the SEC website
Warns Public Pension Funds About Inadequate Compliance Procedures
D.C., March 6, 2008 - The Securities and Exchange Commission
today issued a report reminding public pension funds of their
responsibilities under the federal securities laws, and warning
them that they assume a greater risk of running afoul of anti-fraud
and other provisions if they do not have adequate compliance
policies and procedures in place to prevent wrongdoing in their
money management functions.
Commission's Report of Investigation stems from an insider trading
inquiry into stock purchases by The Retirement Systems of Alabama
(RSA), a state pension fund. RSA purchased shares of The Liberty
Corporation while in possession of material, non-public information
about the prospective acquisition of Liberty. RSA learned about
the transaction because it was to provide financing for the
acquisition. RSA did not have any program, policy, practice,
or training to ensure that its investment staff understood and
complied with the federal securities laws in general, or insider
trading laws in particular. When the information became public,
the value of RSA's Liberty shares increased by more than $700,000.
report reminds public pension funds of their obligations to
prevent fraud and protect investors," said SEC Chairman
Christopher Cox. "While public pension funds are exempt
from most of the federal securities laws governing other money
managers, they are not exempt from important anti-fraud provisions
that prohibit insider trading and other manipulative and dishonest
behavior that threatens the integrity of our markets. It is
vitally important, therefore, that they have appropriate policies
Chatman Thomsen, Director of the SEC's Division of Enforcement,
added, "When public pension funds and other unregulated
money managers come into possession of material non-public information,
they operate at their own peril if they do not have safeguards
specifically designed to prevent the misuse of inside information."
purchased the Liberty shares in August 2005, when RSA knew about
a prospective acquisition of Liberty by Raycom Media, Inc. for
a substantial premium over Liberty's market price. RSA had previously
acquired confidential information about Liberty in connection
with the pension fund's arranging to serve as a source of funding
to Raycom for the acquisition.
resolving its inquiry into RSA's trading with a Report of Investigation,
the Commission took the following into consideration.
took remedial action that the Commission might have sought in
an enforcement proceeding, including adoption of a compliance
program and compensation to the sellers of the Liberty stock
that it purchased.
RSA cooperated in the investigation.
RSA's trading was directed by its CEO, who cooperated in the
investigation and authorized RSA's remedial action.
No individual personally profited from RSA's trading.
A copy of the report, issued pursuant to Section 21(a) of the
Securities Exchange Act, is available at http://www.sec.gov/litigation/investreport/34-57446.htm.