Flourtown, PA – Following the federal indictments of Former Pennsylvania State Treasurer Barbara Hafer and placement agent Richard Ireland, Democratic Nominee for State Treasurer Joe Torsella reiterated his support for a ban on placement agents for investments involving the Pennsylvania Treasury. Torsella remarked, “Pennsylvanians need to be able to trust that their money will be managed with fairness and integrity, uncompromised by conflicts of interest, political affiliation, favoritism, or other unfair considerations. Under my administration, the days of needing to know someone to do business with Treasury will be over. Without a ban, the market incentives for corruption and waste are still in place.”
Torsella continued, “Three out of five of Pennsylvania’s most recent elected state treasurers have faced federal charges. That’s outrageous. These charges involving a placement agent highlight the need for immediate reform.”
Torsella repeated his pledge to implement a ban on the use of placement agents where the Treasurer can act unilaterally. He vowed to work with the legislature and the pension boards to universally ban third party marketers involving SERS, PSERS, and other investment funds controlled by the Commonwealth.
In May, Republican Nominee for State Treasurer Otto Voit was recorded opposing Torsella’s proposal to ban placement agents. To a business group, Voit spoke out in support of allowing politically connected middlemen to help big Wall Street banks get state government contracts in exchange for millions of dollars in fees.
Third party marketers, which are often referred to as “finders,” “solicitors,” and “placement agents” act as middlemen to connect investment managers to investment funds. At times, an investment manager hires a third party marketer solely to capitalize on the marketer’s relationship with a public fund. Third-party marketers can be paid commissions totaling millions of dollars and the costs are sometimes not clearly and universally disclosed to Pennsylvania taxpayers. Third party marketers have been involved in pay-to-play scandals across the United States, including, now, Pennsylvania. The state of New York, New York City, CALPERS, and several other major funds and political entities have already moved to ban or severally restrict third party marketers. In 2010, the SEC proposed a rule to ban third party marketers from soliciting business from public pension funds.
Background
In Response To Torsella’s Call For A Ban On Third Party Marketers, Voit Said He Was Against a Ban. According to a video posted by the Pennsylvania Business Council, “My opponent came out and flatly called for a ban on Third party marketers. My position is different as a third party marketer is primarily used in the hedge fund industry. I believe all third party marketers should be licensed as broker/dealers. Some are not licensed, some are licensed as investment advisers; however, the stronger certification is the series 15 as a broker/dealer. So the third party marketers association too has been working with the SEC to insure that all third party marketers are licensed….So he calls for a full-ban. I call for that all third party marketers should be licensed as third party dealers.” [Pennsylvania Business Council Meeting, 5/5/16]