New York Proposes Legislation Imposing Criminal Penalties on Use of Intermediaries for Pension Funds
The New York State Legislature has introduced bipartisan legislation that would codify Attorney General Cuomo’s anti-pay-to-play Code of Conduct for state pension funds. The legislation bans the use of placement agents, although it allows the use of third parties to directly assist investment firms by preparing marketing materials or conducting due diligence. The proposed legislation prohibits firms from doing business with a public pension fund for 2 years after making a campaign contribution. Additional elements include increased disclosure, a higher standard of conduct (no “appearance of impropriety”), and an annual compliance certification.
OUR TAKE: The move from a Code of Conduct to legislation allows for enhanced penalties including criminal prosecution. New York has led the way on this issue. Expect other states and the SEC to follow suit.