No More Delay? SEC to Discuss Pay to Play on June 30
After almost a year (and countless scandals with related enforcement actions later), it appears the SEC will issue its much loved, hated and debated pay-to-play rule. The SEC has announced the subject matter to be discussed at its open meeting on June 30, 2010: “The Commission will consider whether to adopt a new rule and related rule amendments under the Investment Advisers Act of 1940 to address ‘pay-to-play’ practices by investment advisers. The new rule is designed to prohibit advisers from seeking to influence the award of advisory contracts by public entities by making or soliciting political contributions to or for those officials who are in a position to influence the awards.”
On August 3, 2009, the SEC proposed measures at the federal level intended to eliminate, or at least curtail, “pay-to-play” practices. The proposed pay-to-play rule was published in the Federal Register on August 7, 2009, and the SEC received 250 comment letters on the proposal through October 6, 2009. As currently drafted, the prohibitions on providing investment advisory services and payments to solicit, in each case as described in the proposed rule and outlined in our prior blog entry, arise only from contributions made on or after the effective date of the rule. The current draft rule also contains a prohibition on placement agents acting as intermediaries between public pension funds and advisers. The majority of the comment letters were critical of the ban on placement agents. However, the SEC has indicated that the rule may be revised to reflect public comment. To that end, in April 2010, the SEC engaged FINRA to craft rules for registered broker-dealers when acting as a placement agent soliciting investments from government investors. Please click here for further information on this issue. As Doug Cornelius, Chief Compliance Officer at Beacon Capital Partners has speculated: “That would make it likely that placement agents will not be banned, but merely subject to some additional regulatory requirements.”
