This is from the lawyers at Covington & Burling, who say they expect to see a final rule from the SEC restricting how investment advisers can influence contracts with public pension plans around the middle of next year.
This would be just a few months before the 2010 elections, when campaigns are underway and investment advisors and their associates are already volunteering and raising money for candidates, creating all sorts of potential for conflicts of interest.
“It will stir the pot,” says Covington’s Rob Kelner.
Kelner also doesn’t think the SEC will exempt registered broker-dealers from the new rule — unless the agency is able to hold all investment advisors liable for the actions of any third-party placement agents working on their behalf.
Don’t count on getting 60 to 90 days after the new rule to get your house in order, either — Kelner says investment advisors should be putting a system in place now to monitor and clear campaign contributions, one that assumes there will be state and local laws that are even tougher than whatever the SEC decides to do.
The fact that you would use lawyers to design your compliance plan is no doubt why the folks at Covington & Burling are talking about this. But expect the SEC to be tough, despite some of the howls the commission got in comments last month about their plans.
As it stands now, the proposed rule would ban investment advisors and their associates who make a political contribution to a candidate, an elected official or a political incumbent who’s in a position to influence a contract with a public pension fund or a 529 (college savings) plan from providing services for two years.
More information is here.