The executive director of the state’s Fair Political Practices Commission has ordered San Diego retirement board member Herbert W. Morgan to disclose the identities of nine customers of his investment operation, Del Mar–based Efficient Market Advisors, LLC. An active Republican who backed John McCain during last year’s presidential campaign, Morgan was named in April to the board of the City’s troubled $3.1 billion retirement system by GOP mayor Jerry Sanders and confirmed by the city council on May 4. The job pays no salary, but members are required by state law to file a disclosure statement of their assets and income, including all single sources of income greater than $10,000. On June 9, Morgan filed his statement, valuing Efficient Market Advisors at over $1 million, with total income greater than $100,000. He included an attachment, titled “Explanation for Nondisclosure of Economic Interests,” maintaining that he was exempt from reporting the identities of nine of his investor clients due to regulations of the federal Securities and Exchange Commission “designed to protect the privacy of consumer financial information.” He added that “eight clients are individuals. To the best of my knowledge, none of the clients has any interest financial or otherwise related to [the retirement fund].” The other client was an institution, he said.

After a reporter’s inquiry, Fair Political Practices Commission executive director Roman Porter reviewed Morgan’s disclosure and wrote him a letter dated July 7 ordering him to disclose the client identities. “In explanation of the nondisclosure of customers of Efficient Market Advisors, you asserted a privilege under United States Securities Exchange Commission Regulation S-P,” Porter wrote. “However, SEC Regulation S-P clearly states that it does not apply to the disclosure of nonpublic personal information, including customer names, ‘[t]o comply with federal, State, or local laws, rules and other applicable legal requirements.’ In other words, SEC Regulation S-P does not prevent disclosure of customers’ names if that disclosure is required to comply with federal, State, or local laws.”

In an interview before Porter’s ruling last week, Morgan said he sought to protect the identity of his customers both for the sake of their privacy as well as to shield them from his competitors. He added that he would resign from the retirement board if required to make the disclosures. However, because Morgan has already taken office, he will have to reveal the clients’ names even if he departs the board, according to the order. “Please be advised that failure to comply with the reporting provisions of the Act can result in a fine by the Commission of up to five thousand dollars per violation.” Reached by phone this week, Morgan said he had no immediate comment regarding his next move.

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