AB 1743

Bill Subjects

Abstract

Existing law regulates investments made by public pension and retirement systems and defines the term "placement agent" to mean a person or entity hired, engaged, or retained by an external manager, as defined, to raise money or investment from a public retirement system in California. Existing law, the Political Reform Act of 1974, provides for the comprehensive regulation of the lobbying industry, including defining the term "lobbyist" and regulating the conduct of lobbyists. Among its provisions, the act requires lobbyists to register with the Secretary of State and to file periodic disclosure reports, and it prohibits lobbyists from engaging in certain activities, including accepting or agreeing to accept any payment in any way contingent upon the defeat, enactment, or outcome of any proposed legislative or administrative action, as defined. This bill would amend the existing definition of "placement agent" to mean a person, as defined, hired, engaged, or retained by, or serving for the benefit of or on behalf of, an external manager, as defined, to act as a finder, solicitor, marketer, consultant, broker, or other intermediary in connection with the offer or sale of the securities, assets, or services of an external manager to a public retirement system in California for compensation, and would exclude from that definition an employee, officer, director, equityholder, partner, member, or trustee of an external manager who spends 13 or more of his or her time, during a calendar year, managing the securities or assets owned, controlled, invested, or held by the external manager. The bill would define "placement agent" in a similar way for purposes of the Political Reform Act of 1974, except that the definition would be limited to an individual acting in connection with the offer or sale of the securities, assets, or services of an external manager to a state public retirement system in California and would not include employees, officers, or directors of specified external managers or of affiliates of those external managers. In addition, the bill would prohibit a person from acting as a placement agent in connection with any potential system investment made by a state public retirement system unless that person is registered as a lobbyist and is in full compliance with the Political Reform Act of 1974 as that act applies to lobbyists. The bill would also require a person acting as a placement agent in connection with any potential system investment made by a local public retirement system to file any applicable reports with a local government agency that requires lobbyists to register and file reports and to comply with any applicable requirements imposed by a local government agency. The bill would provide that an individual acting as a placement agent is a lobbyist for purposes of the Political Reform Act of 1974 and is thereby required to comply with all regulations and restrictions imposed on lobbyists by the act, and the bill would further expand the definition of "administrative action" for purposes of the act to include, with regard only to placement agents, the decision by any state agency to enter into a contract to invest state public retirement system assets on behalf of a state public retirement system. The bill would specify that a placement agent who is registered with the Securities and Exchange Commission and regulated by the Financial Industry Regulatory Authority is permitted to receive a payment of fees for contractual services provided to an investment manager, except to the extent that payment of fees is prohibited by the proscription on contingency payments to placement agents. Additionally, the bill would require the Public Employees' Retirement System and the State Teachers' Retirement System to each provide to the Legislature, not later than August 1, 2012, a report on the use of placement agents in connection with investments made by those retirement systems. Existing law makes a knowing or willful violation of the Political Reform Act of 1974 a misdemeanor and subjects offenders to criminal penalties. This bill would impose a state-mandated local program by creating additional crimes. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. The Political Reform Act of 1974, an initiative measure, provides that the Legislature may amend the act to further the act's purposes upon a 23 vote of each house and compliance with specified procedural requirements. This bill would declare that it furthers the purposes of the act.