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A Better Partnership


Jun 2012
June 19, 2012

Pay to Play Provisions Compliance Date Extended

The SEC has extended the compliance date of the “Pay to Play” third-party solicitor provisions of the Investment Advisers Act from June 13, 2012, until nine months after the compliance date of the final rule when the Commission will adopt regarding municipal advisor registration.  The expected date for the municipal advisor registration rule is September 30, 2012.

The Pay to Play rule places a two year ban on investment advisers from providing “advisory services for compensation” after the adviser, or certain employees, make contributions to elected officials or candidates. The adviser and certain employees are also prohibited from paying a third party to solicit “advisory business from any government entity” unless such third-party is an SEC-registered investment adviser or a registered broker or dealer subject to pay to play restrictions.

Although, the compliance date has been extended, many states and local municipalities have adopted regulations regarding how advisers may solicit advisory business from government entities. Further, the SEC Pay to Play rule does not preempt those regulations and your local rules may already apply – and those laws may be more restrictive as to time banned and to the amount contributed. Further, under certain state laws, investment management activities provided to government entities could be considered lobbying and may require registration as a lobbyist, which could involve additional reporting and disclosure requirements, ethics training, and more fees. Among those states are: California, New York, Ohio, and Texas. Failure to register as a lobbyist could result in a fine, and possible loss of SEC safe harbor exemptions.

If you have questions about your compliance obligations, please contact any member of the Broker Dealer/Investment Adviser Practice Group at Warner Norcross & Judd.

NOTICE. Although we would like to hear from you, we cannot represent you until we know that doing so will not create a conflict of interest. Also, we cannot treat unsolicited information as confidential. Accordingly, please do not send us any information about any matter that may involve you until you receive a written statement from us that we represent you.

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