Norway’s Finance Ministry: Keep Sovereign Wealth Fund with Central Bank

Norway’s finance ministry has determined that management of the nation’s $1 trillion sovereign wealth fund will not be spun off from the central bank.

This rejects a commission’s 2017 proposal that a newly created independent entity manage the Government Pension Fund Global (GPFG) that would no longer be subject to Norges Bank’s supervision.

“After a comprehensive assessment, the government recommends that Norges Bank continue to be the asset manager of the GPFG going forward,” said Finance Minister Siv Jensen.

This development came to light Friday in a finance ministry white paper to Stortinget, Norway’s parliament. The paper also suggested the government establish a monetary policy and financial stability committee for Norges Bank which could focus on fiscal and monetary policy, thus freeing up resources to oversee the sovereign wealth fund.

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The ministry said the bank held a high level of trust locally and globally, and that it has maintained a good performance as both a central bank and asset manager. It also said that Norges Bank was fully aware of the fund’s economic policymaking reach.

When the proposal to divest the fund appeared last year, officials said that the responsibilities of the bank’s dual roles had expanded to the point where it began to put a strain on its board, senior management, and the organization itself. It said that dividing the duties to separate management firms would lighten the bank’s loads.

Jensen acknowledged that leaving the Government Pension Fund Global’s management with Norges Bank meant it will still face these issues, and that the ministry “must ensure that the governance structures are well adapted to these responsibilities.”

The ministry said that by moving the responsibility for these tasks to a separate committee within the bank, Norges Bank’s board can now devote “more time to the bank’s other tasks, in particular management of the GPFG.”

Øystein Olsen, the bank’s governor, said it had previously declared itself open to this idea, adding that it is “well equipped to continue its mission in both areas.”

The Norwegian government expects to produce a legislative proposal based on the white paper next spring.

Tags: Government Pension Fund Global, Ministry of Finance, Norges Bank, Sovereign Wealth Fund

A former State Street executive has been sentenced to 18 months in prison on fraud charges.

Ross McLellan, the firm’s previous executive vice president and president of its US broker-dealer division, was indicted in April 2016 for his involvement in a plan to defraud the firm’s transition management business. The Securities and Exchange Commission (SEC) charged him in May, and Judge Leo T. Sorokin, a Massachusetts federal court judge, sentenced him Tuesday.

Prosecutors wanted a five-year sentence for the ex-State Street head, who asked for a year and a day due to his previously clean record. The judge instead gave McLellan a year and a half, with two years of supervised release.

McLellan was found guilty on June 26 for two counts of wire fraud, two counts of securities fraud, and one count of conspiracy to commit securities and wire fraud. McLellan and his associates, Edward Pennings, and Richard Boomgaardt (both former managing directors at the firm), had been adding hidden commission charges to equity and fixed-income trades for at least six institutional clients in the State Street’s transition management department between February 2010 and September 2011. The SEC charged McLellan of violating the antifraud provisions of the securities acts of 1933 and 1934.

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These commissions were not authorized by the bank’s traders. According to US Attorney Andrew E. Lelling, McLellan and others “took steps to hide the commissions from the clients and others within the bank,” such as by not reporting the secret charges in post-trade reports.

Pennings, pleaded guilty in June 2017 and will be sentenced on November 6. Boomgaardt pleaded guilty in July 2017, but only received one year of probation at his July 2018 sentencing.

A separate SEC complaint against McLellan is ongoing.

Tags: Fraud, prisons, Ross McLellan, State Street