Federal review of Kentucky Retirement Systems ends with no action, agency says

jcheves@herald-leader.comJuly 16, 2013 

The Kentucky Retirement Systems said Tuesday that the U.S. Securities and Exchange Commission has finished a three-year review of its use of paid middlemen known as "placement agents," with no enforcement action recommended.

The SEC announced its decision in a July 11 letter, KRS executive director William Thielen said in a prepared statement, released to the news media late Tuesday afternoon.

"This investigation has been completed as to all of your clients, including the Kentucky Retirement Systems and certain former and current trustees and employees of KRS, against whom we do not intend to recommend any enforcement action by the Commission," the SEC wrote, according to Thielen's statement.

Thielen said KRS is "pleased" with the outcome.

"KRS takes any assertion of wrongdoing seriously and KRS fully cooperated with the SEC investigation," Thielen said in his statement.

An SEC spokeswoman, Christina D'Amico, said she could not comment on Thielen's claim. KRS did not release a copy of the SEC's letter, and Thielen did not return calls Tuesday seeking comment.

The SEC's Division of Enforcement in New York opened a review in September 2010 of money given to placement agents as part of investment deals at KRS, which provides retirement benefits to state and county government retirees.

Specifically, the SEC asked for a copy of a 2010 internal audit that identified $15 million in fees paid to placement agents, the middlemen who help private investment companies sell their products. The fees are paid by the investment companies, who then are paid by KRS. The SEC also asked for contracts held by KRS that list placement agents' fees.

The audit revealed a previously existing relationship between New York placement agent Glen Sergeon, who made nearly $6 million from Kentucky pension deals, and Adam Tosh, who resigned in 2010 as KRS' chief investment officer. During the audit process, Sergeon and Tosh disclosed that they previously knew each other from working together in past jobs. Sergeon had won more fees in Kentucky than any other placement agent.

After some debate over whether placement agents should be banned, as several other states have done, the Kentucky General Assembly passed a compromise bill in 2012 that requires them to register with the state as lobbyists.

John Cheves: (859) 231-3266. Twitter: @BGPolitics. Blog: bluegrasspolitics.bloginky.com

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