Political Contributions by Certain Investment Advisers

55 Pages·2016·0.48 MB·English

Wednesday,
July 14, 2010
Part IV
Securities and
Exchange
Commission
17 CFR Part 275
Political Contributions by Certain
Investment Advisers; Final Rule
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41018 Federal Register/Vol. 75, No. 134/Wednesday, July 14, 2010/Rules and Regulations
SECURITIES AND EXCHANGE respect to those registered investment C. Recordkeeping
COMMISSION companies. See section III of this D. Registered Investment Companies
Release for further discussion of IV. Cost-Benefit Analysis
17 CFR Part 275 compliance dates. A. Benefits
B. Costs
[Release No. IA–3043; File No. S7–18–09] FORFURTHERINFORMATIONCONTACT: 1. Compliance Costs Related to Rule
Melissa A. Roverts, Senior Counsel, 206(4)–5
RIN 3235–AK39
Matthew N. Goldin, Branch Chief, 2. Other Costs Related to Rule 206(4)–5
Daniel S. Kahl, Branch Chief, or Sarah (a) Two-Year Time Out
Political Contributions by Certain
A. Bessin, Assistant Director, at (202) (b) Third-Party Solicitor Ban
Investment Advisers
551–6787 or [email protected], Office of 3. Costs Related to the Amendments to
AGENCY: Securities and Exchange Investment Adviser Regulation, Division Rule 204–2
V. Paperwork Reduction Act
Commission. of Investment Management, U.S.
A. Rule 204–2
ACTION: Final rule. Securities and Exchange Commission, B. Rule 206(4)–3
100 F Street, NE., Washington, DC
C. Rule 206(4)–7
SUMMARY: The Securities and Exchange 20549–8549. D. Rule 0–4
Commission is adopting a new rule SUPPLEMENTARYINFORMATION: The VI. Final Regulatory Flexibility Analysis
under the Investment Advisers Act of Commission is adopting rule 206(4)–5 A. Need for the Rule
1940 that prohibits an investment [17 CFR 275.206(4)–5] and amendments B. Significant Issues Raised by Public
adviser from providing advisory to rules 204–2 [17 CFR 275.204–2] and Comment
services for compensation to a 206(4)–3 [17 CFR 275.206(4)–3] under C. Small Entities Subject to Rule
government client for two years after the the Investment Advisers Act of 1940 [15 D. Projected Reporting, Recordkeeping, and
Other Compliance Requirements
adviser or certain of its executives or U.S.C. 80b] (‘‘Advisers Act’’ or ‘‘Act’’).1
E. Agency Action to Minimize Effect on
employees make a contribution to
Table of Contents Small Entities
certain elected officials or candidates.
VII. Effects on Competition, Efficiency and
The new rule also prohibits an adviser I. Background Capital Formation
from providing or agreeing to provide, II. Discussion VIII. Statutory Authority
directly or indirectly, payment to any A. First Amendment Considerations
third party for a solicitation of advisory B. Rule 206(4)–5 I. Background
business from any government entity on 1. Advisers Subject to the Rule Investment advisers provide a wide
2. Pay to Play Restrictions
behalf of such adviser, unless such third variety of advisory services to State and
(a) Two-Year ‘‘Time Out’’ for Contributions
parties are registered broker-dealers or local governments,2including managing
(1) Prohibition on Compensation
registered investment advisers, in each (2) Officials of a Government Entity their public pension plans.3These
case themselves subject to pay to play (3) Contributions pension plans have over $2.6 trillion of
restrictions. Additionally, the new rule (4) Covered Associates assets and represent one-third of all U.S.
