New Guidance on California’s RIA Placement Agent Registration Requirements

California ’s new law requiring RIA placement agents to register as lobbyists has generated substantial interest throughout the investment management community. Pursuant to the legislation and the regulations adopted under it, certain placement agents and others seeking business from California’s CALPERS or CALSTRS pension funds must register with the California Fair Political Practices Commission (“FPPC”), the agency charged with overseeing and enforcing the new law, by completing a series registration forms available online. In January, the FPPC issued guidance on the new registration requirements, which clarified that persons registered as lobbyists are prohibited from providing gifts of more than $10 per month to a person working California’s pension plans, but left many more pressing questions unanswered.

Recently, the FPPC issued a new letter answering many of the more practical questions regarding the new law. The letter, which is laid out in a Q&A format, excludes certain consultants from the definition of “lobbyist,” provided that the consultant’s duties are limited to only providing advice to the agency. This is good news for firms looking to participate in California ’s pension plan business whose activities are limited providing investment advice. The letter also clarified a three-prong exception to the definition of “placement agent” for employees, officers, and directors of an entity that: (1) is registered as an investment adviser or a broker-dealer with the SEC or an appropriate state securities regulator; (2) is selected through a competitive bidding process; and (3) agrees to operate pursuant to the applicable fiduciary standard of care when managing a portfolio of assets of a state public retirement system in California.

This new letter provides much more clarity to the applicability of the new regulations to registered investment advisers, and should help firms determine their ability to provide advice to California ’s pension public pension systems. For additional information on the new guidance or the application of the RIA placement agent registration requirements, please contact Zac Rosenberg, Compliance Consultant by email at zachary.rosenberg@corecls.com or by phone at (619) 278-0020.