SAN DIEGO COUNTY EMPLOYEES RETIREMENT ASSOCIATION (SDCERA) PLACEMENT AGENT POLICY

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1 Effective Date: June 17, 2010 Adopted by Investment Board on June 17, 2010 Last Updated : N/A PROPOSED REVISION May 5, 2011 SAN DIEGO COUNTY EMPLOYEES RETIREMENT ASSOCIATION (SDCERA) PLACEMENT AGENT POLICY This policy is intended to supersede any existing policy provisions that are inconsistent with this policy. This policy is intended to supplement any applicable provisions of state or federal law, which shall govern in the event of any inconsistency. I. PURPOSE: The purpose of this policy is to promote and require transparency in the use of Placement Agents in connection with SDCERA s investment decisions. This policy will support SDCERA s existing practice of making investment decisions solely on the merits of the investment and in a manner consistent with the fiduciary duties of SDCERA s Board. II. APPLICATION: This policy applies to all agreements with External Managers that are entered into after the effective date. This policy also applies to all External Managers with existing agreements with SDCERA as of the effective date, with regard to compliance with the disclosure obligations under Articles IV, V, VII and VIII. Agreements with External Managers in existence as of the effective date shall be amended to be consistent with this policy by September 30, III. DEFINITIONS: The following definitions shall be used in this policy: Board means SDCERA s Investment Board. Business Day means a day which is not a Saturday, Sunday or a day on which banks in San Diego are authorized or required by law to close. Consultant means a person or firm, including key personnel of such firm(s), who are contractually retained by SDCERA to provide advice to SDCERA on investments, External Manager selection and monitoring, and other services, but who do not exercise investment discretion. External Manager means either of the following: (1) A person who is seeking to be, or is, retained by the Board to manage a portfolio of securities or other assets for compensation. (2) A person who is engaged, or proposes to be engaged, in the business of investing, reinvesting, owning, holding, or trading securities or other assets and who offers or sells, or has offered or sold, securities to the Board. 1

2 External Manager Disclaimer has the meaning set forth in Article IV.A. External Manager Initial Disclosure has the meaning set forth in Article IV.A. External Manager Updated Disclosure has the meaning set forth in Article V. FINRA means Financial Industry Regulatory Association. Investment Vehicle means a corporation, partnership, limited partnership, limited liability company, association, or other entity, either domestic or foreign, constituting or managed by an External Manager in which the Board is the majority investor and that is organized in order to invest with, or retain the investment management services of, other External Managers. Person means an individual, corporation, partnership, limited partnership, limited liability company, or association, either domestic or foreign. Placement Agent means any person or entity hired, engaged, or retained by, or serving for the benefit of or on behalf of, an External Manager, or on behalf of another Placement Agent, who acts or has acted for compensation as a finder, solicitor, marketer, consultant, broker, or other intermediary in connection with the offer or sale of the securities, assets, or services of an External Manager to the Board or an investment vehicle, either directly or indirectly. Notwithstanding the prior sentence, an individual who is an employee, officer, director, equityholder, partner, member, or trustee of an External Manager and who spends one-third or more of his or her time, during a calendar year, managing the securities or assets owned, controlled, invested, or held by the External Manager is not a Placement Agent. Placement Agent Initial Disclosure has the meaning set forth in Article VII. Placement Agent Updated Disclosure has the meaning set forth in Article VIII.A. SDCERA Staff means the investment staff of SDCERA. SEC means Securities and Exchange Commission. Statutory Period has the meaning set forth in Article X. IV. EXTERNAL MANAGER INITIAL DISCLOSURE OBLIGATIONS: A. Each External Manager either (i) must provide a written representation to SDCERA that the External Manager has not used a Placement Agent in 2

3 connection with SDCERA s investment with the External Manager ( External Manager Disclaimer ), or (ii) must provide the following information ( External Manager Initial Disclosure ) to SDCERA Staff: 1. The name(s) of the Placement Agent(s) and the relationship between the External Manager and the Placement Agent, including a description of the services provided by the Placement Agent and any and all compensation of any kind agreed to be provided to the Placement Agent; 2. A resume for each officer, partner or principal of the Placement Agent, detailing the person s education, professional designations, regulatory licenses, and investment and work experience; 3. A statement as to whether the Placement Agent, or any of its affiliates, is registered with the SEC or FINRA or any similar regulatory agent in a country other than the United States, and the details of that registration or an explanation of why no registration is required; 4. A statement as to whether the Placement Agent or any of its affiliates, is registered as a lobbyist with any state or national government; and 5. A statement that the External Manager has provided a copy of this policy to any Placement Agent used by the External Manager. B. Each External Manager must provide the External Manager Disclaimer or the External Manager Initial Disclosure, as applicable, prior to SDCERA making any investment with that External Manager. V. EXTERNAL MANAGER CONTINUING DISCLOSURE OBLIGATIONS: External Managers with whom SDCERA has an ongoing investment and who were obligated to provide the External Manager Initial Disclosure must provide updated information ( External Manager Updated Disclosure ) to SDCERA Staff within 15 Business Days of any change in the information reported by that External Manager in its External Manager Initial Disclosure, or previous External Manager Updated Disclosure. VI. EXTERNAL MANAGER AGREEMENTS SPECIFIC PROVISIONS: Any agreement between SDCERA and an External Manager will provide for the following: A. An affirmative agreement by the External Manager to comply with this policy as a material obligation under the agreement 3

