Placement Agent Policies for Massachusetts Public Pension Systems

The local retirement boards in Massachusetts are subject to new regulations regarding placement agents. That means if you have one of the boards as investor in your fund or a client in your advisory business, you need to supply new information to your clients/investors.

Public Employee Retirement Administration Commission is the umbrella regulatory organization that oversees the dozens of local retirement boards in the Commonwealth. Last month they issued Memorandum #34 that implements the new PERAC Placement Agents Policy (.pdf).

As a manager you will need to provide:

(a) a statement whether you used a placement agent

(b)  a resume detailing education, professional designations, regulatory licenses and investment and work experience.  If he or she is a current or former member of a retirement board, employee or consultant or immediate family of such a person that fact should be specifically noted.

(c)  a description of any and all compensation of any kind provided or agreed to be provided to a placement agent, including the nature, timing and value thereof;

(d)  a description of the services to be performed by the placement agent

(e) a written copy of any and all agreements between the manager and the placement agent

 (f) in the event that any current or former Massachusetts public pension system board members, employees, consultants or other service providers have suggested the retention of the placement agent, the names of that person

 (g)  a statement that the placement agent has a minimum of three years experience in the investment field

 (h)  a statement that the placement agent is registered with the Securities and Exchange Commission or the Financial Industry Regulatory Authority, or, if appropriate, the Commodity Futures Trading Commission

The pension board will have to include a provision in the investment management agreement that in the case of a breach will allow the board to terminate the agreement and have two years of management fees returned.