SACRAMENTO, Calif. — CalPERS' new personal trading policy is causing a stir among some employees who claim it's too restrictive and overreaching.
At least one employee recently filed a complaint with California's Office of Administrative Law claiming CalPERS did not follow proper procedure before instituting the new rules.
In April, the $245.4 billion California Public Employees' Retirement System, Sacramento, tightened its personal trading policy to prohibit employees from trading — without first getting approval — a security in their personal portfolios worth more than $2,000 if CalPERS has traded or plans to trade that security within seven days. If approved, the trade can only be completed the same day approval is given.
Outside observers say the new policy does not raise any eyebrows because the new rules are standard practice in the private sector. However, it is generally more restrictive than policies of other public pension funds.
Previously, CalPERS employees had to report their personal trades once a year and did not need permission from the compliance department to execute each transaction.
The new policy applies only to “key access” personnel and their spouses, including some staffers holding executive positions, the investment staff and some information technology staffers, among others. The policy does not apply to board members.
The 14-day blackout period in the personal trading policy, which took effect April 1, was put in place to prevent unintentional front-running, said Sherry Johnstone, chief compliance officer. The policy is also a response to a warning issued by the Securities and Exchange Commission in March to public pension funds to put stricter compliance programs in place to ensure they don't inadvertently violate securities laws, Ms. Johnstone said.
But some say CalPERS is overstepping its bounds. “It gets to where you can't trade large-cap stocks,” said one staffer, who requested anonymity. The fact that it doesn't apply to board members is a case of “do as I say, not as I do,” the employee said.
“It does represent a change in culture,” said Ms. Johnstone, adding that not all employees are put off by the policy. Some had been surprised that CalPERS didn't have it earlier, she said. Board members are covered under a separate compliance policy, she said.
J.J. Jelincic, an investment officer in CalPERS' real estate team, filed a petition in May with the Office of Administrative Law, which oversees the implementation of government regulations. Mr. Jelincic says CalPERS did not go through the proper regulatory process before putting the policy in place. In addition, “the policy is overbroad and not well thought out,” he said in an interview. “They cover private transactions,” he said. “So if I want to buy a rental property ... I need CalPERS' permission.”