prevents an adviser from soliciting from (5) ‘‘Look Back’’ pension assets.4They are among the
others, or coordinating, contributions to (6) Exceptions for De Minimis largest and most active institutional
certain elected officials or candidates or Contributions investors in the United States;5the
(7) Exception for Certain Returned
payments to political parties where the management of these funds affects
Contributions
adviser is providing or seeking
(b) Ban on Using Third Parties to Solicit
government business. The Commission Government Business 2See Sofia Anastopoulos, An Introduction to
also is adopting rule amendments that (1) Registered Broker-Dealers Investment Advisers for State and Local
Governments (2d ed. 2007); Werner Paul Zorn,
require a registered adviser to maintain (2) Registered Investment Advisers
Public Employee Retirement Systems and Benefits,
certain records of the political (c) Restrictions on Soliciting and Local Government Finance, Concepts and Practices
contributions made by the adviser or Coordinating Contributions and 376 (John E. Peterson & Dennis R. Strachota eds.,
certain of its executives or employees. Payments 1st ed. 1991) (discussing the services investment
(d) Direct and Indirect Contributions or advisers provide for public funds).
The new rule and rule amendments
Solicitations 3To simplify the discussion, we use the term
address ‘‘pay to play’’ practices by (e) Covered Investment Pools ‘‘public pension plan’’ interchangeably with
investment advisers. (1) Definition of ‘‘Covered Investment Pool’’ ‘‘government client’’ and ‘‘government entity’’ in this
DATES: Effective Date: September 13, (2) Application of the Rule Release. However, our rule applies broadly to
investment advisory activities for government
2010. (3) Subadvisory Arrangements
clients, such as those mentioned here in this
Compliance Dates: Investment (f) Exemptions Section of the Release, regardless of whether they
advisers subject to rule 206(4)–5 must D. Recordkeeping are retirement funds. For a discussion of how the
be in compliance with the rule on E. Amendment to Cash Solicitation Rule proposed rule would apply with respect to
III. Effective and Compliance Dates investment programs or plans sponsored or
March 14, 2011. Investment advisers
A. Two-Year Time Out and Prohibition on established by government entities, such as
may no longer use third parties to solicit Soliciting or Coordinating Contributions ‘‘qualified tuition plans’’ authorized by section 529
government business except in of the Internal Revenue Code [26 U.S.C. 529] and
B. Prohibition on Using Third Parties to
compliance with the rule on September Solicit Government Business and Cash retirement plans authorized by section 403(b) or
457 of the Internal Revenue Code [26 U.S.C. 403(b)
13, 2011. Advisers to registered Solicitation Rule Amendment or 457], see section II.B.2(e) of this Release.
investment companies that are covered 4Board of Governors of the Federal Reserve
investment pools must comply with the 115 U.S.C. 80b. Unless otherwise noted, when we System, Flow of Funds Accounts of the United
rule by September 13, 2011. Advisers refer to the Advisers Act, or any paragraph of the States, Flows and Outstandings, Fourth Quarter
ES2 subject to rule 204–2 must comply with Advisers Act, we are referring to 15 U.S.C. 80b of 2009 78 tbl.L.119 (Mar. 11, 2010). Since 2002, total
UL the United States Code, at which the Advisers Act financial assets of public pension funds have grown
with R aHmowenedveedr, riuf lteh e2y0 4a–d2v iosne rMegairscthe r1e4d, 2011. i2s0 c4o–d2i,f rieudle, a2n0d4 Aw–h1e, nr uwlee 2re0f6e(r4 t)o– 3r,u oler a2n0y6 (p4a)–ra5g, rraupleh by5 2A8c%co. rIddi.n g to a recent survey, seven of the ten
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O investment companies that are covered of these rules, we are referring to 17 CFR largest pension funds were sponsored by State and
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Federal Register/Vol. 75, No. 134/Wednesday, July 14, 2010/Rules and Regulations 41019
publicly held companies6and the Pay to play practices are rarely been funneled through ‘‘solicitors’’ and
securities markets.7But most explicit: participants do not typically let ‘‘placement agents’’ that advisers engage
significantly, their management affects it be publicly known that contributions (or believe they must engage) in order to
taxpayers and the beneficiaries of these or payments are made or accepted for secure a client relationship with a
