SEC Proposes Ban of Political Contributions by Registered Investment Advisers Seeking to Manage Public Pensions
Earlier this week, the U.S. Securities and Exchange Commission ("SEC") proposed a new rule prohibiting "pay to play" practices by SEC registered investment advisers seeking to manage money for state and local governments. The SEC explained that "[t]he measures are designed to prevent an [investment] adviser from making political contributions or hidden payments to influence their selection by government officials." The proposed SEC rule prohibit three primary activities by a federally registered investment adviser seeking to manage public funds: (1) political contributions (2) solicitation of political contributions and (3) use of a third-party to solicit the government.
First, under the proposed rule, an SEC registered investment adviser, including certain executives and employees of the investment adviser, who makes a political contribution to a candidate or an elected official in a position to influence the selection of the investment adviser would be barred for two years from providing advisory services for compensation, either directly or through a fund. However, the proposed rule provide a de minimis permitting an executive or employee of the registered investment adviser to make a contribution of up to $250 per election per candidate if the contributor is entitled to vote for the candidate.
Second, the proposed SEC rule would prohibit a federally registered investment adviser, including certain executives and employees of the investment adviser, from coordinating or asking another person or political action committee ("PAC") to (a) make contribution to a candidate or elected official who can influence the selection of the investment adviser to manage the government's funds, or (b) make a payment to a state or local political party where the registered investment adviser is seeking to provide investment advisory services to the government.
Third, the SEC proposed rule would prohibit a federally registered investment adviser, including certain executives and employees, from paying a third-party to solicit a government client on behalf of the registered investment adviser.
Finally, the proposed rule prevents a SEC registered investment adviser from circumventing these political contribution prohibitions by also banning the investment adviser from making indirect contributions through the use of third-parties such as spouses, lawyers or affiliated companies.
The proposed SEC rule will be subject to a 60 day comment period. RIA Compliance Consultants will keep its readers informed of any developments related to this proposed ruled by the SEC.
First, under the proposed rule, an SEC registered investment adviser, including certain executives and employees of the investment adviser, who makes a political contribution to a candidate or an elected official in a position to influence the selection of the investment adviser would be barred for two years from providing advisory services for compensation, either directly or through a fund. However, the proposed rule provide a de minimis permitting an executive or employee of the registered investment adviser to make a contribution of up to $250 per election per candidate if the contributor is entitled to vote for the candidate.
Second, the proposed SEC rule would prohibit a federally registered investment adviser, including certain executives and employees of the investment adviser, from coordinating or asking another person or political action committee ("PAC") to (a) make contribution to a candidate or elected official who can influence the selection of the investment adviser to manage the government's funds, or (b) make a payment to a state or local political party where the registered investment adviser is seeking to provide investment advisory services to the government.
Third, the SEC proposed rule would prohibit a federally registered investment adviser, including certain executives and employees, from paying a third-party to solicit a government client on behalf of the registered investment adviser.
Finally, the proposed rule prevents a SEC registered investment adviser from circumventing these political contribution prohibitions by also banning the investment adviser from making indirect contributions through the use of third-parties such as spouses, lawyers or affiliated companies.
The proposed SEC rule will be subject to a 60 day comment period. RIA Compliance Consultants will keep its readers informed of any developments related to this proposed ruled by the SEC.
Labels: Pensions, Political Contributions
posted by bhill at 1:50 PM
