SEC Proposes Rules to Curtail Pay to Play

August 7, 2009

On August 3, 2009, the Securities and Exchange Commission released a proposed new rule under the Investment Advisers Act of 1940 aimed at curtailing so-called “pay to play” practices in connection with providing advisory services to government funds and plans (the “Proposed Pay to Play Rules”). The Proposed Pay to Play Rules, if adopted, would impose extensive restrictions on political contributions by investment advisers and their covered associates and would prohibit advisers from using third-party intermediaries or placement agents in transactions with government clients. The below memo summarizes and describes some potential issues with and possible modifications to the Proposed Pay to Play Rules.