CCOs did not sleep well for one. Monitoring employee contributions to political candidates is difficult. The political contributions do not originate from the firm, so there is no accounting control that you can put in place.
You can’t ban political contribution if you have an office in California. California labor law seems to make such a ban illegal.
You also risk a non-employee spouse making a donation in the name of both. Or you may think less of giving a donation to personal friend or friend of friend running for office.
That makes it easy to trip over the rule with a $500 donation. That happened to Pershing Square. Maybe.
An analyst gave a contribution to a failed candidate for the Governor of Massachusetts. The Governor appoints board members to the state pension fund. That pension fund was a client of Pershing Square.
But the candidate in question failed to garner support at the state convention and never made it onto the ballot. No voter ever had the opportunity to vote for this candidate.
It is not clear if the analyst was a “covered associate” under the rule. He occasionally participated in client meetings to discuss Pershing Square’s strategy and approach. But it does not look like his activities should be considered soliciting investments under Rule 206(4)-5.
Plus, the contribution was made after the state pension fund had already committed to the investment with Pershing Square. The contribution was made in 2013 and the state pension fund had made its investments in 2011 and 2012.
Once again we see that the breadth of the SEC pay to play rule is implicating actions that seem far removed from trying to buy influence. Pershing Square is having expend tremendous resources to avoid Rule 206(4)-5’s draconian penalty of forfeiting two year’s worth of management fees.
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