Nebraska Administrative Code Topic - INVESTMENT COUNCIL

26 Jun 2025 --
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Overview of Nebraska Administrative Code – Investment Council

The Nebraska Investment Council (NIC) oversees state investments, including the Nebraska Public Employees Retirement Systems (NPERS) and other public funds. The NAC lays out rules for:

Fiduciary Responsibilities

Council members must act in the best interests of the state and beneficiaries.

Investments must follow prudent investor standards.

Investment Policy and Strategy

Policies for asset allocation, risk management, and diversification.

Guidelines for selecting external managers, funds, and securities.

Reporting and Transparency

Regular reporting of investment performance and financial statements.

Disclosure of fees, conflicts of interest, and investment decisions.

Conflict of Interest and Ethics

Council members and staff cannot have personal financial interests in investment decisions.

Any potential conflicts must be disclosed and managed.

Audit and Compliance

Independent audits and compliance checks ensure adherence to state law and NIC policies.

Detailed Case Examples

Case 1: Unauthorized Investment in High-Risk Asset

Scenario: The NIC staff directed funds into a high-risk private equity fund outside the approved investment policy.

NAC Application: NAC sections require adherence to the council’s investment policy and prudent investment standards.

Outcome: The council reviewed the action, reallocated the funds to approved assets, and implemented stricter internal controls. Staff received retraining to ensure compliance with approved investment strategies.

Case 2: Conflict of Interest in Manager Selection

Scenario: A council member recommended a fund manager in which they held personal stock.

NAC Application: NAC rules prohibit personal financial interest influencing investment decisions and require full disclosure of conflicts.

Outcome: The recommendation was rejected, the member recused themselves from related decisions, and a formal disclosure process was reinforced for all future council actions.

Case 3: Failure to Report Performance Metrics

Scenario: An investment manager failed to submit quarterly performance reports on a significant state fund.

NAC Application: NAC requires timely reporting of investment performance to the council to ensure transparency and accountability.

Outcome: The council issued a formal warning, imposed contractual penalties, and required immediate compliance. The reporting lapses triggered a review of all external managers’ reporting practices.

Case 4: Mismanagement of Pension Fund Assets

Scenario: A fund under NIC management experienced unusually high losses due to speculative trading inconsistent with fiduciary guidelines.

NAC Application: NAC standards demand prudent investor principles and diversification to minimize unnecessary risk.

Outcome: The council conducted an internal audit, suspended the portfolio manager, and revised internal controls and risk management policies. The case emphasized fiduciary responsibility to beneficiaries.

Case 5: Non-Compliance with Ethical Standards

Scenario: A NIC staff member used insider knowledge from council meetings to benefit a personal investment portfolio.

NAC Application: NAC sections on ethics prohibit using confidential information for personal gain.

Outcome: The staff member was terminated, and NIC reinforced ethics training and confidentiality agreements. This case highlighted the importance of ethical compliance to protect state assets.

Case 6: Delayed Audit Findings

Scenario: An external audit of the NIC found discrepancies in investment reporting, but staff delayed notifying the council.

NAC Application: NAC rules require prompt reporting of audit findings to ensure transparency and accountability.

Outcome: NIC mandated immediate reporting of all audit findings, instituted stricter reporting deadlines, and implemented corrective actions to prevent future delays.