| 1 | A bill to be entitled |
| 2 | An act relating to placement agents; amending s. 215.47, |
| 3 | F.S.; prohibiting state investment funds from being used |
| 4 | to pay the fees or commissions of placement agents; |
| 5 | requiring the State Board of Administration to deal |
| 6 | directly with private equity firms and companies issuing |
| 7 | securities; providing an effective date. |
| 8 |
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| 9 | WHEREAS, according to media reports, Florida's public |
| 10 | retirement and pension system has invested approximately $2 |
| 11 | billion in multiple private investment firms between December, |
| 12 | 2009, and October, 2010, and |
| 13 | WHEREAS, placement agents, who serve as intermediaries to |
| 14 | connect investment firms with state pension systems, often |
| 15 | receive finder's fees of approximately 1 to 2 percent of the |
| 16 | investment or even $1.5 million for their nominal services, |
| 17 | which can result in higher management fees that are paid by the |
| 18 | taxpayers of this state, and |
| 19 | WHEREAS, because placement agents are not hired or employed |
| 20 | by the retirement and pension funds, the disclosure of who is |
| 21 | involved in the transaction, what fees are paid, and what work |
| 22 | is done to merit the fees is often obscure, and |
| 23 | WHEREAS, once placement agents were discovered to be |
| 24 | involved in kick-back scandals involving public pension funds in |
| 25 | other states, their practices came under scrutiny and even |
| 26 | regulation, and |
| 27 | WHEREAS, an investigation into placement agents and state |
| 28 | pension fund misconduct in one state has resulted in multiple |
| 29 | guilty pleas and the recovery of more than $120 million for the |
| 30 | state pension fund, and |
| 31 | WHEREAS, in light of these problems involving placement |
| 32 | agents and public pension funds, the Securities and Exchange |
| 33 | Commission has begun requiring the registration of placement |
| 34 | agents, and |
| 35 | WHEREAS, reputable national financial advisors have argued |
| 36 | that there is no legitimate reason to employ the services of |
| 37 | placement agents, and |
| 38 | WHEREAS, in the instances in which the State Board of |
| 39 | Administration of this state made placement-agent pay a public |
| 40 | record, it was discovered that placement agents, in seven |
| 41 | transactions, received approximately $12 million or |
| 42 | approximately 1.5 percent of Florida's investment of $825 |
| 43 | million, and |
| 44 | WHEREAS, it is reasonably believed that all management fees |
| 45 | that are paid to the private investment firm reduce the amount |
| 46 | of return paid to the investor, who is the taxpayer of this |
| 47 | state, NOW, THEREFORE, |
| 48 |
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| 49 | Be It Enacted by the Legislature of the State of Florida: |
| 50 |
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| 51 | Section 1. Subsection (22) is added to section 215.47, |
| 52 | Florida Statutes, to read: |
| 53 | 215.47 Investments; authorized securities; loan of |
| 54 | securities.-Subject to the limitations and conditions of the |
| 55 | State Constitution or of the trust agreement relating to a trust |
| 56 | fund, moneys available for investments under ss. 215.44-215.53 |
| 57 | may be invested as follows: |
| 58 | (22) Notwithstanding any other provision of law, no |
| 59 | portion of moneys invested under this section, including any |
| 60 | portion used to pay an investment manager's fee, may be used to |
| 61 | pay placement agent fees or commissions. As used in this |
| 62 | subsection, the term "placement agent" means an individual who |
| 63 | is hired by a private equity fund or company issuing securities |
| 64 | for the purpose of finding people who are interested in |
| 65 | investing in the fund or securities. In selecting and purchasing |
| 66 | investments, the board must deal directly with the investment |
| 67 | fund or company and not through a placement agent. |
| 68 | Section 2. This act shall take effect upon becoming a law. |