In a move that could put a dent in fundraising for some politicians, the Securities and Exchange Commission has voted to tighten rules on "pay-to-play" in the public pension arena.
The five-member commission ruled that an investment firm that contributes to a politician who oversees a pension fund cannot manage money for that fund for two years. The ban also applies to consults for investment firms.
The move - designed to curtail the practice of contributing to pension fund overseers in hopes of winning their business - is more lenient than what the commission had proposed earlier this year. Under that proposal, the SEC would have placed an outright ban on third-party solicitations of pension management business. Under the SEC-adopted rules, however, investment managers can pay a third party to solicit pension business for them if the third party is registered with the SEC or other regulators.
Politicians who sit on committees that oversee public pension plans routinely raise campaign money from financial firms. The tightened rules could make it harder for them to do so.
Mary L. Schapiro, the SEC's chairwoman, said it was important to crack down on pay-to-play to avoid favoring "large advisers over smaller competitors" and rewarding "political connections rather than management skill."
Read a Skadden, Arps analysis of the ruling here.
