US - Kentucky lawmakers have put forward a raft of legislative amendments to ban the use of placement agents by the State's retirement systems.
The changes are part of a draft bill submitted this week. They aim to prohibit assets of the Kentucky Retirement Systems (KRS) - including the Kentucky Teachers Retirement System and the Judicial Form Retirement System - from being used to pay placement agents and will introduce additional restrictions to the conflict of interest provisions applicable to employees and trustees of the board.
The amendments will also prohibit the chair of the Kentucky Retirement Systems board from serving more than six consecutive years in the position, require the KRS' audit to be completed by the Auditor of Public Accounts at least once every five years and require the systems to pay all costs of the audit; require the KRS to make system expenditures and employee salaries available online.
KRS trustee Chris Tobe said: "KRS needs placement agents like a dog needs ticks. KRS pays professional staff and consultants nearly $1m year so we do not have to pay placement agents.
"KRS staff and selected trustees have known about placement agents for years. KRS staff cling to the fact that the SEC was lobbied off their proposal to make placement agents illegal outright for the time being. I think barely legal at this time is not the standard we should strive for."
The use of placement agents has become highly controversial in the US and is now ranked alongside pay-to-play - the practice of making campaign contributions and related payments to elected officials in order to influence the awarding of lucrative contracts for the management of public pension plan assets - as among the biggest governance issue facing pension funds.
New York has been at the forefront of the scourge on these practices, but the state is by no means alone. California introduced new state legislation in October which means placement agents who solicit business from its pension funds must now register as lobbyists. (Global Pensions: 9 November 2010)
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