NYC asks SEC to bar pension advisers' campaign gifts

By Joan Gralla

NEW YORK (Reuters) - The U.S. Securities and Exchange Commission should crack down on rules that let investment advisers for public pensions make campaign donations to elected officials who manage the funds, New York City's comptroller said on Wednesday.

The probe of New York state's pension fund uncovered a "pervasive and systematic problem" with placement agents, Comptroller William Thompson said in a letter to the SEC.

Placement agents are middlemen -- often politically connected -- who are hired by investment firms to help them win contracts to manage public pension assets,

While the city's pension funds have suspended the use of placement agents, the Democratic comptroller urged the SEC to enact a reform first proposed in 1999 that would bar investment firms from "providing compensated services to public pension funds if the adviser or certain related parties make any contributions to affected elected officials or candidates."

The SEC says it is reviewing the 1999 measure to ban investment firms from managing state pension funds for two years, based on campaign contributions to politicians who help decide investments. The agency could issue new rules in July.

Thompson's call for SEC reforms mirrors recommendations made by state Comptroller Thomas DiNapoli, another Democrat, who has seen his predecessor's pension investments prompt investigations by New York's attorney general and the SEC.

Two individuals have pleaded guilty in the ongoing investigation of kickbacks paid to placement agents.

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