1.
WORLD’S LARGEST PENSION FUNDS:
Total assets of the world’s
300 largest pension funds rose 27% in 2004, according to the annual
survey conducted by Pensions & Investments and Watson Wyatt Worldwide.
Assets totaled $8.39 Trillion, up from $6.59 Trillion in 2003. A huge
gain -- 50% -- was seen with the top 20 funds, at $3.24 Trillion in
2004 from $2.16 Trillion the year before. Actually, 39% of the top
300 assets were held by the largest 20 pension funds. Assets of U.S.
funds in the top 300 totaled $3.74 Trillion, up from $3.47 Trillion.
But the percentage of total assets held by U.S. funds among the 300
continued to decline. In 2004, U.S. funds accounted for 44.7% of total
assets for the world’s top 300 funds, the first time since the
survey began that total U.S. assets fell below the 50% mark. U.S. funds
held 52.6% of assets in 2003 and 63% in 2001. The following is a list
of the top 10 largest pension funds in the world:
1. Government Pension Investment (Japan) - $1,058,502,000,000
2. ABP (Netherlands) - $230,783,000,000
3. California Public Employees (U.S.) - $168,320,000,000
4. Local Government Officials (Japan) - $164,135,000,000
5. Federal Retirement Thrift (U.S.) - $141,026,000,000
6. National Pension (Korea) - $134,970,000,000
7. New York State Common (U.S.) - $117,450,000,000
8. Pension Fund Association (Japan) - $116,784,000,000
9. California State Teachers (U.S.) - $116,695,000,000
10. Postal Savings Fund (Taiwan) - $110,264,000,000
At $102,517,000,000, Florida State Retirement System ranks number
12.
2. THE 400 RICHEST AMERICANS:
For the third consecutive
year, the rich got richer. In this, the 24th annual edition of the
Forbes 400,
the collective net worth of the United States’ wealthiest climbed
$125 Billion, to $1.13 Trillion. Surging real estate and oil prices
drove up several fortunes and helped pave the way for 33 new members.
Here are the top 10:
1. William Henry Gates, III - $51 Billion
2. Warren Edward Buffett - $40 Billion
3. Paul Gardner Allen - $22.5 Billion
4. Michael Dell - $18 Billion
5. Lawrence Joseph Ellison - $17 Billion
6. Christy Walton - $15.7 Billion
6. Jim C. Walton - $15.7 Billion
8. S. Robson Walton - $15.6 Billion
9. Alice L. Walton - $15.5 Billion
10. Helen R. Walton - $15.4 Billion
The youngest on the list are Sergey Brin and Larry Page, founders
of Google, both 32. At 96, the oldest is vintner Ernest Gallo.
3. FLORIDA RETIREMENT SYSTEM SPECIAL RISK MEMBERSHIP
EXPANDED:
Effective October 1, 2005, Chapter 2005-167 expanded
the definition of special
risk membership in the Florida Retirement System. Section 121.0515(2)(h),
Florida Statutes, has been amended to add the following:
The member must be employed by a law enforcement
agency or medical examiner’s office in a forensic discipline recognized by the
International Association for Identification and must qualify for active
membership in the International Association for Identification. The
member’s primary duties and responsibilities must include
the collection, examination, preservation, documentation, preparation,
or analysis of physical evidence or testimony, or both, or the
member
must be the direct supervisor, quality management supervisor, or
command officer of one or more individuals with such responsibility.
Administrative
support personnel, including, but not limited to, those whose primary
responsibilities are clerical or in accounting, purchasing, legal,
and personnel, shall not be included.
The International Association for Identification recognizes 14 forensic
disciplines, including latent fingerprint identification, questioned
document examination, bloodstain pattern identification and polygraph
examination. For your information, in addition to traditional law enforcement
and firefighting personnel, FRS special risk membership includes about
30 classes of employees.
4. U.S. SEPTEMBER CONSUMER CONFIDENCE INDEX PLUMMETS:
Consumer
confidence in the U.S. fell in September the lowest in almost 2 years,
after Hurricane
Katrina devastated the Gulf Coast and pushed gasoline prices to a
record high. The Conference Board’s consumer confidence index fell to
86.6, the lowest since October 2003, from a revised 105.5 in August.
The index was expected to fall to 95, based on a Bloomberg News survey
of 62 economists. Katrina damaged drilling rigs and curtailed fuel
shipments. The biggest drop in confidence in 15 years threatens to
curtail consumer spending, which makes up 70% of the world’s
largest economy. The Conference Board surveys 5,000 households on general
economic conditions, their employment prospects and spending plans.
The percentage of consumers who saw jobs as hard to get rose to 25.4%
from 23.1%. The percentage who saw jobs as plentiful fell to 20.1%,
compared with 23.6% in August. The component of the index that tracks
consumers’ expectations for the next 6 months dropped to 71.7
from 93.3. A gauge of optimism about the present situation also fell,
to 108.9 from 123.8.
