BILL ANALYSIS
AB 1584
Page 1
Date of Hearing: July 8, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 1584 (Committee on P.E.R. & S.S.) - As Amended: June 18,
2009
Policy Committee: P.E.R. &
S.S.Vote: 6-0
Urgency: Yes State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill makes numerous changes aimed at increasing disclosure
and accountability of investment placement agents, board
members, and others associated with public pension funds in
California.
FISCAL EFFECT
No direct costs to the state, as both CalPERS and CalSTRS report
they are adopting policies consistent with the provisions of
this bill.
SUMMARY (Continued)
Specifically, this bill:
1)Requires public retirement system boards to develop and
implement, on or before June 30, 2010, a policy requiring the
disclosure of payments to placement agents in connection with
system investments with external investment managers.
2)Prohibits an external investment manager or placement agent
who violates the board's disclosure policy from soliciting new
investments from the system for five years from the time of
violation, but allows the board to reduce this penalty by a
majority vote, in open session, upon the showing of good
cause.
3)Requires placement agents to disclose to the retirement board
all campaign contributions and gifts they have made to any
AB 1584
Page 2
elected member of the board during the prior 24-month period
before attempting to place any system investments, and to
disclose any subsequent campaign contributions or gifts during
the time the placement agent is receiving compensation in
connection with a system investment.
4)Prohibits a public retirement system from entering into any
agreement with an external investment manager that does not
provide written consent to comply with the disclosure policy.
5)Provides that the board does not have to take action as
described above unless the board determines, in good faith,
that the action described above is consistent with the
fiduciary responsibilities of the board as described in
Section 17 of Article XVI of the California Constitution.
6)Prohibits a member or employee of the board from, directly or
indirectly selling or providing any investment product that
would be considered an asset of the fund to any public
retirement system in California.
7)Expands post-employment restrictions on high level officers
and investment staff of local pensions funds ('37 Act funds),
so that they are consistent with restrictions that currently
apply to officers and staff members of CalPERS and CalSTRS.
8)Applies these expanded provisions to all public pension plans
in California.
COMMENTS
Purpose . This bill, co-sponsored by the state controller and
state treasurer, is proposed in response to recent allegations
by federal and state investigators that certain placement agents
may have paid bribes or kickbacks in "pay-to-play" arrangements
to help their investment firm clients obtain capital commitments
from public pension funds. Placement agents are companies or
individuals that specialize in finding institutional investors
willing to invest in private equity funds or companies issuing
securities. According to the author, the bill is intended to
"ensure that public pension board members, employees and
consultants conduct business to the highest ethical standard,
comply with all fiduciary responsibilities and actively work to
eliminate actual or perceived conflicts of interest."
AB 1584
Page 3
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081