NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A3137
SPONSOR: Abbate TITLE OF BILL: An act to amend the retirement and social security
law, in relation to prohibiting the use of placement agents by managers
doing business with the common retirement fund
PURPOSE:
For the purpose of maintaining the integrity of the New York State and
Local Retirement System ("System") and the New York State Common Retire-
ment Fund ("CRF" or "Fund"), as well as to increase transparency, this
bill would codify the State Comptroller's policy prohibiting the use of
placement agents or intermediaries by the Common Retirement Fund.
SUMMARY OF PROVISIONS:
Section 1 of this bill renumbers Section 425 of the Retirement and
Social Security Law as Section 426 of such Law and adds a new Section
425 to the Retirement and Social Security Law which prohibits the CRF
from engaging, hiring, investing with or committing to an investment
manager that is using the services of a placement agent or intermediary
to assist such investment manager in obtaining investments by the CRF,
and further prohibits the CRF from engaging, hiring, investing with or
commit to an investment manager without obtaining from such investment
manager a certification in the form and manner prescribed by the CRF
stating that such investment manager has not used the services of a
placement agent or other intermediary to assist such investment manager
in obtaining investments by the CRF.
This Section defines an "investment manager" as any person or entity,
other than an employee of the State Comptroller, engaged by the CRF in
the management of an investment portfolio of the CRF.
Additionally, this Section defines a "placement agent or intermediary"
as any person or entity, including a registered lobbyist, that is
directly or indirectly engaged and compensated by an investment manager
to promote investments to or solicit investment by the CRF, whether
compensated on a flat fee, a contingent fee, or any other basis. A
placement agent or intermediary is not a regular employee of the invest-
ment manager.
Section 2 of this bill provides for an immediate effective date.
PRIOR LEGISLATIVE HISTORY:
S.5632 and A.7909 of 2011-2012
S.4238 and A.3635 of 2013-2014
S.4927 and A.5054 of 2015-2016
JUSTIFICATION:
Restoring confidence in the integrity of the Fund's investment deci-
sion-making process and in the operations of the System has been a top
priority of State Comptroller Thomas P. DiNapoli since he took Office.
In conducting a top to bottom review of the way the Fund does business,
reforming Fund operations and restoring the credibility of the opera-
tion, Comptroller DiNapoli determined a placement agent ban was appro-
priate as part of his commitment to reforming the operations of the
Fund.
In order to preserve the independence and integrity of the Fund, to
preclude potential conflicts of interest, and to assist the State Comp-
troller in fulfilling his or her duties as a fiduciary to the Fund, this
bill codifies the policy that Comptroller DiNapoli adopted on April 21,
2009, which prohibits the Fund from engaging, hiring, investing with or
committing to an outside investment manager who is using the services of
a placement agent or intermediary to assist the investment manager in
obtaining investments by the Fund. By codifying his policy, Comptroller
DiNapoli is ensuring that the Fund will always be protected.
The State Comptroller urges approval of this legislation.
BUDGET IMPLICATIONS:
This bill has no significant fiscal impact.
EFFECTIVE DATE:
Immediately.
STATE OF NEW YORK
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3137
2017-2018 Regular Sessions
IN ASSEMBLY
January 26, 2017
___________
Introduced by M. of A. ABBATE -- (at request of the State Comptroller)
-- read once and referred to the Committee on Governmental Employees
AN ACT to amend the retirement and social security law, in relation to
prohibiting the use of placement agents by managers doing business
with the common retirement fund
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The retirement and social security law is amended by adding
2 a new section 424-a to read as follows:
3 § 424-a. Use of placement agents or intermediaries prohibited. 1. The
4 fund shall not engage, hire, invest with or commit to an investment
5 manager that is using the services of a placement agent or intermediary
6 to assist such investment manager in obtaining investments by the fund
7 nor shall the fund engage, hire, invest with or commit to an investment
8 manager without obtaining from such investment manager a certification
9 in the form and manner prescribed by the fund stating that such invest-
10 ment manager has not used the services of a placement agent or other
11 intermediary to assist such investment manager in obtaining investments
12 by the fund.
13 2. For the purposes of this section:
14 (a) "investment manager" shall mean any person, other than an employee
15 of the comptroller, or entity engaged by the common retirement fund to
16 manage a part or all of an investment portfolio of the fund. "Manage"
17 shall include, but is not limited to, the analysis of portfolio hold-
18 ings, and the purchase, sale, and lending thereof. Any investment made
19 by the fund pursuant to subdivision seven of section one hundred seven-
20 ty-seven of this chapter shall be deemed to be the investment of the
21 fund in such investment entity rather than in the assets of such invest-
22 ment entity.
23 (b) "placement agent or intermediary" shall mean any person or entity,
24 including registered lobbyists, directly or indirectly engaged and
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD06993-01-7
A. 3137 2
1 compensated by an investment manager, other than an employee of the
2 investment manager, to assist the investment manager in obtaining
3 investments by the fund whether compensated on a flat fee, a contingent
4 fee, or any other basis. Employees of an investment manager and its
5 affiliates are excluded from this definition unless they are employed
6 principally for the purpose of securing or influencing the decision to
7 secure a particular investment transaction or investment by the fund.
8 § 2. This act shall take effect immediately.
