SEC Requires Placement Agents to Register by Oct. 1

(September 24, 2010) — Under a new rule by the Dodd-Frank Wall Street Reform and Consumer Protection Act, nearly 1,000 unregistered placement agents for institutional money managers will be required to register with the Securities and Exchange Commission (SEC) by October 1.

The registration requirement will additionally subject placement agents and other ‘municipal advisers’ to the regulations of the Municipal Securities Rulemaking Board, Pensions & Investments is reporting.

The entities required to register with the SEC include non-affiliated people who seek compensation by soliciting public entities, including local and state public pension plans, on behalf of money managers. New SEC rules require money managers to use only agency-registered broker-dealers or investment advisers to win business from local and state public pension plans after September 13, 2011.

Following an investigation of the $110 billion New York State Common Retirement Fund (CRF) last year that revealed the role of middlemen, the SEC has stepped up its regulation of placement agents, who solicit government pension funds. For more than a year, the SEC and New York Attorney General Andrew Cuomo have been investigating state pension fund corruption. In recent news, the SEC opened an “informal inquiry” into the Kentucky Retirement Systems’ (KRS’) use of placement agents. Chris Tobe, a member of the KRS board and investment committee, reportedly revealed that the amount now known to have been paid to placement agents has risen to about $15 million. KRS oversees a $12.5 billion fund for state and county retirees.