office. The council shall have access to all files and records of the investment office and shall require the state investment officer to report on and provide information necessary to the performance of council functions. The council may hire investment management or consulting firms to advise the council with respect to the council's investment decisions for the investment of funds managed by the investment office and pay reasonable compensation for such management or consulting services from the assets of the applicable funds, subject to budgeting and appropriation by the legislature. The terms of any such investment management or consulting services contract shall incorporate the statutory requirements for investment of funds under the council's jurisdiction. Prior to being hired, a prospective investment management, advisory or consulting services firm shall submit to the council a disclosure detailing all campaign contributions made within the last two years by the firm or the principals of the firm to any member of the council, or to a political committee or other entity that is intended to aid or promote the nomination or election of any council member to a political office.
D. The council shall provide an opportunity for public comment at meetings of the council. Advance notice of meetings shall be published on the council's web site and in a newspaper of general circulation at least ten days in advance of the meeting.
E. All funds managed by the state investment officer shall be managed in accordance with the Uniform Prudent Investor Act. The council may form and use committees to study and make recommendations to the council. Prior to commencing work for the council, a committee member who is not a member of the council shall submit to the council a disclosure detailing all campaign contributions made within the last two years to any member of the council or to a political committee or other entity that is intended to aid or promote the nomination or election of any council member to a political office.
F. Fiduciaries of the permanent funds are:
(1) the council;
(2) the state investment officer and investment office staff;
(3) any person providing investment advice to the council, the state investment officer or investment office staff for an investment management, advisory or consulting services fee; and
(4) all persons exercising discretionary authority over or control of funds under the management of the council.
G. The council may contract for legal services for litigation on a contingent or partly contingent fee basis, subject to an expedited solicitation process devised and approved by the council; provided that:
(1) amounts recovered by the legal services contractor shall be deposited in the state investment council suspense fund;
(2) the council shall submit each proposed contract to the attorney general and the department for review of the contingency fee. The attorney general's and the department's review shall take into account the complexity of the factual and legal issues presented by the claims to be pursued under the contract. If the attorney general or the department advises the council that the proposed contingency fee is not reasonable, the council may nevertheless approve the contract and the contingency fee by a majority vote of its members; and
(3) each prospective legal services contractor seeking to represent the council on a contingent or partly contingent fee basis shall file with the council the disclosure required by Section 13-1-191.1 NMSA 1978 disclosing all campaign contributions made to the governor, attorney general, state treasurer or any member of the council, or to a political committee that is intended to aid or promote the nomination or election of any candidate to a state office if the committee is:
(a) established by any of the foregoing persons or their agents;
(b) established in consultation with or at the request of any of the foregoing persons or their agents; or
(c) controlled by one of the foregoing persons or their agents.
H. The council may select and contract for the services of one or more custodian banks for all funds under the council's management. For the purpose of this subsection, "custodian bank" means a financial institution with the general fiduciary duties to manage, control and collect the assets of an investment fund, including receiving all deposits and paying all disbursements as directed by staff, safekeeping of assets, coordination of asset transfers, timely settlement of securities transactions and accurate and timely reporting of the assets by individual account and in total.
I. For funds available for investment for more than one year, the council may contract with any state agency to provide investment advisory or investment management services, separately or through a pooled investment fund; provided that the state agency enters into a joint powers agreement with the council and that the state agency pays at least the direct cost of such services. Notwithstanding any statutory provision governing state agency investments, the council may invest funds available from a state agency pursuant to a joint powers agreement in any type of investment permitted for the land grant permanent funds under the prudent investor rule. In performing investment services for a state agency, the council and the state investment officer and investment office staff are exempt from the New Mexico Uniform Securities Act [58-13C-101 to 58-13C-701 NMSA 1978]. As used in this subsection, "state agency" means any branch, agency, department, board, instrumentality, institution or political subdivision of the state, the New Mexico finance authority, the New Mexico mortgage finance authority and any tax-exempt private endowment entity whose sole beneficiary is a state agency or whose beneficiaries are students attending a public educational institution in the state.
J. The state investment officer shall provide quarterly performance reports to the legislative finance committee. Annually, the state investment officer shall ratify and provide written investment policies, including any amendments, to the legislative finance committee.
K. Council members, the state investment officer and investment office staff and committee members appointed by the council, jointly and severally, shall be indemnified by the state, out of the permanent funds, from all claims, demands, suits, actions, damages, judgments, costs, charges and expenses, including court costs and attorney fees, against all claims, liability, losses or damages arising from any decisions made or actions taken while acting within the scope of duty and pursuant to law as a council member, the state investment officer, investment office staff or a committee member appointed by the council. Following indemnification, if it is shown that the indemnified person acted fraudulently or with intentional malice, the state shall have the right to recover from the indemnified person any amount expended under this subsection.
