BILL ANALYSIS                                                                                                                                                                                                    Ó




                     SENATE GOVERNANCE & FINANCE COMMITTEE
                            Senator Lois Wolk, Chair
          

          BILL NO:  AB 382                      HEARING:  6/26/13
          AUTHOR:  Mullin                       FISCAL:  No
          VERSION:  6/19/13                     TAX LEVY:  No
          CONSULTANT:  Ewing                    

                OPEN MEETINGS AND RETIREMENT SYSTEM INVESTMENTS
          

          Conforms the Brown Act with the Public Records Act with  
          regard to the confidentiality of proprietary investment  
          information.


                           Background and Existing Law  

          The Ralph M. Brown Act and the California Public Records  
          Act establish standards for the open and public operations  
          of the legislative boards of local agencies and the records  
          maintained by those agencies.

          The Ralph M. Brown Act requires the meetings of local  
          governments' legislative bodies to be "open and public,"  
          thereby ensuring people's access to information so they may  
          retain control over the public agencies that serve them.

          Private discussions among a majority of a legislative body  
          are prohibited, unless expressly authorized by the Brown  
          Act.  Legislative bodies can meet in closed sessions only  
          for specified reasons, including:
                 Discussions with legal counsel on pending  
               litigation or liability claims;
                 Threats to public buildings or access to public  
               services;
                 Public employee personnel issues;
                 Conferences with the body's representative on labor  
               negotiations;
                 A conference with real property negotiators;
                 Discussions of multi-jurisdictional drug cases;
                 District hospital peer reviews, quality assurance  
               committees, or reports involving trade secrets; and
                 License or permit determinations for those with  
               criminal records.

          Local officials must place a closed meeting item on an  




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          agenda and cite their statutory authority to meet behind  
          closed doors.  They must report on any action taken in  
          closed session and provide the vote of every elected member  
          present.  

          The Brown Act authorizes any person to seek court action to  
          stop or prevent violations and provides a "safe harbor"  
          provision that clarifies that if local agencies  
          substantially comply with notice requirements, as  
          specified, they will not be found in violation of those  
          requirements. 

          The Brown Act also specifies that agendas of public  
          meetings and any other writings, when distributed to all  
          members of a local legislative body in connection with a  
          matter subject to discussion at an open meeting, are public  
          records, subject to disclosure and must be made available  
          upon request. 

          In 2004, the Legislature authorized local boards to meet in  
          closed session to consider the purchase or sale of specific  
          pension fund investments (AB 2234, Committee on Public  
          Employees, Retirement and Social Security).

          Like the Brown Act, the California Public Records Act  
          directs, with specified exceptions, that public records be  
          open to inspection and that every person has the right to  
          inspect any public record.  Public records are defined to  
          include any writing containing information relating to the  
          conduct of the public's business prepared, owned, used, or  
          retained by any state or local agency.

          Among the exceptions to public disclosure, are records  
          regarding "alternative investments," in which public  
          investment funds invest.  Alternative investments are  
          defined as investment in a private equity fund, venture  
          fund, hedge fund, or absolute return fund.  State law  
          defines alternative investment vehicle as a limited  
          partnership, limited liability company, or similar legal  
          structure through which the public investment fund invests  
          in portfolio companies.

          Records not subject to disclosure are:
                 Due diligence materials that are proprietary to the  
               public investment fund or the alternative investment  
               vehicle.





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                 Quarterly and annual financial statements of  
               alternative investment vehicles.
                 Meeting materials of alternative investment  
               vehicles.
                 Records containing information regarding the  
               portfolio positions in which alternative investment  
               funds invest.
                 Capital call and distribution notices.
                 Alternative investment agreements and all related  
               documents.

          The California Public Records Act does not exempt other  
          information relating to alternative investments, including  
          dollar amounts committed, cash contributions, distributions  
          received, net internal rates of return and related  
          information that is not considered proprietary (SB 439,  
          Simitian, 2005).  

          Similarly, state law exempts from disclosure "trade  
          secrets," (AB 1381, Bagley, 1968), which includes  
          information deriving independent economic value from not  
          being generally known to the public or others who can  
          obtain economic value from its disclosure or use (SB 2053,  
          Killea, 1994).

          Some local officials want to clarify that materials  
          distributed to the members of a local legislative body  
          during an open meeting are not subject to disclosure, under  
          the Brown Act, because they are exempt from disclosure  
          under the California Public Records Act and under trade  
          secrets provisions. 


                                   Proposed Law  

          Assembly Bill 382 amends the Brown Act to clarify that  
          proprietary information relating to alternative  
          investments, currently exempt from disclosure under the  
          California Public Records Act, is not subject to disclosure  
          under the Brown Act.  


                               State Revenue Impact
           
          No estimate.






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                                     Comments  

          1.  Purpose of the bill  .  Assembly Bill 382 clarifies the  
          Brown Act's treatment of proprietary documents relating to  
          alternative investments, exempting them from public  
          disclosure.  AB 382 makes the Brown Act consistent with the  
          California Public Records Act, and statutes regarding  
          "trade secrets," which provide an exception to the  
          disclosure of limited proprietary information.  

          2.  Open is open, closed is closed  .  The Brown Act provides  
          clear guidance on the limited circumstances under which  
          local agencies can meet behind closed doors.  The Brown Act  
          also is clear that materials distributed in open session,  
          relating to a matter of discussion, are subject to public  
          disclosure.  The Brown Act already protects documents  
          distributed only in closed session.  AB 382 blurs the line  
          between open and closed by exempting from public disclosure  
          documents distributed in open session. 


                                 Assembly Actions  

          Assembly Judiciary Committee    9-1
          Assembly Local Government       8-0
          Assembly Floor                 67-2


                         Support and Opposition  (6/20/13)

           Support  :  Los Angeles County Employees Retirement  
          Association; Retired Employees of Los Angeles County; State  
          Association of County Retirement Systems. 
           Opposition  :  Unknown.