Is Your RIA Supervising the Gifts and Political Contributions of Its Investment Adviser Reps – Learn About the SEC’s Proposed Pay-to-Play Rule

October 07, 2009

Reading time : 2 minutes

The U.S. Securities and Exchange Commission (“SEC”) recently proposed new SEC Rule 206(4)-5 under the Investment Advisers Act of 1940. According to the SEC, the proposed rule is intended to curtail “pay to play” practices by registered investment advisers that seek to manage money for state and local governments.

This SEC proposal relates to money managed by state and local governments under public programs such as public pension plans for government employees, retirement plans in which teachers and other government employees can invest monies, and 529 plans that allow families to invest money for college. The state and local governments often hire and pay outside registered investment advisers to provide advisory services such as direct investment management or recommendations about which investments to make. The outside registered investment advisers often are selected by one or more trustees who have been appointed by elected officials. The term “pay to play” has been coined because the selection of such trustees can be undermined if elected officials ask investment advisers for political contributions or if elected officials otherwise make it understood that only investment advisers who make contributions will be selected to provide advisory services to the public programs subject to the control of the elected official.

Pay to play practices have been recognized as a significant problem. During the past several years, the SEC has brought enforcement actions in New York, New Mexico, and Connecticut, and likewise, there also have been criminal prosecutions in New York, New Mexico, Illinois, Ohio, Connecticut, and Florida over pay to play schemes.

If you are interested in learning more about recent actions related to registered investment advisers involved in “pay to play” schemes and the SEC’s proposed rule to limit “pay to play” practices, please purchase your seat for only $59.95 to our upcoming webinar, “Supervising Gifts and Political Contributions,” on Wednesday, October 28, 2009 from 12:00 – 1:00 p.m. CST.

Posted by Bryan Hill
Labels: Code of Ethics, Political Contributions, Webinar