According to a CalPERS press release, the legislation would:
- Require that placement agents be defined as lobbyists in accordance with the Political Reform Act;
- Prohibit compensation paid to placement agents that is contingent upon defeat, enactment or the outcome of any proposed investment action;
- Require placement agents, their firms and employers to register and report quarterly on their activities including any honoraria, gifts, fees or other compensation;
- Significantly limit gifts to individuals;
- Prohibit campaign contributions by placement agents; and
- Require attendance at a biennial ethics class.
The legislation would exclude individuals whom external
managers employ primarily to manage assets or interact with state pension funds
on investment policy matters. CalPERS said its Investment Office is confident
that access can still be afforded to small and emerging investment managers,
even with the legislation.
In May, CalPERS adopted a new policy requiring that
investment partners and external managers disclose their retention of placement
agents, the fees they pay them, the services performed, and other information
about their engagement. Placement agents also are required to register as
broker/dealers with the U.S. Securities and Exchange Commission (SEC) or the
Financial Industry Regulatory Authority (FINRA) or CalPERS will decline the
opportunity to retain or invest with the external manager or investment
In October, state law was enacted that expanded upon
CalPERS’ policy. The law required disclosure of campaign contributions by
placement agents to retirement board members, prohibits board members from
selling investments to other public pension funds, and increases the time that
former board members and pension fund executives must wait before they can try
to influence board actions.
However, the head of the CalPERS board called for a new tougher state law (see CalPERS Head Calls for Tougher Placement Agent Law).