The Rhode Island Retired Teachers Association Post Office Box 7631 Warwick, Rhode Island 02887-7631 General Treasurer Seth Magaziner Chairman, Retirement Board and State Investment Commission Chairman, State Investment Commission Office of the General Treasurer 82 Smith Street, Room 102 Providence, RI 02903 Re: Employees’ Retirement System of Rhode Island 100-Question Internal Control and Fiduciary Breach Review April 30, 2018 Dear Treasurer Magaziner, Both the recent so-called Rhode Island “pension reform” which slashed government workers’ retirement benefits, as well as dramatically increased the fees the state pension pays to Wall Street and the spectacular failure of the pension’s hedge fund investments have made it abundantly clear to retired teachers and other pension participants, and indeed all pension stakeholders, that they can no longer be complacent about management of the state’s pension investments. We at the Rhode Island Retired Teachers Association (“RIRTA”) believe it is entirely appropriate for participants in the Employees’ Retirement System of Rhode Island (the “retirement system” or “pension”), including, but not limited to, our members, to voice concerns they may have from time to time regarding any apparent internal control failures, potential violations of law and breaches of fiduciary duty involving the State Investment Commission (“SIC”), pension staff or third party investment services providers to the pension, as well as seek reassurances from your office. After all, their retirement security is potentially at risk from any such failures, violations and fiduciary breaches. Therefore, we submit the below list of 100 questions regarding pension internal controls and compliance with applicable laws, regulations and fiduciary duties and respectfully request that your office provide us with detailed responses. Legislative Committee : buvace2@aol.com, anngardella@charternet1 Background According to your office’s website, the retirement system is governed by a 15 member Retirement Board which is authorized, created and established in the Office of the General Treasurer as an independent retirement board to hold and administer, in trust, the funds of the retirement system. This Board is chaired by you as the General Treasurer. Management of the $8 billion-plus in pension assets is overseen by the SIC. The SICis a 10- member volunteer body established in your office and is also chaired by you as General ‘Treasurer. The SIC is responsible for strategic asset allocation and final investment decisions and oversees your staff's day-to-day running of the pension, consistent with the authority granted under Rhode Island law. ‘© Misrepresentation of Applicable Fiduciary Standard According to your website, the “SIC has a fiduciary duty to put first the interests of the members of the retirement system.”* However, the Investment Policy Statement (“IPS”) of the pension indicates that each member of the SIC is a fiduciary to the pension and must act solely {emphasis added) in the interests of the participants and their beneficiaries for the exclusive ‘purpose (emphasis added) of providing benefits to eligible participants and their benefciari and defraying reasonable expenses of administering the pension.” There is a crucial difference between the “best interest” standard stated on your website and the “sole interest” standard in the IPS. The sole interest standard is the more rigid standard requiring that conflicts of interest be avoided entirely. Specifically, money managers are not permitted to profit at the expense of the pension. A sole interest standard exists because of the highly vulnerable position pension participants and beneficiaries are put into when someone else has control of their assets. It is deeply embedded in trust law, which is the foundation upon which the federal law protecting private pensions, the Employee Retirement Income Security Act of 1974 ("ERISA"), is buil Anotable difference between Rhode Island fiduciary standards and ERISA is that ERISA requires expenses to be only reasonable while Rhode Island law requires costs to be both appropriate and reasonable. That is, the Rhode Island fiduciary duty applicable to the state pension appears to be even higher than ERISA.” htto://investments,treasury.r.gov/investment-philosophy/the-state-investment-commissic * netp://data.treasury.r.gov/dataset/1bd6b1e3-2697-4760-bc45-b6f99ab3dcb8/resource/bde16d91-c65d-47ch- ab9b-e5a .f/download/Defined-Benefit-Investment-Policy-Statement-February-7 > Rhode Island General Laws 36-8-4.1. Fiduciary...requirements,While your website suggests that furthering the interests of parties other than the participants and beneficiaries is acceptable in connection with management of the pension, the pension’s IPS clearly states that any direct or indirect benefit to any party related to the pension—other than the participants and their beneficiaries—is generally prohibited. Cayman Islands Tax Avoidance Schemes Impermissibly Benefit Wall Street, Violate “Sole Interest” Fiduciary Standard For example, investing in private funds established in loosely regulated offshore tax havens clearly provides an impermissible benefit (under the “sole interest” fiduciary standard applicable to the SIC) to the investment managers of these funds by limiting their own taxes ies. Since the pension does not pay taxes, it receives no tax or legal benefit—but nal risk.