History: 1953 Comp., § 11-2-8.10, enacted by Laws 1957, ch. 179, § 7; 1977, ch. 247, § 100; 1981, ch. 264, § 5; 1983, ch. 306, § 4; 1991, ch. 57, § 1; 1993, ch. 113, § 1; 1997, ch. 135, § 3; 2001, ch. 252, § 1; 2005, ch. 194, § 1; 2005, ch. 240, § 1; 2010, ch. 14, § 4; 2011, ch. 9, § 1; 2015, ch. 95, § 5.
ANNOTATIONSCross references. — For constitutional provision as to duties of state investment officer relative to permanent school fund, see N.M. Const., art. XII, § 7.
For the New Mexico mortgage finance authority, see 58-18-4 NMSA 1978.
The 2015 amendment, effective June 19, 2015, required certain disclosures from prospective investment management, advisory or consulting services firms and from advisory committee members; in Subsection A, after "delegate administrative", added "and investment-related"; in Subsection C, after "shall meet at least", deleted "once each month" and added "ten times per year", after "council may hire", deleted "one or more", after "investment management", added "or consulting", after "respect to council's", deleted "overall", after "investment", deleted "plan" and added "decisions", after "compensation for such", deleted "advisory" and added "management or consulting", after "such investment management", added "or consulting", and after "council's jurisdiction", added the remainder of the subsection; in Subsection E, after "The council may", deleted "employ investment management services to invest the funds and may pay reasonable compensation for investment management services from the assets of the applicable funds, subject to budgeting and appropriation by the legislature" and added the remainder of the subsection; in Subsection F, added "Fiduciaries of the permanent funds are" and added the designation for Paragraph (1) of Subsection F, and after "council", added the designation for Paragraph (2) of Subsection F; in Paragraph (2) of Subsection F, after "investment officer", added "and investment office staff"; added the designation for Paragraph (3) of Subsection F; in Paragraph (3) of Subsection F, after "advice to the council", deleted "or" and added "and", after "state investment officer", added "or investment office staff", after "for", deleted "a" and added "an investment management, advisory or consulting services", and after "fee", deleted "or other compensation"; added the designation Paragraph (4) of Subsection F; in Subsection F, Paragraph (4), after "management of the council", deleted "are fiduciaries"; in Subsection I, after "fund; provided", added "that", after "the council and the state investment officer", added "and investment office staff", and after "beneficiary is a state agency", added "or whose beneficiaries are students attending a public educational institution in the state"; and added Subsection K.
The 2011 amendment, effective March 17, 2011, added Subsection G to permit the council to contract for legal services on a contingent basis, subject to review of the terms of the contract by the attorney general and the department of finance and administration and to the disclosure by prospective contractors of political contributions.
The 2010 amendment, effective March 1, 2010, in the catchline, after "duties of", added "the state investment council and"; in Subsection A, in the first sentence, after "resolutions adopted by the council", changed "and subject to prior authorization by the council the state investment officer may make purchases" to "the council may make purchases" and after "assets of all funds", deleted "administered under the supervision of the council"; in the second sentence, after "The state investment officer", added "and the council are trustees of all funds under their control and"; and added the third sentence; added Subsection D; in Subsection E, at the beginning of the second sentence, deleted "With the approval of" and in the second sentence, after "The council", deleted "the state investment officer"; added Subsections F and G; and in Subsection H, in the first sentence, after "investment for more than one year, the", deleted "state investment officer" and added "council"; in the second sentence, after "governing state agency investments, the", deleted "state investment officer" and added "council"; and in the third sentence, changed the statutory reference from the "New Mexico Securities Act of 1986" to the "New Mexico Uniform Securities Act"; and relettered the succeeding subsections accordingly.
The 2005 amendment, effective July 1, 2005, provided in Subsection A that the state investment officer shall act in accordance with the Uniform Prudent Investor Act; deleted former Subsection B, which provided that sales of securities or investments could not be at a price less than going market; deleted former Subsection C which provided that the state investment officer shall obtain an attorney's opinion certifying the legality of bonds to be purchased; provides in Subsection D that all funds managed by the state investment officer shall be managed in accordance with the Uniform Prudent Investor Act; and added Subsection F to provide that the state investment officer shall provide reports and investment policies to the legislative finance committee.