funds, including the millions of present the purpose of influencing the selection public pension plan or an investment
and future State and municipal retirees8 of an adviser. As one court noted, from one.16As we will discuss in more
who rely on the funds for their pensions ‘‘[w]hile the risk of corruption is obvious detail below, in such an arrangement
and other benefits.9Public pension plan and substantial, actors in this field are the contribution may be made in the
assets are held, administered and presumably shrewd enough to structure form of a substantial fee for what may
managed by government officials who their relations rather indirectly.’’12Pay constitute no more than an introduction
often are responsible for selecting to play practices may take a variety of service by a ‘‘well connected’’ individual
investment advisers to manage the forms, including an adviser’s direct who may use the proceeds of the fee to
funds they oversee. contributions to government officials, an make (or reimburse himself for having
Elected officials who allow political adviser’s solicitation of third parties to made) political contributions or provide
contributions to play a role in the make contributions or payments to some form of a ‘‘kickback’’ to an official
management of these assets and who government officials or political parties or his or her family or friends.17
use these assets to reward contributors in the State or locality where the adviser The details of pay to play
violate the public trust. Moreover, they seeks to provide services, or an adviser’s arrangements have been widely reported
undermine the fairness of the process by payments to third parties to solicit (or as a consequence of the growing number
which public contracts are awarded. as a condition of obtaining) government of actions that we and State authorities
Similarly, investment advisers that seek business. As a result, the full extent of have brought involving investment
to influence government officials’ pay to play practice remains hidden and advisers seeking to manage the
awards of advisory contracts by making is often hard to prove. considerable assets of the New York
or soliciting political contributions to Public pension plans are particularly State Common Retirement Fund.18In
those officials compromise their vulnerable to pay to play practices.
fiduciary duties to the pension plans Management decisions over these 16For example, in one recent action we alleged
they advise and defraud prospective investment pools, some of which are that, in connection with a pay to play scheme in
clients. These practices, known as ‘‘pay quite large, are typically made by one or New York State, investment advisers paid sham
‘‘placement agent’’ fees, portions of which were
to play,’’ distort the process by which more trustees who are (or are appointed funneled to public officials, as a means of obtaining
advisers are selected.10They can harm by) elected officials. And the elected public pension fund investments in the funds those
pension plans that may subsequently officials or appointed trustees that advisers managed and that participants, in some
receive inferior advisory services and govern the funds are also often instances, concealed the third-party solicitor’s role
in transactions from the investment management
pay higher fees. Ultimately, these involved, directly or indirectly, in
firms that paid fees to the solicitor by making
violations of trust can harm the millions selecting advisers to manage the public misrepresentations about the solicitor’s
of retirees that rely on the plan or the pension funds’ assets. These officials involvement and covertly using one of the
taxpayers of the State and municipal may have the sole authority to select solicitor’s legal entities as an intermediary to funnel
payments to the solicitor. SEC v. Henry Morris, et
governments that must honor those advisers,13may be members of a
al., Litigation Release No. 20963 (Mar. 19, 2009).
obligations.11 governing board that selects advisers,14 17See id. (along with the Commission’s complaint
or may appoint some or all of the board in the action, available by way of a hyperlink from
6See Stephen J. Choi & Jill E. Fisch, On Beyond members who make the selection.15 the litigation release). See also, e.g., In the Matter
CalPERS: Survey Evidence on the Developing Role Numerous developments in recent of Quadrangle Group LLC, AGNY Investigation No.
