A California state bill introduced earlier this year that would specify limits on private equity disclosures passed another hurdle last week in its march towards becoming a law.
The California State Senate’s Judiciary Committee voted unanimously to approve the bill, which was introduced by California State Senator Joe Simitian. Simitian’s 11th State Senate district covers Silicon Valley, which includes a sizeable segment of the venture industry. Simitian says he’s confident that the bill will become law by the beginning of next year, though it has few more hurdles to cross.
The disclosure issue in California was resolved somewhat by past cases. 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, but portfolio company valuations and other information is kept confidential.
Simitian’s proposed bill puts this precedent into law.
While there have been no further challenges to California’s public disclosure laws regarding pension information, proponents of the legislation say that the door is still open for future legal battles without a written law for guidance. The California Public Employees’ Retirement System has voiced support for the legislation, citing the need to clarify public law and the potential danger of future lawsuits.
California’s efforts follow legislative action in Colorado, Massachusetts and Michigan. State pension funds in those states and California have found themselves not welcome into funds raised by Charles River Ventures, Sequoia Capital and Woodside Fund. Recently, Austin Ventures did not accept any Texas-based public pension funds into its latest funds, due to very liberal interpretations of public disclosure laws by the Texas attorney general.
Austin Ventures is still raising the fund and has accepted an investment from several public pensions and is likely to include California.