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Rob Feckner, President of the California Public Employees’ Retirement System’s (CalPERS) Board of Administration, and California’s State Controller and Treasurer, today called on their fellow CalPERS board members to support stronger laws that would require placement agents and organizations that hire them to be subject to the reporting and ethics rules governing lobbyists under the California Political Reform Act.
In a letter to the CalPERS 13-member Board, Feckner said stronger rules need to be put in place given recent events that have alleged undue influence by placement agents attempting to sway investment decisions of pension funds in California. He will discuss the idea at the pension fund’s upcoming Board meetings next week.
“I, along with the State Controller and Treasurer, believe that the State must adopt stronger transparency and accountability requirements for all parties engaged in activities to influence public pension investment decisions,” wrote Feckner. “By enacting this change, our members, employers and the public will be able to rest assured that all who serve the system do so with transparency, ethics and accountability.”
Under the proposed concept, placement agents would be defined as lobbyists and be subject to the following regulations:
- Prohibition on compensation paid to placement agents that is contingent upon defeat, enactment, or outcome of any proposed investment action;
- Registration as placement agents, placement agent firms or placement agent employers and quarterly reporting of activities including any honoraria, gifts, fees or other compensation;
- Significant limits on gifts to individuals; Prohibition on campaign contributions; and
- Required attendance at a biennial ethics class.
The idea is in addition to an internal policy the CalPERS Board established in May requiring its investment partners and external managers disclose their retention of placement agents, the fees they pay them, and the services performed. The policy also requires agents to register as broker-dealers with the U.S. Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA) -- or CalPERS will decline the opportunity to retain or invest with the external manager or investment vehicle.
Meanwhile, CalPERS has launched a special review of placement agents to ensure that the pension fund was not victimized in any way. Feckner recently cautioned CalPERS Board members to not meet with placement agents until the review was complete.
The CalPERS Board supported a now-enacted legislative measure, AB 1584 (Hernandez), to establish disclosure requirements for placement agents and their firms and stronger revolving-door prohibitions for public agents for the fund.
“I commend Rob Feckner, Controller Chiang and Treasurer Lockyer for advancing stronger reforms,” said Assemblyman Ed Hernandez, author of AB 1584 and Chair of the Assembly PERSS Committee. “This is a natural follow-up to the work of our Committee and I look forward to carrying the bill that will help CalPERS expand protections for the System.”
A copy of Feckner’s letter can be found in the Press Room of CalPERS Web site at www.calpers.ca.gov.
CalPERS is the nation’s largest public pension fund with approximately $200 billion in market assets. It provides retirement benefits to more than 1.6 million State, school and local public employees, retirees and their families.
