CalPERS Adds Placement Agent Disclosure Policy

May 11, 2009 ( - With a New York-based pay-to-play investigation continuing to have effects around the retirement services industry, the nation's largest public pension plan has adopted a new paid agents policy mandating broad disclosures.

A news release from the California Public Employees’ Retirement System (CalPERS) said its new policy calls for external managers to disclose fees and other information about the placement agents they hire to seek CalPERS asset management business.

“This policy will help us ensure that our decisions are made solely on the merits of proposed investments with full transparency and disclosure,” said Rob Feckner, CalPERS Board President, in the announcement. “We want to know who’s being hired, how much they’re being paid, what they’re paid for, and who pays them.”

Specifically, according to the news release, the policy requires:

  • CalPERS Investment partners and external managers must disclose their retention of placement agents, the fees they pay them, the services performed, and other information about their engagement;
  • Placement agents must register as broker-dealers with the U.S. Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA); and
  • Disclosed information must include agents’ identities, resumes of key people, description of compensation and services, copies of agreements, and if the agent is registered with the SEC or as a lobbyist in any state or national government.

The new guidelines affect partners and external managers who retain placement agents to arrange meetings, prepare presentation materials, identify potential limited partners and otherwise facilitate communication with CalPERS regarding potential investment of its assets, the fund said in its announcement.

The policy would apply to all external manager agreements made after adoption and to existing agreements if their terms were extended or if there were new CalPERS commitments to funds. In addition, the policy would apply to partnerships in which CalPERS has a majority ownership interest.

The Securities and Exchange Commission was reported to be nearing a rules release – possibly by mid-summer – dealing with the pay-to-play issue (see  An SEC Pay-to-Play Rule Expected by Mid-Summer ).

CalPERS has approximately $177 billion in market assets and provides retirement benefits to more than 1.6 million state, school and local public employees, retirees and their families, and health benefits to nearly 1.3 million members.