Under the Louisiana law, consultants and money managers will have to report their conflicts and non-pension fund sources of revenue semiannually, regardless of whether consultants or money managers have any such revenues to report, Mr. Schneider said. The penalty for failure to disclose is the value of the revenue the firm didn't disclose, together with any damages caused by the lack of disclosure, Mr. Schneider said. And for an intentional failure to disclose, the penalty would be triple the value of the revenue and damages, he added.
According to Mr. Schneider, the law states: "Consultants also shall provide full disclosure of any payments they receive from money managers, in hard or soft dollars, for any services they provide, including but not limited to performance measurement, business consulting and education."
Said Samuel W. "Skip" Halpern, executive vice president, Independent Fiduciary Services Inc., Washington: "The overall thrust of the legislation is healthy form a public policy perspective. The statute is well aimed at focusing on revenue from other than pension sponsor sources, and I take that to mean revenue from helping money managers in their proprietary business.
"It's a good provision insofar as it refers to revenue in both hard and soft dollars," Mr. Halpern said. "The law has a presumption that the failure to disclose causes damage. From the standpoint of good governance, that is a good presumption."
Pension executives in Louisiana also applauded the new law.
"We think it is a very fair law," said Bonita B. Brown, director, of the $11.9 billion Louisiana Teachers' Retirement System, Baton Rouge. "We've already been vetting our consultants and have gone to great lengths as long as 15 years ago to make sure there are no conflicts."
Holbein Associates Inc., Dallas, is the fund's general consultant, she said. R.V. Kuhns & Associates Inc., Portland, Ore., is its specialty consultant for performance evaluation, and Hamilton Lane Advisors LLC, Bala Cynwyd, Pa., is its alternative investments consultant.
At the $7 billion Louisiana State Employees' Retirement System, Baton Rouge, Robert W. Beale, CIO, said New England Pension Consultants, Cambridge, Mass., is the system's consultant.
"They have been cleared by the SEC," he noted, referring to the agency's examination of consultants and potential conflicts of interest. He said it is premature to evaluate the impact.
Julia B. LeBlanc, CIO, of the $1.4 billion Louisiana School Employees Retirement System, Baton Rouge, said, "We were already dealing with this in our investment policy. We were getting a lot of that information."
The school system's consultant is Segal Advisors Inc., New York. "It is our understanding they do not have conflicting relationships," she said.
Other systems affected by the law include the $1.2 billion Louisiana Municipal Police Employees Retirement System, $1.6 billion Louisiana Parochial Employees' Retirement System, $1 billion Louisiana Sheriffs Pension and Relief Fund, $700 million Louisiana Firefighters Retirement System, $550 million Louisiana Municipal Employees Retirement System, $306 million Louisiana State Police Retirement System, $138 million Louisiana District Attorneys Retirement System and $121 million Louisiana Assessors Retirement System. The other statewide systems affected by the law are the Louisiana Clerks of the Court Retirement System and the Louisiana Registrar of Voters Retirement System; their asset totals weren't available.
The bill was passed by the state House and Senate and signed by Gov. Kathleen Babineaux Blanco on May 27.
Carl Domino, a Florida state representative and president of money manager Carl Domino Inc., Palm Beach, said he is considering introducing similar legislation. His firm manages about $60 million in value equities.
"There are issues with consultants, particularly broker consultants," about potential conflicts in recommending managers, Mr. Domino said. "Are we sure when a consultant recommends (a manager) to a pension fund that the manager wasn't recommended because he is giving commissions directly or indirectly to the broker consultant?"