/Three Investment Advisers Settle with SEC on Campaign Contribution Charges

Three Investment Advisers Settle with SEC on Campaign Contribution Charges

WHAT HAPPENED?

On July 10th, 2018, the Securities and Exchange Commission (SEC) released its charges against three separate investment advisers in violation of the “pay-to-play” rule.

Rule 206(4)-5 of the Advisers Act is designed to address “pay-to-play abuses involving campaign contributions made by certain investment advisers (or their covered associates) to government officials who are in a position to influence the selection of investment advisers to manage government client assets.”  The Rule specifically prohibits investment advisers from providing advisory services for compensation to a government entity (including government investment vehicles) for two years after the adviser (or associate) makes a campaign contribution.

All three firms, allegedly, contributed thousands of dollars to campaigns and candidates in offices with influence over public entities.  The contributions started the two-year “time-out” period defined by the rule; however, in the two years following the contributions, the firms were allegedly providing advisory services for compensation, violating the “pay-to-play” rule.

The advisers were ordered to cease-and-desist, will be censured going forward and, without denying or admitting to the SEC’s findings, have agreed to participate in monetary settlements totaling $720,000.

WHAT DOES THIS MEAN FOR ME?

Although an extreme example, all three cases serve as an excellent reminder of the “pay-to-play” rule requirements.  For more information, the SEC released responses to a set of questions regarding the rule.  Review your Code of Ethics or policies and procedures to ensure you (or your firm) addresses the “pay-to-play” rule.

If you have any questions or concerns about how these cases relate to you, please reach out to Fairview® directly.  Fairview® is committed to ensuring its clients are compliant with current SEC rules and regulations.

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Fairview®
Founded in 2005 with the goal of developing streamlined back office solutions for investment advisers, Fairview® is now servicing investment advisers, foundations and funds with over $185 billion in collective assets.