An SEC Pay-to-Play Rule Expected by Mid-Summer

May 11, 2009 ( - A new rule is expected as soon as July from the Securities and Exchange Commission (SEC) that would prohibit money managers from running a public pension asset management mandate for two years after contributing to the campaigns of the political officials overseeing the fund.

A Wall Street Journal report said   the ban would apply after the money manager or certain of its employees or consultants contributed to the campaigns of officials in the chain of command of people who oversee pension funds as well as municipal officials, such as the New York City mayor.

Such a move by the SEC comes as a state-federal investigation continues into potential pay-to-play wrongdoing connected with the New York state pension fund (see  DiNapoli Bars Placement Agents for Empire State Fund )    and an agreement among a large group of state attorneys general to share information affecting their pension programs (see Cuomo Announces Multi-state Effort on Pension Abuse ).

Sixteen states ban investment advisers from giving campaign contributions to state pension fund officials, according to a survey of the laws compiled by lawyer Ki Hong at the Washington office of law firm Skadden, Arps, Slate, Meagher & Flom LLP, the Journal said.

Unlike the proposed federal rule, state laws generally apply to a broader swath of businesses and state contracts, according to the Journal. Cities including New York, Philadelphia, San Francisco and Oakland, California, have also enacted pay-to-play bans in recent years.