Publications

July 8, 2010

SEC Adopts Rule Regarding Political Contributions by Investment Advisers

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On June 30, 2010, the SEC adopted a new Rule 206(4)-5 under the Investment Advisers Act to curb “pay to play” practices by certain investment advisers. The Rule prohibits an investment adviser from: (i) providing advisory services for compensation to a government entity for two years after the adviser, or certain of its executives or employees, makes a contribution to certain elected officials or candidates who are in a position to influence the selection of the adviser; (ii) providing or agreeing to provide, directly or indirectly, payment to any third party (i.e., a placement agent) for a solicitation of advisory business from any government entity on behalf of such adviser, unless the third party is an SEC-registered investment adviser or an SEC-registered broker-dealer, in each case, subject to similar pay to play restrictions; and (iii) coordinating or soliciting from others campaign contributions to certain elected officials who are in a position to influence the selection of the adviser or payments to certain political parties in the state or locality where the adviser is seeking government business.