SEC Penalizes 10 Firms for Violating Pay-to-Play Rule

By ASPPA Net Staff • January 18, 2017 • 0 Comments
The Securities and Exchange Commission (SEC) on Jan. 17 announced that 10 firms have agreed to pay penalties to settle charges that they violated the SEC’s pay-to-play rule by receiving compensation from public pension funds within two years after the firms’ associates made campaign contributions.

The firms did not admit to nor deny the findings, but consented to the SEC’s orders finding they violated Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-5. The penalties range from $35,000 to $100,000.

The SEC requires that there be a two-year timeout from providing compensatory advisory services either directly to a government client or through a pooled investment vehicle after political contributions were made to a candidate who could influence the investment adviser selection process for a public pension fund or appoint someone with such influence.

The SEC found that these 10 firms violated that rule when they accepted fees from city or state pension funds after their associates made campaign contributions to elected officials or political candidates who could influence those pension funds.