When members of the State Investment Council, a panel that plays a key role in the handling of New Jersey’s public-worker pension assets, hold their next public meeting they will be working under tougher ethics rules thanks to a bipartisan bill Gov. Phil Murphy recently signed into law.

The new restrictions prohibit any member of the council from voting on a specific investment if it relates to a company or firm they work for or have worked for, or if they have a direct investment in a company or firm that’s worth more than $5,000.

The toughening of the council’s ethics rules caps an effort that goes back roughly a decade after questions were raised about investment decisions that were made in the run up to the Great Recession. But it remains to be seen when the council will hold its next public meeting as the state Senate has yet to consider a slate of eight nominees that Murphy put forward in April to replace members who were appointed by former Gov. Chris Christie. That inaction forced the panel’s July meeting to be postponed, and it is not expected to meet in August.

The state Division of Investment within the Department of Treasury makes most day-to-day investment decisions for the $78.6 billion pension system, but the broader strategies and asset allocations are set by members of the investment council. Half the 16 seats on the council — which was established by a state law that originated in the 1950s — are set aside for the direct appointees of the governor, and most others represent public-worker groups.

In danger of being kicked off council

The council typically meets every other month in Trenton, with members voting on general policy matters. It also receives public briefings and due-diligence reports from staff on other issues that don’t always require votes to be recorded. At times, members leave the meeting room to ensure they are not drawn into discussions where there may be a conflict of interest.

But under the new law enacted by Murphy, members of the council will now be in danger of losing their seat on the panel if they decide to vote on any investment transaction that directly involves a company or firm that they work for or have worked for. The same restriction applies if the investment involves a company that their spouse works for or has worked for.

Members will also be in danger of being kicked off the council if they participate in a vote involving an investment transaction with any entity where they have a personal investment worth $5,000 or more. The same rule will apply if their spouse has a personal investment worth $5,000 or more, a bar that appears high enough to prevent it from catching routine stock investments or 401(k) holdings.

The new law was inspired by questions that were raised in 2008 about a stake in Lehman Brothers, a now-defunct New York investment bank, that the pension system took on just before the onset of the Great Recession, according to the legislation’s primary sponsor Joseph Pennacchio (R-Morris).

While the investment itself was pursued by staff at the Division of Investment, two members of the investment council at the time had financial ties to the firm, according to council records. The state ultimately lost money as Lehman Brothers faltered, leading to a lawsuit and an eventual financial settlement.

Several years later, ethics issues also swirled around then investment council chairman Robert Grady; these included questions about pension-fund investments that the state launched and that had financial ties to Grady’s former employer, The Carlyle Group.

Pennacchio: ‘When in doubt, stay out’

Pennacchio said during an interview yesterday that it was “the combination of those two things, but also just general transparency” that led him to pursue tougher ethics rule for investment council members over the last decade. Murphy signed the bill into law in early July, and it went into effect immediately.

“We’re talking about transparency,” Pennacchio said about conflicts of interest that the new law hopes to prevent. “When in doubt, stay out.”

Based on the current legislative calendar, it’s possible that the investment council will still be able to hold its next regular meeting on September 27, with all its vacant seats filled. The Senate has several days scheduled for committee meetings in early September, leaving time for the eight nominees that Murphy named on April 16 to go before the Judiciary Committee. They are: Theodore R. Aronson of Philadelphia, Pa.; Danielle Beyer, Roselle Park; Wasseem Boraie, East Brunswick; Leonard J. Carr, West Orange; Vaughn Crowe, Randolph; Samir M. Pandiri, Chatham; Deepak Raj, Princeton; and Susan Soh, Short Hills.

The Judiciary Committee last met in late July, but only to go over the nomination of state Supreme Court Justice Anne Patterson for tenure on the high court.

Legislative staff have blamed general scheduling matters for the inaction on the investment council nominees, and Senate President Steve Sweeney (D-Gloucester) said he wasn’t personally standing in the way of their confirmation when asked about the holdup recently by NJ Spotlight. Sweeney had previously blocked Senate confirmation of two of Murphy’s nominees for cabinet positions, education commissioner Lamont Repollet and higher education secretary Zakiya Smith Ellis, over specific policy concerns.