August 26, 1986

Terry C. Anderson 
Director 
South Dakota Legislative Research Council 
State Capitol 
Pierre, South Dakota 57501-5088

OFFICIAL OPINION NO. 86-34

State Investment Council members qualifications

Dear Director Anderson:

You have requested an official opinion based upon the following factual situation.

FACTS: 

Pursuant to SDCL 4-5-13, the executive board of the Legislative Research Council appoints five members of the state investment council.  The qualifications of council members are delineated in SDCL 4-5-14.  The section says, in part, that no member may 'benefit directly or indirectly from any transaction made by the state investment officer.  . . .' In addition, state retirement funds are invested by the state investment officer and the earnings therefrom are available to vested state employees at time of retirement.

Based upon these facts, you have asked the following question:

QUESTION: 

Is a state employee eligible for appointment to the investment council in light of the fact that state retirement funds are invested by the council and a potential improvement in this specific fund may be a benefit to the state employees who are members of that fund?

IN RE QUESTION:

SDCL 4-5-13 provides: 

The state investment council shall consist of eight voting members.  Five members of the council shall be appointed by the executive board of the legislative research council and the executive board may appoint persons holding public office, appointed or elective, provided no more than three members of the state investment council, at any one time, shall hold public office. Action shall be by majority vote.  Each of the members of the state investment council shall be appointed for a term of five years.  No more than four appointed members may be members of the same political party.  In addition to those members appointed by the executive board, the state treasurer and commissioner of school and public lands shall serve as ex officio voting members and a representative of the board of trustees of the South Dakota retirement system shall serve as ex officio voting member.  The term of the representative of the board of trustees shall be one year and he shall be appointed by the board of trustees of the South Dakota retirement system.

SDCL 4-5-14 provides: 

The members of the state investment council shall be qualified by training and experience in the field of investment or finance. During his tenure, a member of the council or his firm shall not be engaged in the sale of  marketable or public securities to the state or to any fund thereof; nor shall any member benefit directly or indirectly from any transaction made by the state investment officer; nor shall he hold any office, position, or employment in any political party.

Based upon my reading of the above-stated sections, together with provisions under South Dakota retirement system, SDCL ch. 3-12, it is my opinion that the benefit restrictions under SDCL 4‑5‑14 do not apply to individuals who may be benefited directly or indirectly through improvement of state retirement system.

It is my opinion, that the restrictive provisions in SDCL 4-5-14 are to be read to only preclude individuals who could benefit directly or indirectly by the investment of the monies.

Finally, given the close proximity of the next legislative session, if the members of the executive board of the legislative research council disagree with my opinion, a bill can be introduced that specifically excludes state employees.

Respectfully submitted,

Mark V. Meierhenry
Attorney General