Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, February 8, 2010

Two Investment Firms Settle New York's Pay-to-Play Investigation

The New York AG's Office announced that it has secured agreements with two major investment firms in the ongoing New York State Pension Fund investigation.  Markstone Capital adopts the Public Pension Fund Reform Code of Conduct and agrees to return $18 Million to the New York State Common Retirement Fund.  Wetherly Capital Group and its Broker-Dealer DAV/Wetherly Financial will exit the placement business and return $1 Million to the Common Retirement Fund.  According to AG Cuomo, Markstone and Wetherly are the eighth and ninth firms to adopt the Code of Conduct.

The Code of Conduct bans investment firms from hiring, utilizing, or compensating placement agents, lobbyists, or other third-party intermediaries to communicate or interact with public pension funds to obtain investments. To avoid pay-to-play schemes, the Code prohibits investment firms (and their principals, agents, employees, and family members) from doing business with a public pension fund for two years after the firm makes a campaign contribution to an elected or appointed official who can influence the fund’s investment decisions. This provision also bars all firms currently doing business with the pension fund from making such campaign contributions. Investment firms must also disclose any conflicts of interest to public pension fund officials or law enforcement authorities, to increase transparency and avoid abuse in the management of public pension funds.

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