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 AB 382 -- 6/19/13 -- Page 2 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. AB 382 -- 6/19/13 -- Page 3 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. AB 382 -- 6/19/13 -- Page 4 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.