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The 8 challenges of pay to play | Learn more in L.A. on April 21

April 12, 2011

NICSA members are telling us that one of the most challenging directives to come along recently is SEC Rule 206(4)-5. This new regulation  — better known as “pay to play” — makes it very difficult for employees of investment advisers to both make contributions to political candidates and manage money for the governmental entity that they are elected to.

Icon of government buildingThe rule creates new operational challenges for advisers. Specifically, firms must:

  1. Flag clients who are government entities.
  2. Determine which employees are currently subject to the rule and which might be subject to it one day.
  3. Establish procedures that ensure that personnel actions, including hires and promotions, don’t cause pay-to-play problems.
  4. Develop a process for catching and — when possible — correcting mistakes.
  5. Monitor compliance procedures of outside solicitors.
  6. Include pay-to-play as part of M&A due diligence.
  7. Create preclearance procedures for covered associates.
  8. Make sure that procedures comply with state — as well as federal — guidelines.

Learn more about all these challenges:

  • At the NICSA West Coast Regional Meeting on April 21st, at the Capital Group offices in Los Angeles. Moderator Mitchell E. Nichter (Paul, Hastings, Janofsky & Walker) and panelists Michael Glazer (Bingham McCutchen), Valerie Lewis (CNI Charter Funds) and Rob Nisi (PwC) will discuss pitfalls and best practices in implementing pay-to-play procedures. They’ll also review the new California pay-to-play law and how it interacts with the SEC rule. Full program and registration information can be found here.
  • From the NICSA webinar archives. In a live webinar recorded on December 8, panelists Maria Dwyer (MFS Investment Management), Christopher P. Harvey (Dechert) and Jay Regan (Deloitte & Touche) provide an overview of the rule and implementation steps. The recording is available for a limited time only to all interested parties here.  Please note: Archive files are available to NICSA members at all times but are usually password protected.

Not a NICSA member? Visit our website at for complete information on eligibility and membership dues.

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One Comment
  1. Bernie Brockgreiten permalink
    April 17, 2011 1:34 pm

    Access Data will be hosting a client roundtable in May to talk about using the tagging feature of our SalesVison platform to track direct accounts that meet the pay to play government entitiy criteria. Accounts held away in omnibus accounts are still problematic.

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