Subject: Very Important Issues Concerning the Selection of Chief Investment Officer of the Pension Agency
From: "[email-masked]" <[email-masked]>
To: [email-masked], David Tsiklauri <[email-masked]>, Timo Viherkenttä <[email-masked]>, Michael Ridley <[email-masked]>, Jean-Frederic Paulsen <[email-masked]>
Cc: [email-masked], [email-masked], [email-masked], [email-masked], Levan <[email-masked]>
Date: Fri, 11 Oct 2019 15:11:46 +0000

Dear Colleagues,

Herewith,  we would like to bring to your attention several very important issues, which are relevant in the course of selecting final candidate for the position of the Chief Investment Officer. These issues have relevance specifically to one of the candidates, as he is currently an employee of the regulator of the investment function of the Pension Agency. Therefore, please  consider these important factors in the course of deliberating over the candidacy of CIO.

The Georgian legislation clearly and imperatively prohibits appointment of former employee of the regulator due to potential conflict of interests. NBG is a regulator of the Pension Agency and appointing NBG long-term management level staffer as CIO of the Pension Agency raises significant conflict of interests concerns formally as well as de facto. Pension Agency’s legal advisors have elaborated legal opinion based on the analysis of the Georgian Law, which is annexed to this letter for your consideration.

Besides the prohibition by the Law, there is a clear factual conflict of interests between the current occupation of the candidate (management of NBG’s currency reserves) and his potential future function, which should ensure maximization of returns on the pension assets. Major effect of the Pension Reform should be support of the capital market development in Georgia. NBG’s potential influence on the Pension Agency’s investments would decrease this effect significantly, since currency concerns could be prioritized over the investment returns. It will be impossible to eliminate this risk should NBG former reserve manager be appointed as CIO.

The candidate has been assessed by the Investment Board and has received lower scores as compared to other candidates applying for this position. His background is “sterile” and mostly NBG related. This candidate is not an asset manager in the investment context required to protect interests of the participants of the pension scheme.

Appointment of this candidate shall entirely undermine independence of the Investment Board subjecting it to the undue potential influence of the regulator and deteriorate the trust of the public in the independence of the Pension Agency and pension reform as a whole.

Such appointment shall raise concerns in the media and the public and will dramatically deteriorate trust towards the reform and the Pension Agency. One of the major messages delivered through public outreach campaign has always been independence of the Pension Agency from the Government. Such appointment shall bankrupt the Pension Agency of the public's confidence in its independence.

All of the above shall cause significant political damage to the Government and the Pension Agency as a face of the Georgian Government in the implementation of the reform and its present success.

Kind regards,

Levan Surguladze

Chief Executive Officer

Pension Agency, LEPL

7 B Kipshidze str.

Tbilisi 0162, Georgia

Tel.:  +995 32 219 5858 (Direct land line)

+995 591 994100 (Cell)

www.pensions.ge