On April 22, New York State Comptroller Thomas DiNapoli published updated policies and procedures banning the use of placement agents, paid intermediaries and registered lobbyists with respect to the State’s Common Retirement Fund (CRF) in response to recent events. The revised policies and procedures require any outside investment manager managing assets of the CRF directly (in a managed account or a fund) or, if the CRF has discretion to decline any investment recommended, indirectly through another manager or pooled investment vehicle, to provide a Disclosure Letter to the CRF certifying that no placement agent was employed in connection with the investment and none of the CRF’s representatives, advisors or consultants received any benefit in connection with the investment. The Comptroller would like the procedures to be officially adopted into state regulation. The definition of Placement Agent in the policy and procedures appears to encompass any party engaged by covered investment managers to help market and sell fund interests or management services, even if use of a registered broker-dealer in connection with the distribution of fund interests would be required by applicable federal securities laws.  

Earlier, on April 3, the Illinois General Assembly passed a number of ethics reforms including prohibitions on employees, board members and spouses of employees or board members of the state’s five pension systems from accepting fees or gifts in connection with investment of assets of the plans and a ban on retaining any person or entity to attempt to influence the outcome of an investment decision or decision to obtain investment advice or services by the state pension plans if the compensation is contingent, partially or wholly, on obtaining the investment or mandate. Other legislation is pending that would further clarify the standards applicable to investment managers’ and funds’ use of paid solicitors and placement agents in connection with a complete reorganization of the Illinois pension system.  

To read the New York press release, policies and procedures, click here.