The action comes amid an ongoing internal investigation into the role and influence of so-called placement agents – middlemen brokers – in securing funding from CalPERS for their clients.
Members of the board also will be required to attend annual training sessions detailing their responsibilities to fund participants and beneficiaries, CalPERS said.
“By toughening our governance policies, we’re making sure that board members are held to the strictest standards,” said Rob Feckner, president of the CalPERS Board of Administration. “The guidelines help us keep the focus on what’s important – the quality of our investments.”
Among the policies approved by CalPERS:
- Board members will be required to refer communication concerning existing or potential investments to CalPERS Chief Investment Officer. The guideline also calls for Board Members to refrain from advocating a course of action concerning an investment with CalPERS staff outside a Board or Committee meeting.
- The Board of Administration President will be responsible for implementing any disciplinary action against a Board member who violates Board policies. The disciplinary action could include admonishment, censure, temporary termination of travel privileges, removal as a committee chair or vice chair, or the requirement of additional ethical or fiduciary training. The Vice President is responsible for any action against the Board President.
- The Board’s Code of Ethics as well as conflict-of-interest rules will be incorporated into the Governance Principles, creating a single document.
“Our staff must make decisions based squarely on the merits of a transaction,” said George Diehr, CalPERS Board Vice President. “We want independent, objective analysis to be the ultimate guide when it comes to CalPERS investments, and these new policies ensure that will happen.”
CalPERS is the nation’s largest public pension fund with about $200 billion in market assets. It provides retirement benefits to more than 1.6 million state, school and local public employees, retirees and their families, and health benefits for nearly 1.3 million members.
In May, CalPERS adopted a policy requiring external managers to disclose fees and other information about the placement agents they hire to seek CalPERS business.
“We want to know who’s being hired, how much they’re being paid, what they’re paid for, and who pays them,” Feckner said at the time.
Specifically, the action required CalPERS’ investment partners and external managers to disclose their retention of placement agents, the fees they pay them, the services performed, and other information about their engagement. The agents must register as broker-dealers with the U.S. Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA).