November 12, 1991
TO: INVESTMENT ADVISERS COMMITTEE NO. 55-91
RE: INSTITUTE TESTIMONY ON CALIFORNIA FAIR POLITICAL PRACTICES
COMMISSION PROPOSALS
__________________________________________________________
As we previously informed you, the California Fair
Political Practices Commission staff proposed an exemption for
employees of investment advisers to California public funds from
the disclosure provisions of the Political Reform Act, which the
Institute had initially recommended to the Commission staff.
(See Memorandum to Investment Advisers Committee No. 17-91, dated
April 18, 1991.) The Institute recently testified in support of
the proposed exemption at a Commission hearing held on November 6
to consider whether to adopt the proposed exemption. Attached is
a copy of the Institute's testimony.
The Institute testified that investment advisers should be
exempt from the disclosure requirements since they are already
required to disclose to their clients any potential conflicts of
interest under federal and California securities laws. In
addition, under the federal securities laws and common law,
investment advisers have a fiduciary obligation to their clients
to eliminate conflicts of interest that would harm a client's
interests. Moreover, investors have a remedy at law or in equity
in all fifty states, including California, if an adviser breaches
its fiduciary duty. Finally, the Institute noted that overly
burdensome disclosure requirements may discourage many of the
most experienced advisers from providing services to California
public funds.
The Commission decided at the hearing to postpone any
decision on the proposed exemption. It is likely that the
proposed exemption will be considered again by the Commission
next February.
We will keep you informed of developments.
Amy B.R. Lancellotta
Associate General Counsel
Attachment