CalPERS Head Calls for Tougher Placement Agent Law

November 20, 2009 ( head of the California Public Employees’ Retirement System (CalPERS) Board of Administration has directed staff members of the giant pension fund to push for a new tougher state law governing private placement agents.

Rob Feckner released a statement Friday announcing CalPERS’ backing for a legislative proposal, saying the pension program needed to further respond to allegations around the country that placement agents improperly benefited by helping investment managers win public pension mandates.

According to the CalPERS statement, Feckner’s proposal would define placement agents as lobbyists and subject them to the following regulations:

  • Prohibition on compensation paid to placement agents that is contingent upon defeat, enactment, or outcome of any proposed investment action;
  • Registration as placement agents, placement agent firms or placement agent employers and quarterly reporting of activities including any honoraria, gifts, fees or other compensation;
  • Significant limits on gifts to individuals;
  • Prohibition on campaign contributions; and
  • Required attendance at a biennial ethics class.

The proposed legislation would be in addition to a new state law advanced by state Assemblymember Ed Hernandez, that was modeled from CalPERS own internal placement agent policy (see CA Officials Reported Drafting Placement Agent Bill ). 

“It is crystal clear that we need stronger laws in California for placement agents to ensure full transparency and accountability,” said Feckner, in the statement.  “I personally believe that we must do everything in our power to make sure that our investment processes and decisions are above reproach and meet the high standards we set for ourselves and our System.”

The CalPERS board established in May an internal policy requiring its investment partners and external managers to disclose their retention of placement agents, the fees they pay them and the services performed. The policy also requires agents to register as broker-dealers with the U.S. Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA) – or CalPERS won’t hire the external investment manager.

CalPERS is the nation’s largest public pension fund with approximately $200 billion in market assets.