* We are not aware of any benefit these offshore funds provide to the pension that could not be secured through onshore investments. Further, even if there (2) A member of the board shall discharge duties with respect to the retirement system..(1) Solely in the interest of the participants and benefciaries..(2) For the exclusive purpose of providing benefits to participants and beneficiaries and paying reasonable expenses of administering the syster..(3) With the care, skill, and caution Under the circumstances then prevailing which a prudent person [the term “person” extends to, and includes, co- partnerships and bodies corporate and politic. See Rhode Island General Laws 43-3-6] acting in alike capacity and familiar with those matters would use in the conduct of an activity of lke character and purpose...(5) Incurring only costs that are both appropriate and reasonable.” Compare to : ERISA Duty of Loyalty The duty of loyalty, expressed as the “sole interest” and “exclusive purpose” rules of ERISA under section 404(a)(1)(A), requires a fiduciary to discharge its duties “with respect to a plan solely inthe interest of the participants and their beneficiaries...for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying only reasonable expenses of administering the plan.” ERISA Duty of Prudence ‘The duty of prudence under ERISA section 404(a)(1)(8) requires a fiduciary to discharge its duties “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting In alike capacity and familiar with such matters would use in the conduct of an enterprise of alike character and with lke aims.” ‘As you can see, a notable difference between ERISA and Rhode Island state law is that ERISA requires expenses to be only reasonable while Rhode Island state law requires costs to be both appropriate and reasonable. So even if ‘an investment were to pass muster as reasonable under Rhode Island state law, it would still need to be appropriate; vice versa, ifan investment were to pass muster as appropriate, it would still need to be reasonable as well In other words, the Rhode Island costs/expenses duty appears to be even higher than ERISA which requires that an ‘expense be only reasonable ~ even while it may not be appropriate. * et mn /poltwere limited benefits to the pension, the massive additional risks related to these offshore investments (detailed more fully below) outweigh any speculative benefit to the pension. ‘Again, in our opinion, the very real tax and legal benefits derived by the managers are impermissible under the applicable “sole interest” fiduciary standard. Thus, these tax avoidance schemes cannot be “appropriate” for the pen: n. The distinction between “best” versus “sole” interest of participants and “exclusive purpose” of providing benefits is significant as a matter of law and we recommend that the SIC reconsider the pension’s investment practices—particularly the private funds—under the higher applicable fiduciary standard, as well as reconsider whether such investments are “appropriate” for the pension. (We hereby request a copy of any such review undertaken by the SIC.) We also recommend that the wording on your website be changed to accurately state the applicable (higher) fiduciary standard. Through transparency, let’s find out if pension stakeholders agree the SIC has met the applicable higher “sole interest” fiduciary standard and that these investments are “appropriate” for our state retirement fund. ‘© Failure to Enforce Fiduciary Standards The IPS further states “Whenever possible (emphasis added),” third party investment managers entrusted with pension assets serve as fiduciaries for assets under their management. In other words, apparently not every investment manager hired by the pension is held to a heightened standard of fiduciary excellence —certain managers are permitted to engage in fiduciary breaches. (On a related note, offshore managers even warn investors that they are not subject to the same fiduciary standards as U.S. managers and fiduciary standards abroad are generally not as rigorous as those in the U.S.) RIRTA believes that the SIC’s failure to demand the highest fiduciary accountability with respect to each and every one of the pension’s investment managers is inconsistent with the fiduciary standard applicable to members of the SIC and that investments lacking fiduciary safeguards are outrageously “inappropriate” for the pension. Simply put, why would a prudent fiduciary ever entrust retirement assets to a non-fiduciary? Please provide any analyses/ legal opinions the SIC may have obtained concluding that entrusting assets to parties that refuse to acknowledge any fiduciary duty to the pension— when the overwhelming majority of investment managers globally are willing to so acknowledge—is “appropriate” and in the “sole interest” of participants, consistent with the fiduciary duty of the SIC and its members and does not violate Rhode Island law.