of Public Pension Funds in Corporate Governance, years have led us to conclude that the 2010–044 (Apr. 15, 2010) (finding that ‘‘private
61 Vand. L. Rev. 315 (2008) (‘‘Collectively, public equity firms and hedge funds frequently use
pension funds have the potential to be a powerful selection of advisers, whom we regulate placement agents, finders, lobbyists, and other
shareholder force, and the example of CalPERS and under the Investment Advisers Act, has intermediaries * * * to obtain investments from
its activities have spurred many to advocate greater been influenced by political public pension funds * * *, that these placement
institutional activism.’’). agents are frequently politically connected
contributions and that, as a result, the
7Federal Reserve reports indicate that, of the $2.6 individuals selling access to public money* * *’’);
trillion in non-Federal government plans, $1.5 quality of management service provided Complaint, Cal. v. Villalobos, et al., No. SC107850
trillion is invested in corporate equities. Board of to public funds may be negatively (Cal. Super. Ct., W. Dist. of L.A. County, May 5,
Governors of the Federal Reserve System, supra affected. We have been particularly 2010), available at http://ag.ca.gov/
no8teS e4e, aPta 7u8l Ztbolr.Ln.,1 11999. 7 Survey of State and Local concerned that these contributions have cnm19s1_5a_ttfailcehdm_ceonmtsp/plariensts_/fpodr_fsc/i vil_penalties.pdf
Government Employee Retirement Systems 61 (alleging, inter alia, that a top executive and a board
(1997) (hereinafter ‘‘1997 Survey’’) (‘‘[t]he 12Blount v. SEC, 61 F.3d 938, 945 (D.C. Cir. member at CalPERS accepted various gifts from a
investment of plan assets is an issue of immense 1995), cert. denied, 517 U.S. 1119 (1996). former CalPERS board member, ‘‘known among
consequence to plan participants, taxpayers, and to 13See, e.g., 2 N.Y. Comp. Codes R. & Regs. tit. 2 private equity firms as a person who attempts to
the economy as a whole’’ as a low rate of return will §320.2 (2009) (placement of State and local exert pressure on CalPERS’ representatives,’’ who
require additional funding from the sponsoring government retirement systems assets (valued at was acting as a placement agent trying to secure
government, which ‘‘can place an additional strain $109 billion as of March 2009) is under the sole investments from the California public pension
on the sponsoring government and may require tax custodianship of the New York State Comptroller). fund).
increases’’). 14See, e.g., S.C. Code Ann. §§9–1–20, 1–11–10 18See SEC v. Henry Morris, et al., Litigation
9The most current census data reports that public (2008) (board consists of all elected officials); Cal. Release No. 21036 (May 12, 2009); In the Matter of
pension funds have 18.6 million beneficiaries. 2007 Gov’t Code §20090 (Deering 2008) (board consists Quadrangle Group LLC, AGNY Investigation No.
Census of Governments, U.S. Bureau of Census, of some elected officials, some appointed members, 2010–044 (Apr. 15, 2010); In the Matter of GKM
Number and Membership of State and Local and some representatives of interest groups chosen Newport Generation Capital Servs., LLC, AGNY
Government Employee-Retirement Systems by by the members of those groups); Md. Code Ann., Investigation No. 2010–017 (Apr. 14, 2010); In the
S2 State: 2006–2007 (2007) (at Table 5), available at State Pers. & Pens. §21–104 (2008) (pension board Matter of Kevin McCabe, AGNY Investigation No.
