In a new approach to pension fund regulatory oversight in New York, which has already resulted in subpoenas to pension fund trustees at the top state and city public plans, state Superintendent of Financial Services Benjamin M. Lawsky also subpoenaed roughly 20 consulting companies last week, according to a report in The New York Times. The aggressive nature of this approach should give pause to trustees and investment advisers to New York public pension funds.

The subpoenas are said to have been sent to a range of firms, including some that have submitted unsuccessful bids for their financial services to the pension funds. The article suggests that Mr. Lawsky is interested in determining whether some consulting companies, which are hired as advisers to New York’s pension trustees and which assist in investing the billions of dollars of the public plans, have participated in schemes to conceal conflicts of interest and other financial incentives. The subpoenas seek information about measures currently in place to prevent conflicts of interest and, among other things, compensation practices, means for tracking the funds’ non-public investments, and documents related to investment proposals including pitchbooks. 

The effort comes on the heels of Detroit’s fiscal collapse. The city’s municipal pension fund suffered losses while at least one pension trustee was allegedly treated to trips under the guise of investment site inspections and another allegedly spent pension money previously allocated for a real estate project to build a personal mansion.

New York is no stranger to pension fund scandals. Alan G. Hevesi, former State Comptroller, pleaded guilty and was sentenced to one to four years in 2011 for a pay-to-play scheme in which he sold pension investment contracts, in essence bypassing the competitive bidding process. 

Concern is not limited to undisclosed financial incentives, however. Mr. Lawsky’s letter accompanying the subpoenas apparently discloses that he has “decided to take a new approach to pension fund oversight.” Mr. Lawsky is apparently looking at whether investment advisers have encouraged trustees to take on potentially volatile investments with the promise of big gains, which would expose taxpayers to higher risk.

The possibility that taxpayers could bear the brunt of those decisions has led Mr. Lawsky to explore whether pension funds, like other financial institutions, can and should be downgraded if they are found to have too volatile a portfolio. The implications of a potential downgrade, along with the increased oversight, may mean big changes for New York’s public pension funds and for the consulting companies bidding for the chance to be investment advisers.

Ballard Spahr's attorneys, and in particular lawyers based in New York at Ballard Spahr Stillman & Friedman, have extensive experience in dealing with New York state regulators on a wide variety of investigative and regulatory enforcement matters. Ballard Spahr’s Employee Benefits and Executive Compensation attorneys have decades of experience advising clients on fiduciary matters involving pension funds.

As related to the initiative announced by Mr. Lawsky, our attorneys handle matters related to public pension funds, including independence issues relating to financial advisors, as well as conflict of interest issues in general involving New York public officials. They regularly represent financial institutions and their personnel. 

For more information, please contact Employee Benefits and Executive Compensation Practice Leader Brian M. Pinheiro at 215.864.8511 or, Julian W. Friedman at 212.223.0200 x8019 or, or Marjorie J. Peerce at 212.223.0200 x8039 or



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