‘Ata minimum, we recommend that you prominently disclose to pension stakeholders those investment managers handling pension assets that refuse fiduciary status and explain the additional risks related to such failure to enforce heightened fiduciary standards—including the fact that fund of fund underlying managers are generally not regarded as fiduciaries and that non-US. fiduciary standards are generally not as rigorous. Through transparency, let’s find out whether pension stakeholders believe it is “appropriate” for the SIC to waive critical fiduciary safeguards. ‘© Indemnification of Money Manager Wrongdoing RIRTA is also very concerned that the pension may have undertaken indemnity obligations with respect to its private fund investments holding the managers of these funds harmless from all ities, cost, claims (including expenses incurred in investigating, preparing for or defending against any litigation commenced or threatened or any claim whatsoever) related to the pension’s investment in certain funds. RIRTA strongly opposes indemnification agreements which serve to thwart investigations by pension fiduciaries (consistent with their duty to investigate) into investment manager wrongdoing. We believe agreements to hold managers harmless with respect to their wrongdoing violate the pension’s applicable “sole interest” fiduciary standard and are “inappropriate.” While the benefit provided under these agreements to ethically-challenged money managers is obvious, there is no benefit whatsoever—only detriment—to the pension. We simply cannot imagine why the SIC would ever entertain, or, worse still, enter into an agreement to indemnify a crooked money manager. ‘As noted in 2014 with regard to indemnification agreements that require public pensioners to pay Wall Street settlement costs: The retirees — and people who are currently working but have accrued benefits in those pension funds — probably don’t know that they are responsible for these costs. It would be very hard for them to find out: Their legal obligations are detailed in private equity documents that are confidential and off limits to pensioners and others interested in seeing them.> Please disclose each firm and the terms of each such indemnification agreement entered into by the pension to the participants, as well any legal analyses indicating that each such indemnification agreement is “appropriate” and in the “sole interest” of participants, as * hetos://wwwnvtimes.com/203 sment/behind-private-eauitys-curtain.htmrequired under applicable pension fiduciary standards and Rhode Island law. Please disclose any settlement costs incurred by the pension as a result of any indemnification agreements. If the SIC has entered into confidentiality agreements with asset managers which the SIC believes precludes disclosure of the indemnification agreements, please provide any legal analyses concluding that such confidentiality agreements are “appropriate” and in the “sole interest” of participants, as required under applicable pension fiduciary standards and Rhode Island law. Through transparency, let's find out whether pension stakeholders believe the SIC should secretly agree to indemnify Wall Street wrongdoers with pension money. Il. 100 Questions Regarding Internal Controls to Safeguard Pension Assets Finally, the pension’s financial statements state the SIC and your staff are responsible for ensuring that an adequate internal control structure is in place to provide reasonable assurance regarding the safeguarding of pension assets and the reliability of preparing financial statements in conformity with generally accepted accounting principles. jancial records for Listed below are but a few of the complex issues RIRTA has identified to date which arise as a result of the pension’s recent massive gambling in high-cost, high risk, opaque private funds, in particular. To our knowledge, this is first attempt by participants in a public pension to ask detailed questions regarding the heightened risks related to private fund investing and request that plan fiduciaries demonstrate competence in answering their questions. ‘A. 50 Questions Related to Treasurer's “Back to Basics” Plan® 1. Please identify the investment consulting firm and name specific employees of said firm which participated in the recommendation that the pension invest in hedge funds. 2. Please disclose whether the investment consulting firm that recommended hedge fund investing disclosed, at the time of the initial recommendation (or anytime thereafter), that legendary investor Warren Buffett warned investors, indeed public pensions specifically, not to invest in hedge funds.” © On September 28, 2016, you announced a new so-called "Back to Basics" investment strategy for the pension, following unanimous approval by the State Invest ment Commission. Among the changes you recommended was 3 significant reduction in the state's investments in hedge funds. Under the "Back to Basics" plan, the state will reduce its investment in hedge fund strategies by more than $500 million and reallocate these funds to more traditional asset classes, according to your press release. htto://wwwri.gov/oress/view/28643 The 2/butett: westments-are-a-fools-game.html3. Please disclose whether the investment consulting firm that recommended hedge funds disclosed that John Bogle, Vanguard Group founder and pioneer of index funds, warned investors in 2013 that hedge funds cannot beat the market over time and that any downside protection they offer is illusory.® 4, Please provide any analyses prepared by the investment consulting firm, the SIC or any other party, at any time, related to the Warren Buffett and John Bogle hedge fund warnings. 5. Please provide any analyses prepared by the investment consulting firm, the SIC or any other party regarding an October 17, 2013 forensic investigation by Benchmark Financial Services, Inc. warning of the risks related to the pension’s proposed ‘gambling in alternative investments and foreseeing massive losses.” 6. Please provide any analyses prepared by the investment consulting firm, the SIC or any other party regarding a June 5, 2015 forensic investigation by Benchmark Financial Services, Inc. which exposing that the first four years of so-called “pension reform” had already cost the pension $1.4 billion.” 