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UL http://www.census.gov/govs/retire/2007ret05.html. consists of some elected officials, some appointed 2009–152 (Apr. 14, 2010); In the Matter of Darius
with R ma1n0iApmuloanteg tohteh emr atrhkientg fso, rp aadyv tios oprlya ys eprrvaiccteisc ebsy m ay mgreomupbse rcsh, oasnedn sboym the er emperemsebnertas toivf etsh oosf ei ngtreoruepsts ). AInnvdeestrisgoanti Ponla Ntinou. 2m0 0A9d–v1i5so3r (sA LpLrC. ,1 A4,G 2N0Y10 ); In the
OD creating an uneven playing field among investment 15See, e.g., Ariz. Rev. Stat. Ann. §38–713 (2008) Matter of Global Strategy Group, AGNY
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DX contributions. eight members); Idaho Code Ann. §59–1304 (2008) Investigation No. 2009–174 (Feb. 1, 2010); In the
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41020 Federal Register/Vol. 75, No. 134/Wednesday, July 14, 2010/Rules and Regulations
addition, we have brought enforcement Mexico,21Illinois,22Ohio,23 rulemaking we received a letter from
actions against the former treasurer of Connecticut,24and Florida,25charging one public official detailing the role of
the State of Connecticut and other defendants with the same or similar pay to play arrangements in the
parties in which we alleged that the conduct. selection of public pension fund
former treasurer awarded State pension Allegations of pay to play activity managers and the harms it can inflict on
fund investments to private equity fund involving State and municipal pension the affected plans.27In addition, other
plans in other jurisdictions continue to public officials wrote to express support
managers in exchange for payments,
be reported.26In the course of this for a Commission rule to prohibit
including political contributions,
investment advisers from participating
funneled through the former treasurer’s
21See U.S. v. Montoya, Criminal No. 05–2050 JP in pay to play arrangements.28
friends and political associates.19
(D.N.M. Nov. 8, 2005) (the former treasurer of New On August 3, 2009, we proposed a
Criminal authorities have in recent Mexico pleaded guilty); U.S. v. Kent Nelson, new antifraud rule under the Advisers
years brought cases in New York,20New Criminal Information No. 05–2021 JP, (D.N.M.
2007) (defendant pleaded guilty to one count of Act designed to prevent investment
mail fraud); U.S. v. Vigil, 523 F.3d 1258 (10th Cir. advisers from obtaining business from
2008) (affirming the conviction for attempted government entities in return for
extortion of the former treasurer of New Mexico for
political contributions or fund raising—
requiring that a friend be hired by an investment
manager at a high salary in return for the former i.e., from participating in pay to play
treasurer’s willingness to accept a proposal from the practices.29We modeled our proposed
manager for government business). rule on those adopted by the Municipal
22See Jeff Coen, et al., State’s Ultimate Insider Securities Rulemaking Board, or MSRB,
Indicted, Chi. Trib., Oct. 31, 2008, available at
which since 1994 has prohibited
http://www.chicagotribune.com/news/local/chi-
cellini-31-oct31,0,6465036.story (describing the municipal securities dealers from
thirteenth indictment in an Illinois pay to play participating in pay to play practices.30
probe); Ellen Almer, Oct. 27, 2000, available at We believe these rules have
http://www.chicagobusiness.com/cgi-bin/
significantly curbed pay to play
news.pl?id=775 (discussing the guilty plea of
Miriam Santos, the former treasurer of the City of practices in the municipal securities
Chicago, who told representatives of financial market.31
services firms seeking city business that they were
required to raise specified campaign contributions
for her and personally make up any shortfall in the investments in the fund). See also sources cited
amounts they raised). See also SEC v. Miriam supra note 17.
Matter of Falconhead Capital, LLC, AGNY Santos, et al., Litigation Release No. 17839 (Nov. 27Comment Letter of Suzanne R. Weber, Erie
Investigation No. 2009–125 (Sept. 17, 2009); In the 14, 2002); Litigation Release No. 19269 (June 14, County Controller (Oct. 6, 2009) (‘‘Weber Letter’’) (‘‘I
Matter of HM Capital Partners I, LP, AGNY 2005) (355 F. Supp. 2d 917 (N.D. Ill. 2003)). have seen money managers awarded contracts with
Investigation No. 2009–117 (Sept. 17, 2009); In the 23See Reginald Fields, Four More Convicted in our fund which involved payments to individuals
Matter of Ares Management LLC, AGNY Pension Case: Ex-Board Members Took Gifts from who served as middlemen, creating needless
expense for the fund. These middlemen were
Investigation No. 2009–173 (Feb. 17, 2010); In the Firm, Cleveland Plain Dealer, Sept. 20, 2006
political contributors to the campaigns of board
Matter of Levine Leichtman Capital Partners, AGNY (addressing pay to play activities of members of the
members who voted to contract for money
Investigation No. 2009–124 (Sept. 17, 2009); In the Ohio Teachers Retirement System). management services with the companies who paid
Matter of Access Capital Partners, AGNY 24See U.S. v. Joseph P. Ganim, 2007 U.S. App. them as middlemen.’’). See also Comment Letter of
Investigation No. 09–135 (Sept. 17, 2009); In the LEXIS 29367 (2d Cir. 2007) (affirming the district David R. Pohndorf (Aug. 4, 2009) (‘‘Pohndorf
Matter of The Markstone Group, AGNY court’s decision to uphold an indictment of the Letter’’) (noting that when the sole trustee of a major
former mayor of Bridgeport, Connecticut, in
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Wetherly Financial, L.P., AGNY Investigation No. adviser in return for city business); U.S. v. Triumph trustee with suggested donation amounts.’’).
