The Teachers' Retirement Board began a comprehensive review of its ethics policy in December 2005.
During the April 2006 meeting, the Board heard from a panel of experts covering the topics of
government ethics, current developments among state pension funds on the topic of restricting
campaign contributions and gifts, and Department of Labor (the federal agency responsible for
regulating private pension funds under the Employee Retirement Income Security Act - ERISA)
activities addressing "pay to play" issues. The Board found that when contributions are made to
a public official or candidate for public office, the public often perceives that such contributors
expect and receive reciprocal benefit for their contributions; in other words, "pay to play."
While there has been no occurrence of impropriety associated with CalSTRS investments or contracts,
nor any allegations of improper investing based on campaign contributions, the Board recognized there
was a potential for abuse, and that public perception of the possibility of potential abuse could
undermine the credibility of CalSTRS' investing and contracting processes..
The regulations being proposed by the Teachers' Retirement Board reflect a one year effort on the part
of the TRB to review and address ethical issues surrounding campaign gifts and contributions to public
pension fund board members. In the course of this review, the Board examined the policies and practices
of public pension funds around the country, past rule making efforts of the Securities and Exchange
Commission ("SEC"), and the historic efforts of the California Public Employees' Retirement System
("CalPERS") to address what is referred to in the investment industry as "pay to play" practices.
The Board heard from experts on ethics and public pension fund fiduciary standards. It also solicited the
input of the investment community and the public.
As part of the rulemaking process, CalSTRS is making available the rulemaking file associated with the
regulatory changes and seeks public comments about these changes through March 12, 2007 at 5:00 p.m.
Please send your comments on the proposed rules to CalSTRS
or attend the public hearing to be held March 15, 2007 from 9:00 a.m. to 1:00 p.m. in the CalSTRS boardroom
located at 7667 Folsom Boulevard, Sacramento, California, 95826.
Full details about the rulemaking process may be found through the
Office of Administrative Law.
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