7. Please disclose the percentage and total dollar amount the investment consultant recommended the pension invest in hedge funds and the dates when these recommendations to invest were made. 8. Was the investment consultant responsible for ongoing monitoring of the hedge funds for actual or potential violations of laws or regulations? If not, who was responsible? 9. Please disclose any actual or alleged violations of law related to any hedge fund investment as disclosed to the SIC by the investment consultant. 10. Please disclose any actual or alleged violations of law related to any hedge fund investment as disclosed to the SIC by any party other than the investment consultant. 11. When did the investment consultant disclose to the SIC that hedge funds were highly speculative investments? Please provide any documentation. 12. When did the investment consultant disclose to the SIC that hedge funds are designed only for sophisticated investors able to withstand a total loss of their investment? Please provide any documentation. * https: 3 /articles/SB10001424127887323469804578523612570406102 ° Rhode island Public Pension Reform: Wall Street's License to Steal, Forensic Investigation of the Employee Retirement System of Rhode Island for Rhode Island Council 94, American Federation of State, County and Municipal Employees by Benchmark Financial Services, Inc, October 17, 2013, ° Double Trouble: Wall Street Secrecy Conceals Preventable Pension Losses in Rhode Island13. When did the investment consultant disclose to the SIC that hedge funds do not provide downside protection? Please provide any documentation. 14. When did the investment consultant disclose to the SIC that hedge funds are not required to hedge any of their investments? Please provide any documentation. 15. When did the investment consultant disclose to the SIC that hedge funds may abandon or change their investment strategies at any time? Please provide any documentation. 116. When did the investment consultant disclose to the SIC that hedge funds may invest in derivatives? Please provide any SIC reports detailing the types and degrees of risk related to hedge fund derivatives trading. 17. When did the investment consultant disclose to the SIC that hedge funds may engage in unlimited leverage? Please provide any documentation. 18. When did the investment consultant disclose to the SIC that shares of the hedge funds were not approved by the SEC or any state securities commission or other U.S. regulatory authority. Please provide any documentation. 19. When did the consultant disclose that each of the hedge funds would not register as. commodity pool operators (“CPO”) with the Commodity Futures Trading Commission; unlike registered CPOs, would not be required to deliver a disclosure document and certified annual report to investors and that the CFTC had not, reviewed or approved the offering of such funds or any disclosure documents for such funds? Please provide any documentation. 20. When did the consultant disclose that each of the hedge funds would permit “friends and family” and other hedge fund insiders to invest at more favorable terms, as well as secretly profit at the expense of the pension? Please provide any documentation. 21. Please disclose any analysis provided to the SIC opining that secret profiting by hedge fund insiders at the expense of the pension does not violate the “sole interest” fiduciary standard applicable to the SIC, the pension and its advisers, or Rhode Island law and that such hedge fund investments are “appropriate” for the pension. 22. Were the identities of the hedge fund insiders secretly profiting at the expense of the pension and the terms of insider investments ever disclosed to the SIC? Please provide any documentation. If not, how did the SIC determine that such secret, insider investing did not violate applicable law and fiduciary standards? Please provide any documentation. 23. What was the maximum amount the pension invested in hedge funds? 24. With respect to each hedge fund recommended (and in which the pension invested), please disclose the all-in fees and expenses (including any pass-through fees andexpenses) as disclosed to the SIC by the investment consultant annually since inception. 25. How much have the hedge fund fees paid by the pension disclosed to the public increased annually since inception? 26. On a 1, 3, 5, 10-year and from inception bi underperformed the public equity indices? 27. How much has this underperformance cost the pension on a 1, 3, 5, 10-year and from inception basis? the investment consultant ever recommend that the pension invest in hedge fund of funds? Please provide any documentation. 29. Did the pension ever invest in hedge fund of funds and, if so, how much did the pension invest in these funds? 30. With respect to each hedge fund of fund in which the pension invested, please disclose the all-in fees and expenses (including any “look-through” fees and expenses) as disclosed by the investment consultant to the SIC. 31. Did each hedge, hedge FOF managers and FOF underlying managers acknowledge their fiduciary status in writing to the pension? Please provide any documentation. 32. Please provide any documentation or analyses indicating that hedge FOF underlying managers are fiduciaries to the pension. 33. Did the investment consultant disclose to the SIC, on an ongoing basis, the identity of each of the FOF underlying investment funds? Please provide any documentation. 