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The Sixth Annual Evolving Fiduciary Obligations of Pension Plans

April 1, 2015

On February 10, 2015, delegates, representing various-sized public pension funds from the United States and Canada, as well as other legal and financial service providers, converged in Tempe, Arizona for the sixth annual Evolving Fiduciary Obligations of Pension Plans conference.

The theme of the conference was “Making Strides in Engagement through Strategic Due-Diligence” and was hosted by Kessler Topaz Meltzer & Check, LLP and Institutional Investor. Delegates engaged in a full day of dialogue and debate about fiduciary obligations through a series of panels, case studies, presentations, workshops, and an enthralling keynote address by former SEC chairperson Mary Schapiro. 

The day began with a panel discussion about governance practices and polices moderated by Karen Mazza, General Counsel for the New York City Retirement Systems, and featured as panelists Paul Matson, Director of Arizona State Retirement System, Amanda York Ellis Jenkins, Administrator of Compliance and Corporate Governance for the Michigan Department of the Treasury, Katherine Hesse, Counsel for the Norfolk County Retirement Board, and Elaine Reagan, Deputy CEO of Compliance and Legal Operations for the San Diego City Employees’ Retirement System. The panelists discussed the practices and policies that fiduciaries utilize in plan governance including conducting plan due diligence, the involvement of board members, and communications with plan members.

Following the discussion of plan governance, another panel session highlighted the due diligence and monitoring considerations that plans should take into account when investing in non-U.S. markets. Moderator Jennifer Schreck, Senior Attorney for Colorado PERA and panelists G. Blair Cowper-Smith, Executive Vice President of Corporate Affairs and Chief Legal Officer of the Ontario Municipal Employees Retirement System, R. Paul Edmonds, Chief Legal and Governance Officer for the Ontario Pension Board, and Cynthia Collins, Attorney at Robinson Bradshaw & Hinson explored the numerous factors that fiduciaries must consider when investment committees look to invest abroad. The panelists highlighted the fact that different foreign markets often present different considerations.

The conference continued with a case study on Selecting and Monitoring Plan Consultants and Service Providers presented by Hank Kim, Executive Director and Counsel for the National Conference on Public Employee Retirement (“NCPERS”). Mr. Kim unveiled and outlined the NCPERS Draft Code of Conduct for service providers that fiduciaries can utilize as a tool to adequately select and monitor service providers. Following Mr. Kim’s presentation, Mr. Kim was joined by panelists James Love, General Counsel of the City of Birmingham Retirement and Relief System, Mary Schaaf, Controller for the Erie County Employees’ Retirement System, and moderator Erin Perales, General Counsel for the Houston Municipal Employees Pension System for a discussion on monitoring and reviewing investment managers and their compliance with fund investment policies and guidelines.

The conference next offered the delegates the opportunity to choose between two different workshops: one addressing the issue of the SEC’s efforts to increase monitoring of private equity firms and the resulting obligations on plan fiduciaries (“Workshop A”), and the other addressing how funds can best manage technological and enterprise risks and adequately protect plan member data and personal information (“Workshop B”). Workshop A was led by Georgette Schaefer, a partner at Morgan Lewis & Bockius and Yuliya Oryol, an attorney at Nossaman. Workshop B was facilitated by Victoria Hale, General Counsel for the Denver Employees Retirement Plan and Thomas Gray, General Counsel for the Teachers’ Retirement System of Illinois. Both workshops allowed delegates to actively participate and engage in a constructive dialogue with their colleagues. 

After lunch, Scott Shapiro, Senior Advisor to the Mayor of the City of Lexington regaled the delegates with a case study on the city of Lexington’s comprehensive pension reform which cut the city’s unfunded liability by forty percent and that is now being heralded as a model for the rest of the country.

Lee Rudy, a partner at Kessler Topaz Meltzer & Check, LLP, Jay Chadhuri, General Counsel & Senior Policy Advisor for the North Carolina Department of State Treasury, and Michael Hanrahan, Director at Pricket Jones & Elliot next presented the recent decision by the Delaware Supreme Court in the ATP Tour Inc. v. Deutscher Tennis Bund case and the implications that decision has on shareholder rights. The panelists discussed how in the aftermath of the ATP decision, more than 50 U.S. public companies adopted bylaws that shift the legal fees to stockholder plaintiffs who bring litigation and do not prevail. The panelists also informed delegates about the legislative debate in Delaware and the efforts by institutional investors to combat the affront to shareholder rights. 

The next panel discussion featured moderator Margaret M. Fahrenbach, Legal Advisor to the County Employees’ and Officers’ Annuity and Benefit Fund of Cook County and panelists Brian Bartow, General Counsel at CalSTRS, Michael Herrera, Senior Staff Counsel at the Los Angeles County Employees Retirement Association, Chris Supple, Deputy Executive Director & General Counsel at Massachusetts Pension Reserves Investment Management Board, and Jeffrey Padwa, Deputy Treasurer for the State of Rhode Island. The panelists discussed the biggest developments in securities litigation over the past year and how those decisions were impacting their funds investment decisions and operations. 

Many of the day’s themes and discussions were brought together in the next panel discussion, “Combatting Increased Shareholder Constraints.” Moderator Julie Deisler, Investment Compliance and Governance Officer for the School Employees Retirement System of Ohio and panelists Amy Borrus, Deputy Director for the Council of Institutional Investors, Carol Nolan Drake, Chief External Affairs Officer for the Ohio Public Employees Retirement System, and Ryan Stippich, attorney at Reinhart Boerner Van Deuren discussed the landscape facing shareholders including the Delaware legislature’s consideration of corporate fee shifting bylaws, the US Chamber of Commerce’s proposal to limit shareholder proposals, shareholder access to annual meetings and board of directors, and shareholders’ ability to file litigation after the Supreme Court decisions in Halliburton and IndyMac

Following the final panel discussion, Paul Matson, Director for the Arizona State Retirement System presented a case study on the Arizona State Retirement System’s successful performance over the past few years. Mr. Matson outlined strategies other funds could implement in order to replicate some of Arizona’s success and create more sustainable pension funds. 

The conference concluded with a keynote presentation by Mary Schapiro, a former chairperson of the SEC. Kessler Topaz Meltzer & Check, LLP partner Darren Check interviewed Ms. Schapiro about her time at the SEC, which began just after Bernie Madoff was arrested and continued through some of the most critical moments of the financial crisis. In response to questions, Ms. Schapiro offered insightful remarks about how the 2010 Dodd-Frank act was not perfect but offered a lot more benefits than problems and how in her view, the biggest omission in the Dodd-Frank act was not providing for more stable funding for the SEC that is more insulated from the political process (the SEC’s funding is provided by the industry but its budget is still controlled by Congress). Ms. Schapiro also offered insights on the need for Boards to not reflexively react negatively to investors’ attempts at engagement because not all activists are the same. Ms. Schapiro’s remarks were astute and well-received by the audience. 

The delegate response to the sixth annual EFOPP conference was positive and we are already in the process of planning next year’s event. We’re changing the name of the conference to the Evolving Fiduciary Obligations of Institutional Investors (EFOII) but will still feature the same quality discussions and programming. We look forward to hosting you for EFOII in Washington, DC on February 16, 2016. 

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