April 2009 saw the adoption of sweeping pension system reforms in Illinois and New York State that will have a significant effect on investment advisers, managers and consultants.
In Illinois, Public Act 096-0006 became effective on April 3, 2009. The new law makes significant changes to the operations of Illinois retirement systems, pension funds and investment boards by amending the Illinois Pension Code, 40 ILCS 5/1-101 et seq., the Illinois Governmental Ethics Act, 5 ILCS 420/1-101 et seq., the State Officials and Employees Ethics Act, 5 ILCS 430/1-1 et seq. and the State Treasurer Act, 15 ILCS 505/0.01 et seq. The provisions generally impose increased oversight and accountability requirements on the boards of trustees, fiduciaries and investment advisers, managers and consultants. Many of these provisions apply to virtually all pension systems in Illinois, not only at the state level, but at the local level, including pension systems of the City of Chicago and other local governments.
One of the reforms adopted in Illinois is a ban on contingent fee arrangements and placement fees to influence the outcome of an investment decision or the procurement of investment services by an Illinois state or local retirement system, pension fund or investment board. An even more expansive ban was instituted in New York.
On April 22, 2009, New York State Comptroller Thomas DiNapoli imposed a ban on the use of placement agents, paid intermediaries and registered lobbyists with respect to the state’s $122 billion Common Retirement Fund, including arrangements under which any of these persons are compensated on a flat fee, contingent fee or any other basis. Shortly after his announcement, Comptroller DiNapoli released the “New York State Common Retirement Fund Placement Agent Disclosure Policies and Procedures of the Office of the State Comptroller” formalizing this ban. New York City Comptroller William C. Thompson, Jr., is calling for a similar ban to be adopted by the trustees of the New York City pension funds, which hold $82.5 billion in assets. In addition, Comptroller DiNapoli plans to submit proposed legislation to the New York State Assembly to codify his reforms and to enact additional pension system reforms in New York.
These reforms will have a significant effect on investment advisers, managers and consultants doing business with the New York Common Retirement Fund and the Illinois state and local retirement systems and pension funds. For detailed information on these reforms please review the respective Client Updates:
- “Sweeping Illinois Pension Reform Legislation Affects Retirement Systems and Pension Funds and their Advisers, Managers and Consultants”
- “New York State Comptroller Bans Placement Agents, Paid Intermediaries and Lobbyists in Investments with the Common Retirement Fund”