2009–172 (Feb. 8, 2010) (in each case, banning the Capital Group, et al., No. 300CR217 JBA (D. Conn.
28See, e.g., Comment Letter of New York State
use of third-party placement agents pursuant to a 2000) (the former treasurer, along with certain Comptroller Thomas P. DiNapoli (Oct. 2, 2009)
‘‘Pension Reform Code of Conduct’’). others, pleaded guilty—while others were (‘‘DiNapoli Letter’’); Comment Letter of New York
ultimately convicted). One of the defendants, who
19See SEC v. Paul J. Silvester, et al., Litigation City Mayor Michael R. Bloomberg (Sept. 9, 2009)
Release No. 16759 (Oct. 10, 2000); Litigation had been convicted at trial, recently won a new (‘‘Bloomberg Letter’’). See also Comment Letter of
trial. U.S. v. Triumph Capital Group, et al., 544 F.3d
Release No. 20027 (Mar. 2, 2007); Litigation Release 149 (2d Cir. 2008). K(Seenpttu. c1k8y, 2R0e0ti9r)e m(‘‘Tenotb eS yLsettetmers’’ )T (rsuusgtgeees tCinhgri sth Teo be
No. 19583 (Mar. 1, 2006); Litigation Release No. 25United States v. Poirier, 321 F.3d 1024 (11th negative effects of pay to play activities on the
18461 (Nov. 17, 2003); Litigation Release No. 16834 Cir.), cert. denied sub nom. deVegter v. United Kentucky Retirement System’s investment
(Dec. 19, 2000); SEC v. William A. DiBella et al., States, 540 U.S. 874 (2003) (partner at Lazard Freres performance).
Litigation Release No. 20498 (Mar. 14, 2008) (2007 & Co., a municipal services firm, was convicted for 29Political Contributions by Certain Investment
U.S. Dist. LEXIS 73850 (D. Conn., May 8, 2007), conspiracy and wire fraud for fraudulently paying Advisers, Investment Advisers Act Release No. 2910
aff’d 587 F.3d 553 (2nd Cir. 2009)). See also U.S. $40,000 through an intermediary to Fulton County’s (Aug. 3, 2009) [74 FR 39840 (Aug. 7, 2009)] (the
v. Ben F. Andrews, Litigation Release No. 19566 independent financial adviser to secure an ‘‘Proposing Release’’).
