I was looking through an issue under Rule 206(4)-5. The Securities and Exchange Commission limits the ability of investment advisers and fund managers to contribute to certain politicians that can influence investment decisions for state pension funds. Under Rule 206(4)-5, you can contribute up to $150 to any candidate or up to $350 if you can vote for the candidate. I was looking at how that rule applies to political parties.
Section (a)(2) makes it unlawful for an investment adviser or any of its covered associates
(ii) To coordinate, or to solicit any person or political action committee to make, any:
…(B) Payment to a political party of a state or locality where the investment
adviser is providing or seeking to provide investment advisory services to a government
entity.
So it’s not unlawful to make a contribution to the party, but it’s unlawful to solicit others to make a contribution to the party.
Just to confirm the SEC responses seems to agree with this reading of the rule.
Question V.3. Contributions to Others.
Q: If an adviser subject to the pay to play rule, or one of the adviser’s covered associates, makes a contribution to a political party, PAC or other committee or organization, but not to an official, could the adviser still be subject to a two-year time out under rule 206(4)-5(a)(1)?
A: A contribution to a political party, PAC or other committee or organization would not trigger a two-year time out under rule 206(4)-5(a)(1), unless it is a means to do indirectly what the rule prohibits if done directly (for example, the contribution is earmarked or known to be provided for the benefit of a particular political official) (see footnote 154 of the Adopting Release).
We note, however, that the pay to play rule prohibits advisers and their covered associates from coordinating or soliciting any person (including a non-natural person) or PAC to make any payment to a political party of a state or locality where the investment adviser is providing or seeking to provide investment advisory services to a government entity (see rule 206(4)-5(a)(2)(ii)). (Posted March 22, 2011).
A covered associate at an investment adviser could attend a state political party fundraiser, but not host one.
Sources:
