July 3, 2002

In the wake of investment scandals and fraud that have cost the State of Michigan Pension System millions of dollars, State Treasurer Douglas B. Roberts has announced that Michigan has joined a major initiative designed to protect public pension funds. The coalition that now includes Michigan, California, New York, and North Carolina is demanding that the nation’s largest investment banking firms adopt conflict of interest principles designed to eliminate abuses within the nation’s investment system. Treasurer Roberts says, that is the first step in restoring the public’s faith in Wall Street. "As investment firms begin to adhere to these important principles, confidence in the stock market will grow," Roberts says. "That in turn will have a beneficial impact on both the public pension funds we manage and individual investors."

Financial organizations that provide brokerage services to the State of Michigan Pension System must abide by the following principles:

• sever the link between compensation for analysts and investment banking;
• prohibit investment banking input into analyst compensation;
• create a review committee to approve all research recommendations;
• require that upon discontinuation of research coverage of a company, firms will disclose the coverage termination and rationale for such termination, and disclose in research reports whether the firm has received or is entitled to receive any compensation from a covered company over the past 12 months;
• establish a monitoring process to ensure compliance with these principles.

As sole fiduciary of Michigan’s $45 billion public pension system, Treasurer Roberts says, his message to both investors and money management firms is clear. "The State of Michigan is committed to protecting funds that belong to our employees and retirees, and we are willing to take whatever steps are necessary to do just that."