SEC in Kentucky placement agent probe

The US Securities and Exchange Commission is planning to interview officials from the $15bn Kentucky Retirement Systems as part of an inquiry into the use of placement agents.

The US Securities and Exchange Commission sent subpoenas last week to one current and two former staff members to face questioning under oath, according to pension documents. A pension spokesperson declined to identify the individuals.

The SEC has said only that they are interested in the use of placement agents in making certain investments.

The SEC also told attorneys for the retirement systems that it wants to talk to all individuals who have served on the pension board of trustees since 2007. A deposition is scheduled for 25 October, according to pension documents.

Kentucky’s $15 billion pension system has been the subject of an internal review.

In June, Kentucky state Auditor Crit Luallen found that the pension did not engage in pay-to-play practices after the conclusion of an internal audit.

The audit found that the pension’s former CIO Adam Tosh failed to disclose the use of one placement agent in violation of the pension’s disclosure policy, according to a report released by the auditor. However, no evidence of pay-to-play activity was found.

The state audit followed an internal audit by the pension in July 2010 showing that Tosh used Glen Sergeon as a placement agent.

The pension found that Sergeon, working with three different firms called Diamond Edge Capital Partners, Bleecker Street Partners and Cazanave, secured six investments worth $426 million for private equity managers from the pension and was paid nearly $6 million in fees.

Sergeon and Tosh worked together on a global emerging markets strategy when Tosh was CIO at the Pennsylvania State Employees' Retirement System, according to the audit. It's not clear who Sergeon worked for at the time, but he formerly worked as director of public fund marketing for the US institutional effort of Merrill Lynch Mercury Asset Management.

Tosh resigned as CIO in June 2010 to join investment consultant RogersCasey in Connecticut.