The SEC ended its two-year investigation of the $137.9 billion Florida State Board of Administration over accusations of potential securities violations and does not intend to recommend enforcement action, according to a letter sent to the Tallahassee-based board from the SEC Miami regional office.
The letter, released March 5 by the FSBA, was dated March 3 and written by Eric R. Busto, SEC assistant regional director.
The SEC in March 2008 began investigating the FSBA's former internally managed Local Government Investment Pool, according to a 2008 SEC order to the FSBA to take testimony from its officers. The order mentioned no other specific fund the board oversees, such as the $112.8 billion Florida Retirement System.
The SEC was investigating possible securities violations by the FSBA, Lehman Brothers Inc., J.P. Morgan Securities and Credit Suisse Securities in connection with making false or misleading statements about “the risk and liquidity of investments purchased by the LGIP and possibly other SBA-managed funds,” according to the 2008 order.
Clients of the pool, a type of short-term investment fund, were local and other governmental units in the state using it for temporary cash management investments.
In December 2007, Coleman Stipanovich resigned as FSBA executive director following losses from structured investment vehicles in the pool. He was replaced by Ashbel C. Williams Jr. in 2008.
The pool had about $30 billion in assets in September 2007 when reports of subprime mortgage-related investment problems caused a run of withdrawals. The pool was closed temporarily in late 2007 because of liquidity problems and then reopened with withdrawal restrictions because of some investment impairments. The internal management wasoutsourced in 2008 to Federated Investment Counseling, and in 2009 the pool was restructured as Florida PRIME to reflect changes the FSBA made to improve the fund's transparency, compliance and conservative investment policy.
As of March 3, the pool had $6.1 billion in assets, 80% less than before the run of withdrawals.
Dennis D. MacKee, communications director, said the no other information was immediately available about the investigation.
Michael J. Pucillo, of the law firm Berman DeValerio, representing FSBA in the SEC investigation, said, “The investigation was limited to the LGIP. There are no other investigations that I am aware of.”
Mr. Busto couldn’t be reached for comment.