The amendments to AB 1743 (Hernandez) are now in print.  This bill would require placement agents with respect to California public retirement systems to register as lobbyists.

These amendments address several technical concerns that I had with earlier versions of the bill.  In particular, I thought that the bill confused the two situations in which placement agents are used to obtain retirement system business.  Investment advisers may use placement agents to obtain investment advisory service contracts.  In other situations, a fund or other investment vehicle may use a placement agent to solicit a direct investment by the retirement system.  The bill now contemplates these two scenarios in the definition of "external manager".  I'm pleased that CalPERS, as one of the bill's sponsors, was willing to work with me in making these changes.

One "sleeper" in the bill is that the exclusion for employees, officers and directors of an external manager requires, among other things, that the external manager has agreed to a fiduciary standard of care, as defined by the standards of conduct applicable to the retirement board of the retirement system and set forth in Article XVI, Section 17 of the California Constitution.  At the federal level, the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the Securities and Exchange Commission to study the obligations and standard of care applicable to broker-dealers.   Pursuant to this requirement the Commission is requesting public input and it has already received a large number of comments.