The 2001 amendment, effective June 15, 2001, substituted "in accordance with the prudent investor rule set forth in the Uniform Prudent Investor Act" for "on a total rate of return basis in a prudent manner, unless a higher standard of care is required by law" in Subsection F; in Subsection G, substituted "prudent investor rule" for "same standard of care applicable to investments of the land grant permanent funds" at the end of the second sentence, and inserted "and any tax-exempt private endowment entity whose sole beneficiary is a state agency" at the end of the subsection.
The 1997 amendment, effective April 9, 1997, substituted "assets of all funds administered under the supervision of the council" for "permanent fund" in Subsection A; substituted "shall be" for "is" in Subsection B; in the second sentence of Subsection E, inserted "for the investment of all funds managed by the investment office", inserted "advisory", and substituted the language beginning "the assets of the applicable" for "funds of the investment office"; rewrote Subsection F; in Subsection G, deleted "state investment" preceding "council" in the first sentence, and substituted the language beginning "institution or political" for "or institution of the state other than the educational retirement board and the retirement board created by the Public Employees Retirement Act" in the last sentence.
The 1993 amendment, effective June 18, 1993, made a stylistic change in the second sentence of Subsection A and rewrote Subsection G, substituting references to state agencies for references to educational institutions.
The 1991 amendment, effective June 14, 1991, added the subsection designations; in the first sentence of Subsection A substituted "adopted" for "promulgated"; in Subsection D substituted "that should govern" for "which should govern"; and added Subsection G.
Duties of investment officer not delegated. — Within the scope of the duties and potential liabilities established within the contractual relationship, an investment advisor was required to advise the state to make lawful investments. The contract did not delegate nondelegable duties to the advisor, and the advisor was therefore estopped to assert that doctrine as a bar to suit on the contract. State ex rel. Udall v. Colonial Penn Ins. Co., 1991-NMSC-048, 112 N.M. 123, 812 P.2d 777.
Investment officer has only powers granted by constitution or statute. — The investment officer is a creature of statute, being unknown at common law, and has only those powers and rights granted to him by the constitution and legislative enactment. 1961 Op. Att'y Gen. No. 61-49.
Requirements for exchange of securities. — The requirement of this section, as it pertains to an exchange, is that the securities which are to be received in the exchange must have an aggregate price which is equal to or in excess of the market price of the securities which are to be given by the state. 1960 Op. Att'y Gen. No. 60-09.
Determination of "market price". — The generally accepted definition or meaning of the term "market price" indicates that the words imply price or value in an open market where one desires but is not compelled to buy and one is willing but not compelled to sell. In order for an item to have a market price, the same or similar items must have been sold enough times so that the items obtain a somewhat fixed price or value to purchasers. 1960 Op. Att'y Gen. No. 60-09.
Mere combining of funds from several trusts for investment does not violate intermingling rule. 1960 Op. Att'y Gen. No. 60-09.
Investment officer may sell or exchange securities held in portfolio. — This section confers upon the investment officer the power to sell and exchange securities originally held in the state portfolio. 1960 Op. Att'y Gen. No. 60-09.
Investment not limited to current funds. — The primary purpose for the creation of the investment council was to improve the position of the permanent fund in regard to its investments generally, and specifically, its return on the funds invested, keeping in mind the preservation of the principal. This goal could not be accomplished if the powers of the council were limited to investing only current funds. 1960 Op. Att'y Gen. No. 60-09.
Capital gains from sale of common stock may not be used to offset loss on sale of fixed-income security. — Since the 1965 amendment to N.M. Const., art. XII, § 7, the state investment council has not had the power to sell common stocks realizing a capital gain and use such gain to offset a loss taken on the sale of a fixed-income security. 1968 Op. Att'y Gen. No. 68-116.
Sale at loss which cannot be made up by increased interest income. — The state investment officer has the power and the duty to sell fixed income securities at less than their original acquisition cost and take a loss which cannot be made up by increased interest income where, in his discretion, such action is consistent with the protection and preservation of the permanent fund. While the loss must be reimbursed, it is up to the legislature to effect it; accordingly, in the event of a loss, the state investment council should inform the legislature thereof. 1989 Op. Att'y Gen. No. 89-19.
Commitment for purchase prior to actual investment. — Investment council can make definite commitment for purchase of Capehart mortgages prior to actual investment in them. 1959 Op. Att'y Gen. No. 59-160.
Employment of management company constitutes unlawful delegation of powers. — If a management company is to be of any real value to the investment council, it must by the very nature of its duties possess a portion of the decision-making powers of the investment officer. This is an unlawful delegation of the investment power of the investment officer. 1961 Op. Att'y Gen. No. 61-49.
