Another fund manager was heavily fined for an employee making a political contribution. Wayzata Investment Partners had to pay a $60,000 fine.
The Minnesota State Board of Investments made $300 million in commitments to Wayzata funds from 2007 to 2013. In 2022 a Wayzata employee made a $4000 campaign contribution to a Minnesota elected official who was up for re-election. The board of the Minnesota State Board of Investments consists of the Governor, State Auditor, Secretary of State, and Attorney General. All are elected offices. Neither the name of the employee or the politician are named in the SEC action.
Under SEC Rule 206(4)-5 a covered associate of a registered investment adviser can not make a contribution of more than $150 to a elected official who can directly or indirectly influence investment decisions. The Minnesota State Board of Investments falls under the coverage of the Rule.
The $60,000 fine was levied even though the funds were closed-end funds with no opportunity for withdrawal. The contribution was years after the commitments were made. There was no finding that there was a connection between the government investment and the political contribution. Under the Rule, the SEC does not have to prove any connection.
The fine is much less than the full penalty under the SEC rule which would be forfeiture of 2 years of management fees and carried interest.
As with some other political contribution fines, Commissioner Peirce dissented from the decision in this case. She points out the stifling of political participation.
I’ll point out the magnitude of the fine. In most SEC cases the subject ends up paying a fine that matches the damage. In these political contribution cases, the subject is paying over a 10x penalty.
More Reading:
- SEC Order against Wayzata: https://www.sec.gov/files/litigation/admin/2024/ia-6590.pdf