In December, the Securities and Exchange Commission (“SEC”) fined an investment adviser $100,000 for violating the SEC’s pay-to-play rule. The SEC’s rule effectively prohibits investment adviser executives and other “covered associates” of an investment adviser from making political contributions in excess of de minimis amounts ($350 per election if the contributor is eligible to vote … Continue Reading
Companies doing business with state and local governments or operating in regulated industries are subject to a dizzying array of “pay-to-play” rules. These rules effectively prohibit company executives and employees (and in some cases, their family members) from making certain personal political contributions. Even inadvertent violations can be dangerous: a single political contribution can, for example, … Continue Reading
The universe of those covered by the SEC’s pay-to-play restrictions is expanding. If a newly proposed SEC rule is adopted as expected, pay-to-play restrictions will now extend to cover the recently created class of broker-dealers called Capital Acquisition Brokers (“CABs”). In this advisory, we discuss the background on the proposed rule and its implications for … Continue Reading
Over the past few years, a few state political party committees have relentlessly sought to block or overturn pay-to-play laws overseen by the Securities and Exchange Commission (SEC). Yesterday, the Sixth Circuit delivered another defeat to an ongoing effort to challenge federal pay-to-play laws. Last year, we noted that the Municipal Securities Rulemaking Board (MSRB) … Continue Reading
The Securities and Exchange Commission announced Tuesday that it will allow further comment on a pay-to-play rule proposed by the Financial Industry Regulatory Authority (FINRA). As we discussed previously, if the SEC approves FINRA’s pay-to-play rule, it would clarify that investment advisers are allowed to hire third party solicitors if they are subject to FINRA … Continue Reading
On Wednesday, the Municipal Securities Rulemaking Board (MSRB) announced that its expanded pay-to-play rules will cover municipal advisors, including third-party solicitors, as of August 17, 2016. As we noted previously and discussed during Covington’s Corporate Political Activity & Government Affairs Compliance Conference earlier this month, the MSRB has been drafting an expansion to its pay-to-play … Continue Reading
A $12 million settlement announced last week by the Securities & Exchange Commission suggests that the SEC will aggressively pursue alleged schemes connecting political contributions to government contracts even if the political contributions do not violate its 2010 pay-to-play rule. According to the settlement order, in 2010, the head of Public Funds at State Street … Continue Reading
Yesterday’s D.C. Circuit opinion upholding the SEC’s burdensome “pay-to-play” rule on procedural grounds is bad news for those questioning the rule’s constitutionality. Nevertheless, the rule is still far from invincible. The SEC pay-to-play rule, among other things, effectively prohibits investment firm executives from making certain political contributions to state and local officeholders and candidates. Last … Continue Reading
The Wagner case, decided today by the D.C. Circuit, is important because of its analysis of the constitutionality of federal campaign contribution restrictions and, by extension, of pay-to-play laws generally. Covington has been monitoring this case since the district court decision in 2012, to the argument before the D.C. Circuit in 2013, and the decision … Continue Reading
A constitutional challenge to the SEC’s “pay to play” rule moved one step closer to resolution today, even as significant hurdles remain in an effort to strike down the rule. The U.S. Court of Appeals for the District of Columbia Circuit heard arguments this morning on an appeal brought by two state political parties challenging … Continue Reading
In our discussion of the Securities & Exchange Commission’s (SEC) actions over the past year, we described how the SEC is ramping up enforcement of its pay-to-play restrictions. We also pointed out an acknowledgment by an agency enforcement official that the agency is “actively looking” for violations and that the agency does its own “surveillance.” What kind … Continue Reading
When the history of the Securities & Exchange Commission’s pay-to-play rule is written, 2014 could be the inflection point. Developments this year suggest two dramatically different paths for the rule in the years to come: either the rule will unravel from court challenges or it will become an increasingly prominent enforcement weapon in the SEC’s … Continue Reading
In an important decision, the US District Court for the District of Columbia yesterday dismissed a constitutional challenge to the SEC’s “pay to play” rule, which restricts contributions and fundraising by some individuals who are associated with hedge funds, private equity funds, and other registered investment advisers. The Court ruled that the case had been … Continue Reading
The Securities & Exchange Commission hit a Philadelphia-area private equity firm today with a major penalty, in the SEC’s first case involving alleged violations of its 2010 “pay-to-play” rules. More enforcement actions may be coming. The SEC pay-to-play rules were adopted to prevent, among other things, executives of investment firms from making political contributions in … Continue Reading
While Super PACs and million dollar contributions have dominated the campaign finance headlines this election year, as with every election, there are trends developing just below the surface that the media have yet to focus on clearly. This year, one of those emerging trends is the increasing bite of so-called “pay to play” laws. These … Continue Reading
More investment firms are adopting policies to address compliance with the SEC pay-to-play rule, according to a recent survey conducted by the Investment Adviser Association, the ACA Compliance Group, and Old Mutual Asset Management. The survey of 555 firms found that 43% of firms reported adopting pay-to-play policies as part of larger compliance policies, and … Continue Reading
