Ten investment advisory firms will each pay penalties of $35,000 to $100,000 to settle charges that their compensation from public pension funds violated pay-to-play rules, the Securities and Exchange Commission announced Tuesday.
The firms are Adams Capital Management, Aisling Capital, Alta Communications Commonwealth Venture Management Corp., Cypress Advisors, FFL Partners, Lime Rock Management, NGN Capital, Pershing Square Capital Management and The Banc Funds Co. None admitted or denied the SEC's findings.
The public pension funds involved are the Massachusetts Pension Reserves Investment Management Board, Boston; Pennsylvania State Employees' Retirement System, Harrisburg; Illinois Teachers' Retirement System, Springfield; Ohio State Teachers Retirement System, Columbus; State of Wisconsin Investment Board, Madison; and four pension funds within the $163.1 billion New York City Retirement Systems serving city employees, teachers, police and fire departments.
The contributions were made to a variety of campaigns, including mayor of New York City, Pennsylvania treasurer, and governor races in Illinois, Massachusetts and Pennsylvania.
The cases stem from political campaign contributions made by some of the firms' associates years after the pension funds hired them. The SEC's investment adviser pay-to-play rule prohibits firms from receiving compensation from public pension funds within two years of campaign contributions to anyone in a position to influence investment decisions or to appoint someone who does.
“Advisory firms must be mindful of the restrictions that can arise from campaign contributions made by their associates,” said LeeAnn Ghazil Gaunt, chief of the SEC enforcement division's unit on public finance abuse.
In a statement, Pershing Square Capital Management said that settling with the SEC was in the best interest of the firm, which reported a contribution to a Massachusetts gubernatorial candidate by a former employee when it learned of it. “Pershing Square follows rigorous compliance procedures, takes all reasonable steps to enforce its policies, and carefully trains and periodically reminds all employees and related parties of those policies,” according to the statement, which noted that the SEC rule “does not require a showing of actual intent to influence a candidate for elected office, and that the commission was not required to show that Pershing Square was even aware that it was violating the rule.” Other fined firms did not return phone calls for comment by press time.
The order is on the SEC website.