Client Alert

SEC Proposes Pay-to-Play Rules That Would Significantly Restrict Political Contributions by Investment Advisers

August 17, 2009

Lawrence Hass and Matthew Nadworny

On August 3, 2009, the Securities and Exchange Commission (the SEC) published the provisions of its proposed rule that would prohibit investment advisers from compensating placement agents to market private funds to certain governmental entities, including public pension plans, and restrict political contributions by investment advisers and certain of their employees. In support of the proposed rule, the SEC claims that pay-to-play schemes cause pension plans to pay higher fees and manipulate the market for advisory services, and that third-party solicitors played a central role in several recent pay-to-play scandals. The SEC is seeking public comments on the proposed rule until October 6, 2009.

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