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© St. Petersburg Times, published September 21, 2002
In the aftermath of Enron, WorldCom and other investment disasters, Florida's pension fund is joining a national movement to hold outside money managers up to greater scrutiny.
The State Board of Administration, which manages the $84-billion Florida Retirement System, adopted a set of "investment protection principles" similar to those being put into effect in New York, California, North Carolina and other states.
"We will immediately begin to implement and monitor compliance," said Coleman Stipanovich, executive director of the Florida board.
The principles are designed to push money managers to disclose or avoid potential conflicts of interest. For example, a money manager working for Florida would have to disclose that it also managed a 401(k) plan for a company that has publicly traded securities that could end up in the Florida retirement fund's portfolio. Methods for determining compensation for portfolio managers and analysts also will have to be disclosed.
Other principles the state board adopted are aimed at severing ties between investment bankers and research analysts. The money managers must agree to abide by the same terms that Merrill Lynch & Co. accepted last spring when it settled charges of misleading investors brought against the company by New York Attorney General Eliot Spitzer.
In addition, the money managers are required to consider some of the current hot issues when making investment decisions. At the top of the list: the quality and integrity of a company's accounting and financial data. Money managers also are supposed to look at whether a company's outside auditors are providing consulting services, another potential conflict, and at corporate governance.
"This is a definite signal to money managers that in the future we want them to pay more attention to these things than they may have done in the past," said Donald Nast, a finance professor at Florida State University and a member of the state board's investment advisory committees.
However, he said the new principles are no guarantee against losses such as the Enron and WorldCom debacles, which cost the fund more than $400-million.
-- Helen Huntley can be reached at huntley@sptimes.com or (727) 893-8230.