34, Did the investment consultant disclose to the SIC, on an ongoing basis, the investment holdings of each of the hedge funds and FOF underlying investment funds? Please provide any documentation. 35. Did the investment consultant disclose to the SIC the country of domicile, applicable law and regulation of each of the underlying investment funds, as well as the significantly greater risks involved in non-U.S. funds? Please provide any documentation. 36. Did the investment consultant provide the SIC or staff with independently audited financial statements for each hedge fund and hedge FOF on an annual basis? 37. Did the investment consultant provide the SIC or staff with independently audited financial statements for each of the FOF underlying funds on an annual basis? 38, Who reviewed the independently audited financial statements of each hedge and hedge FOF annually? 38. Who reviewed the independently audited financial statements of each FOF underlying fund annually? 40. When did the investment consultant disclose to the SIC the greater risks related to offshore custody of pension assets? Please provide any documentation. , by how much have the hedge funds41. Are the assets of the pension invested in hedge FOF underlying hedge funds held in the name of the pension at the custodian? If not, why not? Does this arrangement involve additional risks? 42. In dollar amounts, how much has the pension already reduced its hedge fund investments? 43, How much further will hedge fund investments be reduced? 44, How much remains invested in hedge funds? 45. Please disclose the “more traditional asset classes” into which, according to your office, the proceeds of these redeemed funds have been invested. 46. Over the past decade, how much has the investment consulting firm that recommended hedge funds been paid by the pension for any and all investment, advice provided? 47. Did the pension consultant that recommended the hedge fund investments participate in the Back to Basics extensive review? If not, why not? Please provide any documentation. 48. Did the SIC investigate whether the investment consultant which recommended the hedge fund strategy resulting in massive underperformance losses may have been negligent, or materially misrepresented the fees, risks and returns related to these funds? Please provide details regarding any such investigation. If no investigation was undertaken, please explain how failure to investigate potential investment consultant liability is consistent with the SIC’s fiduciary duty to the pension. 49. As of January 2015, what percentage of pension assets was invested in low-fee index funds? What percentage of the pension is invested in low-fee index funds today? Pursuant to the Back to Basics plan, how much has been invested in assets supposed designed to protect the pension against market risks such as inflation and volatility? Please identify these funds, their legal structures, applicable fees and investment strategies. 50. B. 20 Questions Related to Private Fund’* isks 1. Please disclose all private funds with which the SIC has entered into so-called “confidentiality agreements.” 2. What information regarding public funds has the SIC determined can be withheld from public scrutiny? 3. Please provide any analysis by the SIC regarding the basis under Rhode Island law for withholding private fund information from the public. + «private Funds” include private equity, venture, real estate and other funds not publicly offered, as well as hedge funds. 1010. 11. 12. 13. 14, 15. 16. v7. Please provide any analysis by the SIC opining that confidentiality agreements which undermine public scrutiny comply with the “sole interest” and “exclusive purpose” fiduciary standard applicable to the pension. Do each of the pension’s private fund managers acknowledge in writing their fiduciary duty with respect to pension assets they manage? If not, which do not? Are the pension’s investments in private funds liquid? If not, which private fund investments are liquid and which are not? For those private funds that have “lock-up periods, what is the lock-up period with respect to each private fund? Are the pension’s investments in private funds registered with any state or federal regulator? Which are and which are not? Is there a readily available market in existence for interests in each of the private funds? ). Please disclose any private fund FOFs (other than hedge FOFs) in which the pension has invested. With respect to each private fund, including any FOFs, is the SIC fully informed on an. ongoing basis as to the actual investments made by the investment manager and any underlying funds? Please disclose the country of domicile of each private fund in which the pension invests. Please disclose the law applicable to each private fund in which the pension invests. Please disclose any analysis the SIC has undertaken of the risks related to non-U.S. private funds in which the pension invests. What benchmark is used for measuring private equity performance? Has private equity performance exceeded the 400 basis point annual excess return over the public equity markets benchmark commonly used by institutional investors over the past 5 and 10 years? If not, what are private equity underperformance losses over the past decade? Please provide any analysis provided to the SIC opining that secret profiting by private fund insiders at the expense of the pension did not violate the “sole interest” fiduciary standard applicable to the SIC, the pension and its advisers, or Rhode Island law. Were the identities of the private fund insiders secretly profiting at the expense of the pension and the terms of insider investments ever disclosed to the SIC? Please provide any documentation. If not, how did the SIC determine that such secret, insider investing did not violate applicable law and fiduciary standards? Please provide any documentation. a18. 