An Associated Press news report said A.B. 1743 had stalled in the state Assembly’s Appropriations Committee.
The measure would require placement agents to register as lobbyists and report gifts while prohibiting outside investment managers from paying them contingency fees for driving pension business in the investment managers’ direction.
The involvement of the placement agents has come under fire in California and New York and sparked a joint state-federal investigation of the agents’ activities.
California state Treasurer Bill Lockyer, who sits on the board of the California Public Employees Retirement System (CalPERS), said he would propose an outright ban on placement agents in September if the Legislature failed to pass the bill. Earlier this year, CalPERS released a list of managers not responding to its demand for information about their placement agent use (see CalPERS Calls out Firms not Responding to Placement Agent Info Request).
“If we can’t reform the practices with these firms, we should ban them, the same as New York pension funds and others have done,” Lockyer said, according to the Associated Press. “That’s the next step for me if we can’t get sensible reform in the Legislature.”
He added: “Obviously there’s been a Wall Street sneak attack to try to stall reform of their business practices. We’re trying to root out corrupt practices and the economic incentives that produce bad behavior.”
Assemblyman Felipe Fuentes said the bill would be heard for a second time in the Appropriations Committee next week.
Two former CalPERS officials were sued by state Attorney General Jerry Brown earlier this month for allegedly setting up a system of kickbacks, including a Lake Tahoe condominium, to guarantee outside firms won a piece of the fund’s investment portfolio (see Former CalPERS Officials Sued over Investment Scheme).
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