IN the wake of news that some US jurisdictions have passed laws banning pension fund managers from making political contributions to politicians, Minister of Finance Paula Cox is contemplating legislative changes to preclude any future "pay-to-play" situation developing with regard to the Public Funds Investment Committee (PFIC).

The Mid-Ocean News has reported extensively on a "fund-raising" lunch organised by Bermuda's Philadelphia-based PFIC consultant Tina Poitevien of Fiduciary Investment Solutions (FIS) for Cabinet Minister Dr. Ewart Brown in Washington, DC in 2002, and that Ms Poitevien recently announced that she will no longer involve herself in political fund-raising from public fund money managers and stockbrokers, a practice known in the industry as "pay-to-play".

Her decision may be timely; not only had revelations of her fund-raising for politicians connected to powerful pension fund interests "generated numerous unwelcome headlines", according to FIS president Ed Swan, but the tide of opinion in the US is running against "pay-to-play".

Pennsylvania's neighbouring state, New Jersey, passed new legislation last year to make payments by pension fund managers to state politicians illegal, and Opposition Leader Dr. Grant Gibbons has already pledged to pressure for local legislation, using new rules passed earlier last year by Louisiana as a template.

Also, last week the US Securities and Exchange Commission (SEC) released the results of a year-long study of the pension fund industry which uncovered significant conflicts of interest between pension fund consultants and the money managers they recommend to clients.

The study did not stipulate new federal regulations, but is expected to lead to recommendations for better disclosure by consultants and money managers.

Some consultants who engaged in ethically-challenged practices can expect some special attention from the SEC.

Lori Richards, director of the SEC's Office of Compliance Inspections and Examinations, said the results of the commission's first "sweep" examination of 24 US consultants would lead to legal action, fines, and "deficiency letters" for many of them. The SEC would not release the names of the offending consultants at this time. Ms Cox responded to a question asking if she would contemplate legislation here, like that in New Jersey, to prohibit PFIC fund managers, and their principals and employees, from making contributions to Bermuda's politicians, political parties, or PFIC members, to prohibit these people or entities from soliciting or accepting such contributions, and to prohibit any PFIC consultant from fund-raising activities.

Ms Cox referred to the prospective PFIC "governance" review by Canadian pension and benefits consultants Morneau Sobeco, and said "an outcome of the governance review will be recommendations that may include, but are not limited to, legislative change. This is to better position ourselves to operate in accordance with current best practice."

She added: "Accordingly, I anticipate that we will get some useful guidance as to how we can further refine and improve on existing practices, and if there is found to be any glaring omissions in our legislative framework, then this too will be addressed."

Ms Cox said she looked forward to receipt of the report, but that in the meantime, it would not be "constructive for me to speculate on its recommendations".