5. SEC VOTES TO PROPOSE SOFT DOLLAR INTERPRETIVE
RELEASE:
On September 21, 2005 the Securities and Exchange
Commission voted to publish for
comment proposed interpretive guidance concerning Section 28(e) of
the Securities Exchange Act of 1934. That section creates a “safe
harbor” by providing that a person who exercises investment discretion
with respect to an account shall not be deemed to have acted unlawfully
or to have breached a fiduciary duty under state or federal law solely
by reason of having caused an account to pay more than the lowest available
commission if that person determines in good faith that the amount
of the commission is reasonable in relation to the value of the “brokerage
and research services” received. The proposed interpretive guidance
would clarify that the scope of the Section 28(e) safe harbor is limited
to brokerage and research services that
- satisfy
the eligibility criteria in the statute;
- provide lawful and
appropriate assistance to the money manager in carrying out his
decision-making responsibilities; and
- satisfy the requirement that
the money manager make a good faith determination that commissions
paid are reasonable in relation to the
value of the products and services provided by broker-dealers in
connection with his responsibilities to the advisory accounts for
which he exercises
investment discretion.
As noted in a speech by SEC Chairman Christopher Cox the same day,
soft dollars are an anachronism. They are a throwback to the time of
fixed commission rates on securities transactions, which Congress abolished
in 1975. In the old days, under the high price umbrella of fixed commissions,
price competition could occur only in the form of extra services, such
as provision of research. Because research is a good thing, when Congress
abolished fixed commissions, it also added the statutory safe harbor,
in Section 28(e) of the Exchange Act. The purpose was to clarify that
money managers could continue using commissions to pay for research
in this new environment of competitive commission rates. Over the last
30 years, the Commission has issued only two interpretive releases
regarding the scope of permissible research services. The first release
was issued in 1976, just one year after the law was enacted. It stated
that the safe harbor did not protect “products and services which
are readily and customarily available and offered to the general public
on a commercial basis.” This release was clearly aimed at soft
dollar abuses that had nothing to do with research. Among the products
excluded from the safe harbor were office supplies, off-the-shelf software
and airline tickets. The second release, issued 10 years later in 1986,
went the other way: it construed the safe harbor more broadly, to cover
research services that provide “lawful and appropriate assistance
to the money manager in the performance of his investment decision-making
responsibilities.” This release opened the door to potentially
overbroad readings of the safe harbor, and renewed opportunities for
abuses that heightened the conflicts of interest between money managers
and investors. The Commission has continued to study the question of
soft dollars in recent years. There is a sometimes breathtaking audacity
in private determinations of what services qualify for the safe harbor.
For example, the Commission has seen soft dollars used to pay for membership
dues, professional licensing fees, office rent, carpeting and even
entertainment and travel expenses. Although the Commission has brought
enforcement actions in some of the most egregious cases, going after
abuses one at a time is not enough. The Commission must provide greater
clarity in its own guidance and insure that there can be no mistake
about how this 30-year old law applies in today’s world.
6. KENTUCKY
DISABILITY RETIREMENT PLAN SURVIVES AGE-DISCRIMINATION CHALLENGE:
Under Kentucky’s retirement plan for certain state
and county employees, one who becomes disabled prior to reaching normal
retirement age is credited with unworked years in determining the benefit
amount. The Equal Employment Opportunity Commission challenged the
system under the Age Discrimination in Employment Act, but suffered
a summary judgment at the trial level. On appeal, the United States
Court of Appeals for the Sixth Circuit affirmed based upon prior Sixth
Circuit precedent, which requires that the system be upheld even though
under the plan certain younger employees (those below normal retirement
age) are eligible to receive credit for additional years of service
that they did not in fact work, with the result that a younger employee
receives greater retirement benefits than an older employee with the
identical final or average salary and years of actual service. The
Sixth Circuit precedent controls even though Congress in enacting the
Older Workers Benefit Protection Act (amending ADEA) appears to have
intended to make such schemes unlawful unless cost-justified. Equal
Opportunity Employment Commission v. Jefferson County Sheriff’s
Department, Case No. 03-6437 (U.S. 6th Cir., September 19, 2005)
7. EXCLUSION OF WORKERS COMP BENEFITS TO VOLUNTEER
POLICE OFFICER UNCONSTITUTIONAL:
Pepper, an unpaid member of the City
of Florence,
Colorado’s volunteer police reserves, allegedly suffered mental
impairment and experienced stress as a result of a shooting incident
at the time he was performing his duties as a volunteer reserve police
officer. Colorado’s Workers’ Compensation Act provides
that regularly employed police officers, firefighters, sheriffs and
deputy sheriffs are deemed employees. In addition, posse members [seriously]
and several types of volunteers, including volunteer firefighters and
members of volunteer rescue, disaster and ambulance teams, are deemed
employees. However, members of volunteer police departments, volunteer
police reserves and volunteer police teams or groups in any county
or municipality, while actually performing duties as volunteer police
officers, may be deemed employees at the option of the governing body
of such county or municipality. Because the City of Florence chose
not to include members of its volunteer police reserves as employees
under its workers compensation policy, Pepper was, as they say, S.O.L.
However, on appeal from a determination to that effect by the Industrial
Claim Appeals Office, Pepper was successful in having the state appellate
court conclude that the statute is unconstitutional. In a 2-1 decision,
the higher court found that the law violated the guarantees of equal
protection: there is no conceivably valid purpose for allowing police
volunteers to be excepted from workers’ compensation coverage,
while mandating all other volunteers, who similarly serve a vital function
and are subject to similar risks and perils, be covered. Pepper v.
Industrial Claim Appeals Office of the State of Colorado, Case No.
04CA0457 (Col. App., September 22, 2005).
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