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Public Pension Funds may Face Sec “Pay-to-Play” Rules

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Making good on a promise by its chairman (see C&C Newsletter for February, 1999, Item 2), the Securities and Exchange Commission may propose "pay-to-play" rules. According to BNA, SEC's area of concern is the practice of requiring, either expressly or implicitly, municipal securities participants to make political contributions to officials in order to be considered for work. Although there is an SEC rule prohibiting municipal securities dealers from engaging in municipal securities business for two years after contributions are made, SEC is turning its attention to the action of investment advisors and other vendors in the public pension fund arena. Under the Investment Advisers Act of 1940, money managers have a fiduciary duty to their clients (that is, pensioners) that may be compromised if the selection process is corrupted.
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