4 B. A representation and warranty by the External Manager that any information disclosed to SDCERA under this policy is complete and accurate. C. An agreement by the External Manager to cause any Placement Agent engaged by that External Manager to comply with the Placement Agent disclosure requirements of this policy. VII. PLACEMENT AGENT INITIAL DISCLOSURE OBLIGATIONS: A Placement Agent, prior to acting as a Placement Agent in connection with a potential SDCERA investment, must disclose the following information ( Placement Agent Initial Disclosure ): A. All campaign contributions made by that Placement Agent to any elected member of the Board during the prior 24-month period; and B. All gifts given by the Placement Agent to any member of the Board, any SDCERA Staff, or any Consultant, during the prior 24-month period. VIII. PLACEMENT AGENT CONTINUING DISCLOSURE OBLIGATIONS: A. At any time that a Placement Agent is receiving compensation in connection with an SDCERA investment, the Placement Agent must disclose the following information ( Placement Agent Updated Disclosure ): 1. Any subsequent campaign contribution made by the Placement Agent to an elected member of the Board and 2. Any subsequent gift given by the Placement Agent to any member of the Board. B. The Placement Agent Updated Disclosure must be made to SDCERA Staff within 15 Business Days of any campaign contribution or gift being made. IX. SDCERA STAFF RESPONSIBILITIES: The SDCERA Staff is responsible for the following: A. Providing External Managers and Placement Agents with a copy of this policy prior to presenting the Board with a recommendation to invest, in connection with a prospective investment with an External Manager; B. Confirming that either (i) the External Manager Disclaimer, or (ii) the External Manager Initial Disclosure and Placement Agent Initial Disclosure has been received by SDCERA prior to SDCERA making an 4

5 investment commitment with that External Manager by executing definitive, binding agreement(s) with that External Manager; C. Causing the existing agreements with External Managers to be amended to conform with this policy by September 30, 2011 and providing those External Managers and any Placement Agents with a copy of this policy; D. Confirming that External Managers under existing agreements, and any Placement Agents used in connection with existing investments, have provided the External Manager Initial Disclosure and Placement Agent Initial Disclosure; E. Maintaining records of all information disclosed to SDCERA in accord with this policy and as soon as possible, providing to the Board copies of any disclosures showing any campaign contributions or gifts were made; F. Providing the Board with quarterly reports listing all External Managers, the names of any Placement Agents used by each External Manager, and any campaign contributions or gifts reported by each Placement Agent. G. Providing the Board with notice of any violation of this policy at the next scheduled public Board meeting (in addition to the prompt providing of copies of disclosures showing that campaign contributions or gifts were made). X. SDCERA BOARD RESPONSIBILITIES: The Board must review all violations reported by SDCERA Staff promptly at a public session, and consider whether each violation is material and whether to prohibit that External Manager and/or Placement Agent from soliciting new investments from SDCERA for a period less than the statutory requirement, which is five (5) years from the date of the violation (the Statutory Period ). The Board may only reduce this Statutory Period by a majority vote of the Board at a public session, upon a showing of good cause. In the absence of a vote, or if a vote occurs and a majority vote in favor of reducing the Statutory Period is not achieved, the External Manager and/or Placement Agent will be prohibited from soliciting new investments from SDCERA for the entire Statutory Period. A majority vote of the Board at a public session will be required to terminate an agreement with any External Manager for violations found to be material by the Board, and which the Board determines make it inappropriate for SDCERA to continue its relationship with that External Manager. 5

6 EXTERNAL MANAGER ACKNOWLEDGMENT: The undersigned acknowledges receipt and review of this policy, and agrees to comply with its provisions. The undersigned represents either (1) or (2) below: 1. It has not used a Placement Agent in its relationship with SDCERA. There is no additional disclosure required unless SDCERA makes additional investment with this External Manager. 2. It has used a Placement Agent(s) in its relationship with SDCERA and will provide the Initial External Manager Disclosure information listed in Article IV.A, and will update that information if it changes, as set out in Article V. It will provide all such Placement Agent(s) with a copy of this Policy. It will make commercially reasonable efforts to cause all such Placement Agents to provide the Placement Agent Initial Disclosure information listed in Article VII, and will inform them of their duty to update that information if it changes, as set out in Article VIII. Name of External Manager: By: Name: Title: Date: 6