Just when you thought the war and the worry over public pension disclosure was over in the Golden State, California may enact a law to specify limits on private equity disclosures. The law, which was proposed in the California State Senate last week, would codify limits that California has put on such disclosures through court decisions and legal agreements. The law could be voted on by the entire State Senate by May and go into effect starting next year.
California State Senator Joe Simitian introduced the legislation, S.B. 439, citing concerns from the private equity community over possible future lawsuits as a result of California’s public disclosure laws and what he characterized as a misuse of those laws to gain competitive business advantage. “I’m trying to balance legitimate competing interests between the public’s right to know and keeping proprietary information confidential,” said Simitian, whose 11th senate district in Silicon Valley is home to much of the venture capital industry.
“This area has raised some interesting questions,” said Simitian. “At what point do you want to share information that undermines the competitive advantage to the very firms that are providing returns to our pensions and endowments?”
The Senator’s bill was sent to the State Senate’s Judiciary Committee, which will hold hearings on the proposal on April 26. While the bill may come to a vote before the State Senate by May, it would still have to work its way through the State Assembly. Simitian says he is optimistic that the law can be passed and signed this year and go into effect at the start of 2006.
Lawsuits and legal agreements involving The San Jose Mercury News and the California First Amendment Coalition set a standard whereby some information such as management fees, returns, and amounts invested in funds are disclosed by portfolio company information is kept confidential.
Proponents of the legislation say that the door is still open for future legal battles without a written law for guidance. “It provides us some assurance that we can access top tier funds without any question as to what will be disclosed in the future,” says CalPERS spokesman Brad Pacheco.