Keywords: Pension system reform, Illinois
Public Act 096-0006, New York Common Retirement Fund, placement
agents, placement fees, investment boards, pension funds.
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:
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Mayer Brown article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
intended to provide legal advice. Readers should seek specific
legal advice before taking any action with respect to the matters
Copyright 2009. Mayer Brown LLP, Mayer Brown
International LLP, and/or JSM. All rights reserved.
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