A year-and-half ago, in the wake of Enron’s implosion, North Carolina State Treasurer Richard Moore decide to get tough. Realizing that he had limited power, but was charged with overseeing $56 billion in one of the country’s largest public pension funds, he teamed up with the then New York State Comptroller and New York State Attorney General Eliot Spitzer to promulgate stronger corporate disclosures for public pension funds.
In wake of the ongoing mutual fund scandal, Treasurer Moore – who is also responsible for overseeing the largest public employee 401(k) plan in the nation, with 181,000 participants and $3.2 billion in assets – has declared a similar war on mutual fund companies and other defined contribution plan providers, especially those whose funds are included in the state’s 401(k) plan.
Last Tuesday, Treasurer Moore sent letters to the consortium outlining 10 reforms the state is compelling investment firms to adopt. These include a requirement that two-thirds of a mutual fund’s board, as well as its chairman be independent, with these directors having no business or employment ties with the firm for five years.

Moore is also mandating funds to disclose their portfolio holdings more than twice per year if their annual turnover exceeds 100%, and that both the compensation of the portfolio manager and manager’s holdings in the fund and all purchases and sales within the last 12 months be revealed in the fund’s annual report.
Treasurer Moore’s reforms would also require that, for other than money market funds, a portfolio manager, research analyst, marketing or other senior executive who purchases shares of a fund, be required to hold those shares for at least 12 months.
On the Treasurer’s hit list were: Capital Research & Management’s American Funds, Federated Investors, Fidelity Investments, Prudential Financial, Putnam Investments, T. Rowe Price, OppenheimerFunds, Van Kampen Investments, and Vanguard Group.
It all comes down to two simple concepts – sunshine and transparency, said Julie White, director of communications in Treasurer Moore’s office.
What’s more, Treasurer Moore is putting some teeth into his fund reform suggestions. "When we do our annual review next September, we will strongly consider whether or not the funds in our (plan) lineup have done this, and if not, they will be at risk for being dropped," White said.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.