Treasurer adopts policy for selecting state brokers

The Missouri State Treasurer’s investment committee March 16 adopted selection and monitoring criteria for broker-dealers through whom the state invests public dollars.
The adoption of the formal policy follows a February committee vote to remove from the state’s preferred broker-dealer list a firm owned by a French bank involved in the Iraqi oil-for-food scandal. The state’s preferred broker-dealer list handles investments of Missouri’s tax dollars that are not immediately needed by the state.
“This policy will help safeguard against fraud and assure the highest possible protections for the investment of citizens’ tax dollars,” said State Treasurer Sarah Steelman in a news release. “The plan establishes monitoring procedures to detect brokers subject to investigations involving regulatory or legal improprieties so that appropriate action can be taken regarding investments with which they could be involved.”
The committee’s approved list comprises registered National Association of Securities Dealers broker-dealers and banks in the categories of primary dealers, regional brokers and emerging market firms.
Criteria for selecting preferred broker dealers include the services and research they provide, their presence in Missouri, the financial strength and capital adequacy of the firm, reputation and qualifications of sales representatives, and the experience of the broker-dealers in handling investments with large government agencies.
The new policy also sets in place a system for monitoring broker-dealers to assure the firms maintain the highest industry and legal standards, with an emphasis on foreign investment firms.
“It is comparatively easy to track domestic companies because they fall under the regulatory authority of the Securities and Exchange Commission,” said committee chairman Mark Mathers. “Foreign parent companies may comply with the laws of the country in which they are located, but those laws may differ from U.S. law, and it can become very difficult to monitor the activities and stability of those companies.”
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