SEC Ponders Pension Intermediaries Ban

April 22, 2009 ( - The U.S. Securities and Exchange Commission (SEC) is considering rules to restrict money managers from paying to win state pension business.

The effort comes as a state-federal probe continues into the practice of using paid intermediaries in an effort to be chosen to manage a portion of the Empire State’s public pension fund.

Bloomberg reported the SEC is taking another look at a 1999 proposal that would have barred investment advisers from managing state pension funds if they donated to elected officials involved in awarding adviser contracts.

Under the proposal, investment advisers would have been barred from managing pension money for two years after making a political contribution. The measure, which the SEC never adopted, also would have required money managers with government clients to keep records of their contributions.

“One of the first things I asked the staff to do was dust off” the earlier proposal and “take a look at it,” SEC chairman Mary Schapiro told Bloomberg. “Let’s see if it still makes sense or if there are things that we should do differently.”

The SEC and New York Attorney General Andrew Cuomo are investigating whether private-equity firms and hedge funds made illegal payments to so-called placement agents to do business with New York’s pension fund.

Bloomberg reported that New Mexico officials are also examining whether similar practices occurred with its $11.7 billion state trust.

New Mexico this week released a partial list of third-party brokers paid by money managers to win business from the state and also suspended an investment adviser. The list showed 42 brokers were paid as much as $35.9 million to get a piece of New Mexico’s State Investment Council’s trust.