State Treasurer Reforms Pension Investment Policies

Dec 18, 2013

North Carolina State Treasurer Janet Cowell is implementing transparency reform policies for contractors who manage investments for the state pension fund.

The State Treasurer's office is putting transparency reforms in place for contractors who manage some investments for the state pension fund.

The pension fund is worth about 83-billion dollars.

Treasurer Janet Cowell says independent reviews of NC Retirement Systems showed that until 2009, some managers hired third-party brokers, or “placement agents” to arrange investments, often without disclosing to the state.

“The work that we did was to go back and ask all those money managers, 'Did you hire anybody? Was there a placement agent on this transaction? And if so, who was that person? Were they qualified or registered to be a placement agent? What did they get paid?’ so that we had full information of who was interacting with our staff and how these transactions came forth,” Cowell explained.

Cowell says the reviews show some conflicts-of-interest between investors and brokers.

She said most investment contractors have agreed to disclose placement agents in the future. Three have agreed to pay the Treasurer's office for legal fees and investigation costs. Cowell says they're on the right track.

“These firms showed a good faith effort,” Cowell said. “They want to have a long-term relationship with the North Carolina pension. They agreed to help pay for the legal fees. They agreed to help pay financial remedies. They agreed to policy remedies. And so, because we recovered $15 million, that in combination, I would say there has been no material harm to the pension fund.”

Now, she wants the General Assembly to enforce these policies.

“If I ask someone, 'Did you hire a placement agent?' You know, 'Who is that person?' And they don't tell me, or they give me false information, I need to have more teeth to enforce their compliance with these policies we've put in place.”

Cowell also wants the legislature to to expand its definition of bribery and to require placement agencies to register with the state.