AIMA Workshop: Pay to Play, Lobbying and Other Similar Restrictive Rules on Donations
A recap of this workshop is available here.
The SEC’s Pay to Play rule, released in 2010, was intended to deter investment firms or their employees from making campaign contributions to politicians or candidates for office in the hope of receiving business from the municipalities that those political figures represent. The burden the rule places on advisers is significant; aside from careful, thorough monitoring of staff and firm political contributions, the rule includes a two-year “time-out” from providing compensated advisory services if certain triggering contributions are made, and a look back into certain new hires’ contribution activity. An extremely limited number of waivers have been granted where an inadvertent violation has been detected, and recent enforcement actions highlight the significance of Pay to Play compliance.
However, the SEC’s Pay to Play is but one of several contribution-focused rules. Many states, counties, and even cities have additional requirements, which may also include lobbyist registration. The burden is on the adviser to determine what applies and when. Furthermore, many pensions and endowments have their own sets of restrictions applicable to anyone doing business with them, often with the burden on the adviser to determine applicability and proof of compliance.
As with the SEC’s Pay to Play rule, one misstep on these additional rules can cost dearly. In addition to potential monetary penalties, forced redemption, and time-out provisions, a violation can warrant a disciplinary disclosure on the adviser’s Form ADV. Practically speaking, this can dissuade other pensions from seeking advisory services from the adviser or disqualify the adviser altogether.
A contentious 2020 election season has begun, with candidates asking early and frequently for donations. This workshop will help you to prepare by providing you with practical guidance on how to establish and maintain a framework and related best practices. You are welcome to submit anonymous questions before or during the session, all of which will be reviewed by the panel and your peers. Please join us for what we expect to be an informative and timely session.
- Karl Egbert, Partner, Baker & McKenzie LLP
- Suzan Rose, Senior Advisor, Government & Regulatory Affairs, AIMA
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