Sink Shows Her SBA Strategy

Alex Sink, Florida’s chief financial officer, last Thursday unveiled a 10-point plan to strengthen investments at the State Board of Administration, which oversees the local government investment pool as well as the state’s pension plan and other investment funds.

Sink’s plan, forwarded to the Legislature on its third day in session, includes determining if there is a basis for a lawsuit regarding investments sold to the state by investment firms.

The recommendations are an outgrowth of a run on the local government investment pool late last year that led officials to freeze withdrawals and segregate troubled investments linked to subprime mortgages.

“Today’s investments are different than the investments of 30 years ago and that means we’ve got to adapt and strengthen our safeguards at the State Board of Administration,” Sink said in a statement. “I’m pleased to offer a number of strong proposals … that will increase oversight over public funds and further protect our investors.”

The elected CFO’s number-one recommendation is to perform a litigation analysis. Last year, she said the local government pool was sold several investments that within a short period of time defaulted or had to be restructured. 

“Several news reports have suggested that some financial firms may have been selling or offering advice inconsistent with their own investment strategies,” Sink said. “A litigation analysis prepared by the independent law firm already working for the SBA would reveal whether the [pool] has legal remedies with regard to the purchase of these investments. 

Sink also recommended that companies should be required to publicly disclose when they are selling assets or offering financial advice in conflict with their own investment strategies.

Her other recommendations include increasing transparency and communication about investments, enacting new ethics and disclosure requirements for investment advisers, strengthening performance requirements for the SBA’s executive director, and segregating risk-management functions from investment decisions.

On Tuesday, Sink and members of Florida’s Cabinet discussed possible litigation against firms that sold SBA funds the troubled investments. They have ordered an audit of the board to determine what happened and when.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER