Investment advisers managing public pension funds and other government assets must now comply with key portions of Advisers Act Rule 206(4)-5 . Rule 206(4)-5 is designed to prevent "pay-to-play" by investment advisers seeking investment allocations from public pension funds and other government entities. Rule 206(4)-5 imposes significant restrictions and record-keeping requirements on investment advisers who might use offers of political contributions or fundraising to influence public entity investment allocation decisions.
For complete details on these new rules and their implications, including the potential for significant forfeitures, please see the attached alert.
Key changes include:
- certain fund employees are prohibited from making contributions to government officials who are directly or indirectly responsible for investment decisions (this applies even to contributions made by new employees before they join the fund);
- solicitation or coordination of political contributions on behalf of state or local political parties is prohibited; and
- should non-exempt payments or contributions have been made, investment advisers are banned from receiving compensation from that government entity for two years.
Employees of investment advisers, as well as certain types of third parties including PACs, are all covered by the new rule, which has few exceptions.
Our multi-disciplinary team, experienced in both investment management and political law issues, can help you ensure that your policies and procedures comply with this complex, challenging new rule, or work with you to develop a comprehensive compliance plan. Please contact any of the authors listed on the alert, or your Venable contact, with questions or for further information.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
