Just in time for a governor to be selected to the presidential ticket, the Securities and Exchange Commission levied a big fine for violating the Pay-to-Play Rule for Investment Advisers.
Obra Capital Management was the sponsor and adviser to a closed-end, private fund. The Michigan Public Employees’ Retirement Fund made a $100 million commitment to the fund in 2017. The state had no right to withdraw from the Obra fund.
In 2019 Person1 made a $7150 campaign contribution to a Michigan government official. Person1 was not employed by Obra at this time. Presumably, the official was Governor Whitmer, although not specifically stated in the Order. The Governor meets the definition of an elected official who can indirectly influence investment decisions.
Six months later, in mid-2020, Obra hired Person1 to a position that would be considered a “covered associate” under the Pay-to-Play Rule. After being hired, Person1 sought return of the campaign contribution and was successful in getting it back.
That return of funds did not meet the requirements of the Rule.
Obra was censured and had to pay a $95,000 fine.
Seems like the SEC didn’t care that Michigan’s investment decision had already been made, or that the contribution was made well before employment, or that the contribution was made in accordance with state campaign restrictions, or that there was no evidence of deception, fraud or malfeasance.
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