Posted on: Tuesday, August 20, 2002

NATION/WORLD BUSINESS
Biggest U.S. pension fund curbs conflicts of interest

Associated Press

SACRAMENTO, Calif. — The nation's largest pension fund adopted policies yesterday designed to end conflicts of interest by its Wall Street investment bankers and money managers.

The $137 billion California Public Employees' Retirement System followed similar action last month by the $100 billion California State Teachers' Retirement System, and by the $112 billion New York State Common Retirement Fund. They are the nation's top three public pension funds.

So far, pension funds with combined assets of more than $400 billion have adopted principles recommended last month by state treasurer Phil Angelides, who sits on both California boards, and by the chief financial officers in New York and North Carolina.

The new measures require investment banking firms and money managers doing business with the pension funds to disclose more about potential conflicts, adhere to several safeguards and accept closer monitoring.

Angelides called it the first coordinated action of its kind by major institutional investors.

"We must wield our consumer power in the marketplace to clean up the abuses that have harmed pensioners, taxpayers and our economy," he said.

The action is designed to force bankers and managers to follow the reforms in the settlement between New York attorney general Eliot Spitzer and Merrill Lynch and Co.

Among other things, Merrill Lynch and a few other major brokerages agreed to separate their analysts from their investment banking after internal e-mails showed stock analysts were urging investors to buy stock in risky companies that also were clients.