The SEC on June 30 will vote on rules to restrict hedge funds and private equity firms from giving money to politicians to win pension business in response to abuses in an industry that oversees $2.4 trillion of public retirement funds, according to a statement on the SEC’s website.
Last year, the SEC proposed that investment firms be barred from managing pension fund assets for two years if their executives gave money to a politician with sway over contracts.
Rules considered by the SEC last July would have barred use of so-called placement agents, individuals and firms paid by investment advisers to help them gain access to pension money. The proposal followed allegations that New York officials arranged for a fund to invest $5 billion with money managers who paid political advisers associated with placement agents. The SEC and New York Attorney General Andrew Cuomo have been probing state pension fund corruption for more than a year.
The SEC moved away from the ban in December when Andrew Donohue, head of the agency’s division of investment management, asked the Financial Industry Regulatory Authority whether it could restrict brokerages from engaging in so-called pay-to-play practices as an alternative.
Richard Ketchum, FINRA chairman and CEO, responded in March, telling Mr. Donohue that rules aimed at keeping securities firms from engaging in “improper pay-to-play practices” are a viable alternative “to a ban on certain private-placement agents.”
