January 30, 2023

Volume XIII, Number 30


January 27, 2023

Subscribe to Latest Legal News and Analysis

Pennsylvania Treasurer Prohibition on Third Party Placement Agents

The Treasurer of the Commonwealth of Pennsylvania has prohibited investment managers from using third-party placement agents for funds managed on behalf of the Commonwealth of Pennsylvania Treasury Department.[1] The Treasury Department administers the following funds: (i) the Commonwealth Investment Program; (ii) the Pennsylvania 529 Guaranteed Savings Plan; (iii) the Pennsylvania 529 Investment Plan; (iv) the INVEST Program; and (v) the Treasury Global Investment Fund. 

This prohibition was announced in a directive from the Treasurer of the Commonwealth of Pennsylvania. As the directive only applies to funds that the Treasury Department manages, it does not apply to the Pennsylvania State Employees’ Retirement System (SERS) or the Pennsylvania Public School Employees’ Retirement System (PSERS).  Nonetheless, it is worth noting that the Treasurer serves on the board of both SERS and PSERS.

The prohibition applies to current investment contracts, including any renewals or amendments thereto, and all future investment contracts with respect to these funds.  Pursuant to the press release that accompanied the directive, any current agreement for managing funds administered by the Treasury Department with a “finder’s fee” must end that provision by February 16, 2017.

Some investment advisers use placement agents as intermediaries to market their products to potential investors by making introductions, assisting with marketing materials, and developing a marketing strategy.  In the directive, the Treasurer noted that while the Securities and Exchange Commission has recognized that placement agents may be useful, improper use of placement agents has led certain states to limit the use of placement agents with respect to certain public funds in those states.

This directive was Treasurer Joe Torsella’s first official act as Treasurer and was signed immediately after his swearing-in as Treasurer.  The Treasury Department’s Chief Counsel has been instructed to communicate the policy to affected investment advisers.

[1] The directive for this prohibition is available at: http://www.patreasury.gov/media/archive/assets/pdf/Solicitor-Agreement-Ban.pdf  

Copyright 2023 K & L GatesNational Law Review, Volume VII, Number 39

About this Author

Sonia R. Gioseffi, KL Gates, transactional matters lawyer, federal securities laws

Sonia Gioseffi concentrates her practice in the investment management area, and focuses on a variety of regulatory, transactional and counseling matters involving state and federal securities laws. She advises sponsors regarding the organization and regulatory requirements of private equity funds, venture capital funds, hedge funds and other private investment funds. Ms. Gioseffi advises managers and placement agents concerning “pay-to-play” and lobbying regulation and compliance under federal, state and local laws. She also represents public pension plans and other...

Cary J. Meer, Investment Management and Hedge Fund Attorney, KL Gates, Law Firm

Ms. Meer is a partner in K&L Gates’ New York City and Washington, D.C. offices and a member of the Investment Management and Hedge Fund practice groups.

Ms. Meer structures private funds as limited liability companies, limited partnerships, offshore corporations, common trust funds and business trusts, and prepares disclosure documents and organizational documents for such entities. She also advises investment advisers, private fund managers and investment companies on compliance issues, including under the Investment Advisers Act of 1940...

Ruth E. Delaney, KL Gates, Compliance Lawyer, offshore private fund advisers attorney

Ruth Delaney is an associate in the firm’s Los Angeles office. She focuses her practice on advising domestic and offshore private fund advisers on organizational, regulatory, and compliance issues. In particular, she assists clients with:

  • Forming hedge funds and preparing all necessary organizational and offering documents.

  • Negotiating advisory and subadvisory agreements.

  • Structuring private funds to comply with ERISA or to avoid “plan asset” status.

  • ...