SEC Reportedly Probing CalPERS Financial Disclosures

January 7, 2011 ( – The Securities and Exchange Commission (SEC) is reportedly investigating whether the state of California properly informed municipal bond buyers about the true fiscal condition of its largest public pension program.

The New York Times, citing an anonymous source, said the SEC probe of the California Public Employees’ Retirement System (CalPERS) is focused on whether the state adequately disclosed the fund’s investment risk level and how much money might have to be pumped into the fund if its investment program ended up with a shortfall. The Times pointed out that CalPERS lost about a quarter of its investment portfolio during the financial downturn.

The SEC declined to confirm an investigation, citing agency rules, while a CalPERS spokeswoman said it had not been contacted by the SEC about its accounting or about financial disclosures. CalPERS is America’s largest public pension fund with assets of about $220 billion.

“The SEC has an ongoing look at pension funds in California” because of revelations about the use of placement agents who recommended investment managers,” Patricia Macht, a spokeswoman for CalPERS told the Times.

A spokesman for the California state treasurer’s office, which is responsible for disclosures to bondholders, said “we provided all material information about pension fund issues at all times.”

The Times said CalPERS has lately been under fire for a big benefit increase in 1999 when the fund ran various assumptions on how its investments might do. It discussed them in a public meeting but the state did not put them into its bond prospectus, according to the news account.