19. 20. G Px aay 10. For each private fund which the pension has requested redemption, please disclose amounts redeemed, amounts awaiting redemption and projected date of final redemption. Please name all private funds, such as Point Judith Il, that have extended their expected life and provide performance for each fund from inception to date. Please disclose any actual or alleged violations of law related to any private fund investment as disclosed to the SIC by any party. 10 Questions Regarding Valuation Uncertainties What percentage of pension assets is Level 1, based upon quoted price in active markets? What percentage of assets is Level 2, based upon significant other observable inputs? What percentage of pension assets is Level 3, limited liquidity and hard to value? What percentage of assets is actually held at the master custodian? What percentage of assets is held in the name of pension? What percentage of assets is independently valued by the master custodian? What percentage of assets is held outside the U.S.? What standards has the SIC established for foreign custodians which the custodians are required to meet? Please demonstrate compliance with any such established standards. What percentage of assets is the fair value based solely upon estimates provided by the manager? In light of the conflict of interest involved in manager valuations and manager incentives to inflate asset values, what procedures have been established to review the fair value of assets based exclusively upon manager estimates. Please provide documents related to any such procedures and reviews. 10 Questions Regarding Failure to Disclose All Investment Fees Please disclose the total investment fees paid by the pension in 2011 and the total investment fees paid in the most recent year. Please disclose whether the pension has ever asked its money managers to disclose any “retrocessions” paid. Please provide any analysis regarding any “retrocessions” paid by the pension’s managers. 24, The financial statements of the pension indicate that “In some instances (hedge funds, private equity, real estate, infrastructure, and cash investments), investment related costs are not readily separable from investment income and consequently investment income is recorded net of related expenses.” What is the basis for the SIC’s representation that these costs are not readily separable? 5. Has the SIC ever requested these funds separate investment related costs from investment income? If not, why not? 6. Is the SIC aware that certain pensions have so required and managers have ‘complied? 7. Please provide any review by the SIC of SEC findings of illegal fees or severe compliance shortfalls in more than half private equity firms.12 8, Please disclose any procedures established by the SIC, in light of the SEC findings, to protect the pension from such illegal fees or compliance shortfalls. 9. IFinvestment related costs are not separated, how does the SIC establish that all costs and expenses paid are legitimate? 10, How does the SIC monitor the legitimacy of all fees, costs and expenses without being aware of what they are? E, 5 Questions Regarding Fiduciary Liability Insurance 1. Does the SIC have fiduciary liability insurance? If so, please provide a copy of the insurance, indicating costs, coverage and limits. 2. Does the fiduciary liability insurance include coverage for hedge, private equity and other private funds? 3, Has a claim ever been presented to the fiduciary liability insurer? 4, Has the fiduciary liability insurer ever paid or denied a claim? If so, please disclose details. 5. Please provide details regarding any indemnification or reimbursement by the pension of any costs related to any investment manager wrongdoing. D. 5 Questions Regarding Other Matters 1. Does the pension hold any seat on any private fund or other advisory boards? 2. Has any SIC member or pension staff attended any advisory committee meetings? If so, please identify the place and time of meetings and cost to the fund, manager or pension. tps://mvw.see.gov/news/s B3. For each external manager, please provide a fully completed Rhode Island Investor Code of Conduct pledge, as well as a fully completed pledge verifying that no placement agent was used in solicitation of state business. 4, Please disclose whether any agreements between the pension and its custodians permit the custodians to receive revenue sharing or any other form of compensation from asset managers. 5. Please provide any analyses by the SIC of revenue sharing and other forms of compensation received by the custodians. In closing, we thank you for your anticipated cooperation in answering the above 100 questions. We wish to emphasize that RIRTA’s goal in sending you this detailed list is to improve internal controls, address potential violations of law and breaches of fiduciary duties at the pension—particularly with respect to the unprecedented levels of private fund investments. Very truly yours, Diane Bucci, Chair, Legislative Committee buvacc2@aol.com Ann Gardella, Executive Director anngargella@charter.net 4