Placement Agent Legislation Introduced in California

The legislation – AB 1743, introduced by Assemblyman Ed Hernandez – would define placement agents as lobbyists in accordance with the state’s Political Reform Act.  Placement agents would be subject to strict gift limits, campaign contribution prohibitions, and be prohibited from receiving compensation contingent upon any investment decision, according to a press release from the California Public Employees Retirement System (CalPERS).

The placement agents, their firms and employers would be required to report quarterly on their fees and compensation and on any honoraria or gifts. The law would apply to CalPERS, the California State Teachers Retirement System (CalSTRS) and local retirement systems in California if those jurisdictions have similar lobbyist registration requirements in place.

The bill is sponsored by the California Public Employees’ Retirement System (CalPERS), state Controller John Chiang and Treasurer Bill Lockyer.

“This bill enhances transparency and removes any cloud of secrecy around investment decisions made by public pension funds,” Hernandez said, according to the announcement. “The message we’re sending is that we won’t let a few placement agents damage the credibility of our public pension plans. The focus is on full disclosure and protecting the system from any kind of improper influence.”

Rob Feckner, President of the CalPERS Board of Administration, said in the press release: “This bill will help ensure full transparency and accountability when it comes to our investment decisions.”   

The latest proposal is Hernandez’s second measure restricting the actions of placement agents. Last fall, he successfully pushed through legislation placing strict new reporting requirements on placement agent activities and strengthening the revolving door policy for retiring pension fund board members, supervisors, and other staff members (see CalPERS Head Calls for Tougher Placement Agent Law).