An excerpt of Dentons’ Political Law Playbook.
SEC Fines TX Investment Adviser for Pay-to-Play Rule Breach – A Texas-based investment adviser was recently fined $95,000 by the SEC after an investigation by the agency found the firm in violation of the Commission’s pay-to-play rule. As we discussed in the August Edition of the Playbook, SEC pay-to-play Rule 206(4)-5 prohibits investment advisers from receiving compensation for providing advisory services to a government entity for two years after the investment adviser, or certain covered personnel, make a contribution to an “official” of the government entity. According to the SEC order issued against Obra Capital Management, the infractions relate to a $7,150 campaign contribution made in December 2019 by an individual whom the firm later hired in July 2020 into a position that made him a covered associate. The contribution in question was directed to a Michigan government official with influence over the Michigan Public Employees’ Retirement Fund, which had invested in a closed-end fund managed by Obra Capital. According to the order, the office of that government official had the ability to influence which investment advisers the fund hired. In addition to the $95,000 fine, the SEC censured Obra Capital and ordered it to refrain from future violations of the pay-to-play rule.
CA Legislature Passes Bill to Update the State’s Pay-to-Plays Laws – In August, both chambers of the California legislature passed legislation that would, if enacted, update the state’s pay-to-play laws. Under the state’s current law, an elected official must disclose contributions of more than $250 from anyone who has pending state business interests, such as a contract, permit, or housing development, before the official’s government body, and must recuse themselves from participation in the decision. If signed by the Governor, Senate Bill 1243 would, in part, raise the contribution threshold from $250 to $500, clarify that a contribution from a party’s agent that exceeds $500 will not be aggregated with the party’s contributions, and exempt from these provisions: contracts valued under $50,000; contracts where no party receives financial compensation; and the periodic review or renewal of development agreements, as specified. The legislation is now awaiting Governor Gavin Newsom’s signature.
About the Political Law Playbook
Dentons’ Political Law Playbook is a monthly update on the most important developments in the areas of political law, government ethics, campaign finance, lobbying and election law. Each edition of Political Law Playbook will cast a spotlight on the unique issues at the intersection of law, policy and politics and give you a window into how the Dentons Political Law, Ethics and Disclosure team can help you navigate the compliance challenges you face.
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