NYC Pension Funds Unveil Disclosure Rules

A Liu news release said the new rules will apply to the Teachers’ Retirement System (TRS) and the New York City Employees’ Retirement System (NYCERS) that total $74.5 billion in assets as of April 2010. The rules, which go into effect with the start of the 2011 fiscal year on July 1, 2010, also apply to the Board of Education Retirement System (BERS), totaling $2.5 billion in assets as of April 2010. 

 “By instituting these new policies, we are holding investment managers to higher standards than ever before,” Liu said. “Any violation of these rules could result in financial and reputational damage to the investment manager.” 

Effective July 1, the following policies will be in place: 

• Investment managers must certify in writing that they have not given any gifts to any employee in the Comptroller’s Office, and have complied with NYC Conflict of Interest Board gift restrictions for  the Systems and Trustees ; 
• Investment managers must disclose all contacts with employees of the Comptroller’s Office regarding new investments as well as contacts with other individuals, such as Trustees, involved in the investment decisionmaking process; 

The rules also require investment managers to certify that: 

• No placement agent was used in the connection with securing the Systems’ commitment to any private equity investment transaction;  
• Full disclosure of all fees and terms relating to any firm retained to provide marketing or placement services for transactions that are not covered by the placement agent ban; 
• Marketing/placement fees, if any, shall be fully borne by the investment manager;  
• They have read and complied with Chapter 68 of the NYC Conflict of Interest Board rules and have not caused any employee of the Comptroller’s Office or Trustee or employee of NYCERS or TRS to breach them in any way; 
•  Agree that the Systems may terminate an investment commitment or contract, and any obligations to pay future management or performance fees, for violation of the Systems’ placement agent policy and related disclosure requirements.    

In addition, Liu has voluntarily agreed not to accept any campaign contributions from investment managers and their agents doing business with, or seeking to do business with, the New York City pension systems, the announcement said.  

Liu announced initial placement agent restrictions in February (see NYC Redraws Pension Placement Agent Regs .)

Steps announced by Liu come in light of state-federal investigations into the activities of placement agents at pension funds around the country and announcements by a number of pension fund boards they were instituting similar placement agent restrictions.