Schwarzenegger Signs Law on Placement Agents
October 14, 2009 (PLANSPONSOR.com) - California
Governor Arnold Schwarzenegger has signed a bill clamping
down on placement agents, the marketing middlemen hired by
private equity groups and other investment firms to secure
business from public pension funds.
The Sacramento Bee reports that Assembly Bill 1584
requires disclosure of fees paid by investment firms to
placement agents. It also requires agents to notify pension
system governing boards of any campaign contributions or
gifts they've made to system board members.
The new rules are in response to a multi-state probe
into whether placement agents improperly influence pension
fund boards that began in New York, where a number of
individuals have been indicted (see
Cuomo Announces Guilty Pleas in
Pay-to-play Probe
).
The New York probe broadened to other states, including
New Mexico (see
NM to Undergo Independent Review of
Investment Practices
) and California, with subpoenas issued by California
Attorney General Jerry Brown (see
California AG Steps Up Pension Corruption
Investigation
), the Securities and Exchange Commission, and others.
In May, a former employee of Los Angeles placement agent
firm Wetherly Capital Group, which has successfully
represented clients seeking business with the California
Public Employees Retirement System (CalPERS) and California
State Teachers Retirement System (CalSTRS), pleaded guilty
to paying fees to New York political figures (see
Ramirez Enters Pension Probe Guilty
Plea
).
The Bee said it had previously reported that a Nevada
placement agent firm Arvco Capital Research, headed by
former CalPERS board member Alfred Villalobos, was among
the most successful at securing business from CalPERS. In
addition, CalPERS board member Charles Valdes is being
investigated by the Fair Political Practices Commission for
accepting campaign donations from firms doing business with
the fund, including Arvco.
CalPERS adopted a policy in May requiring investment
firms to disclose whether they've hired placement agents
(see
CalPERS Adds Placement Agent Disclosure
Policy
). CalSTRS created a similar policy in 2006.
New York and Connecticut state officials and
officials in Los Angeles have already adopted new private
placement agent rules (see
NYC's Thompson Backs SEC Private
Placement Agent Regulations
), as has New Jersey's State Investment Council (see
NJ Adopts New Placement Agent
Standards
).
Rebecca Moore
editors@plansponsor.com