SEC announces first investment adviser ‘pay-to-play’ enforcement action

Abstract

Purpose

To explain the first enforcement action the USA Securities and Exchange Commission (SEC) has brought under “pay to play” rules for investment advisers since those rules were adopted nearly four years ago.

Design/methodology/approach

First, the article provides a summary of the SEC enforcement action against TL Ventures Inc., a Philadelphia-area private equity firm. Next, the article provides a historical context and some key provisions of the rules. Finally, the article provides political contribution policy and procedure recommendations.

Findings

Political corruption in the municipal market has been a focus of the SEC for several years and is likely to continue to be a top priority. Investment advisers should ensure they have sufficient policies and procedures in place to avoid a two-year ban on business with a state or local government as the result of a political contribution.

Originality/value

The article provides the facts underlying the SEC’s enforcement action, the historical context of municipal market pay-to-play rules, a summary of the pay-to-play prohibitions, and recommendations for avoiding rule violations. The article would be of interest to investment advisers, public pension plans, municipal securities underwriters, brokers, and dealers as well as state and local governments.

Citation

Norman Goldberger, M., C. Grugan, J., O’Neil, C. and N. Stanley, T. (2014), "SEC announces first investment adviser ‘pay-to-play’ enforcement action", Journal of Investment Compliance, Vol. 15 No. 3, pp. 35-37. https://doi.org/10.1108/JOIC-08-2014-0036