New California Lobbyist Legislation Regulates Private Fund Sponsors and Placement Agents


Recent California legislation dramatically expands the regulation of private fund sponsors and placement agents. Both outside placement agents and certain employees of investment managers who solicit investments from CalPERS and CalSTRS are now required to register as lobbyists in California. Registered lobbyists may not receive commissions on investments by California’s state public pension and retirement systems (“State Plans”), even if the lobbyist is an associated person of a registered broker-dealer. In addition, registered lobbyists are subject to annual reporting of certain expenses and limitations on contributions and gifts. Similar limitations apply to companies that employ, engage or retain registered lobbyists. CalPERS will no longer approve new investment contracts or certain types of amendments to existing investment contracts unless it is provided with significant additional remedies for failure by fund sponsors and other investment managers to comply with its placement agent disclosure rules.

New Placement Agent Legislation

Assembly Bill 1743. On January 1, 2011, Assembly Bill No. 1743 (“AB 1743”) became effective in California. AB 1743 amends California’s lobbyist law, the Political Reform Act of 1974 (the “PRA”), to require placement agents, and employees of private fund sponsors and other investment managers and advisory services who are deemed to be placement agents, to register under the PRA as a condition to soliciting State Plans. State Plans currently consist of the California Public Employees’ Retirement System (“CalPERS”) and the California State Teachers’ Retirement System (“CalSTRS”).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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