(Feb. 15, 2006); In the Matter of Thayer Capital assurance that Lazard would be selected for the 30MSRB rule G–37 was approved by the
Partners, TC Equity Partners IV, L.L.C., TC Fulton County underwriting contract). Commission and adopted in 1994. See In the Matter
Management Partners IV, L.L.C., and Frederick V. 26See, e.g., Aaron Lester, et al., Cahill Taps Firms of Self-Regulatory Organizations; Order Approving
Tied to State Pension Investor, Boston.com, Mar. Proposed Rule Change by the Municipal Securities
Malek, Investment Advisers Act Release No. 2276
21, 2010 (suggesting that an investment adviser may Rulemaking Board Relating to Political
(Aug. 12, 2004); In the Matter of Frederick W. have bundled out-of-State donations to the Contributions and Prohibitions on Municipal
McCarthy, Investment Advisers Act Release No. Massachusetts State Treasurer’s campaign in return Securities Business and Notice of Filing and Order
2218 (Mar. 5, 2004); In the Matter of Lisa A. for a State pension fund investment management Approving on an Accelerated Basis Amendment
Thiesfield, Investment Advisers Act Release No. contract); Kevin McCoy, Do Campaign No. 1 Relating to the Effective Date and
2186 (Oct. 29, 2003). Contributions Help Win Pension Fund Deals, USA Contribution Date of the Proposed Rule, Exchange
ES2 20See New York v. Henry ‘‘Hank’’ Morris and Today, Aug. 28, 2009; Ted Sherman, Pay to Play Act Release No. 33868 (Apr. 7, 1994) [59 FR 17621
with RUL D19a,v 2id0 0L9o)g (laisllceig, iInngd itchtamt ethnet Ndeop. u2t5y/ 2c0o0m9p (tNroYl lMera arn. d A2co0lni0vt9ei n (anunoedtsi nWtog e omlcl ocinure rN gweewinthe Jr egarolslveyye tr,h nNamtJ .epcnoatmy c t,o oNn potrlvaa.yc 2t s8 ,o f all (iaAnvcaplirul.ad 1be3l eM, 1oS9nR9 tB4h) e]r. u MTlehSseR G BM–’s3S 7RW Baen’bsd ps Giaty–e 3at8ot . hp Ttltahpye: y/r/ u alrees
OD a ‘‘placement agent’’ engaged in enterprise kinds in New Jersey); Imogen Rose-Smith and Ed www.msrb.org/msrb1/rules/ruleg37.htm and http://
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DX kickbacks and other payments for personal and (suggesting connections between a private equity 31See Proposing Release, at n.23. See also infra
K1 political gain). fund principal’s fundraising activities and pension note 101; Comment Letter of the Municipal
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Federal Register/Vol. 75, No. 134/Wednesday, July 14, 2010/Rules and Regulations 41021
Along the lines of MSRB rule G–37,32 example, that our proposal ‘‘may result particularly opposed the proposed
our proposed rule would have in unintended hardships being placed prohibition on payments to third parties
prohibited an investment adviser from upon public pension funds.’’39We for soliciting or marketing to
providing advisory services for received no letters from plan government entities modeled on MSRB
compensation to a government client for beneficiaries whom we sought to protect rule G–38.44Several urged that, if we
two years after the adviser or certain of with the proposed rule,40although two were to adopt a rule based on the
its executives or employees make a public interest groups supported it approach taken in our proposal, we
contribution to certain elected officials strongly.41Advisers, third-party should broaden exceptions and
or candidates.33It also would have solicitors and placement agents, fund exemptions under the rule to
prohibited an adviser and certain of its sponsors, and others whose business accommodate certain business
executives and employees from arrangements could be affected by the arrangements.45We respond to these
soliciting from others, or coordinating, rule generally supported our goal of comments below.46
contributions to certain elected officials eliminating advisers’ participation in
II. Discussion
or candidates or payments to political pay to play practices involving public
parties where the adviser is providing or plans.42Nonetheless, most of them As discussed in more detail below, we
seeking government business.34In objected to our adoption under the have decided to adopt rule 206(4)–5,
addition, similar to MSRB rule G–38,35 Advisers Act of a rule similar to MSRB which we have revised to reflect
our proposed rule would have rules G–37 and G–38.43Most comments we received. For the reasons
prohibited the use of third parties to we discuss above and in the Proposing
solicit government business.36We also 39Comment Letter of Executive Director and Release, we believe rule 206(4)–5 is a
proposed amendments to rule 204–2 Secretary to the Board of Trustees of the State proper exercise of our rulemaking
under the Advisers Act that would have Retirement and Pension System of Maryland R. authority under the Advisers Act to
Dean Kenderdine (Oct. 5, 2009).
required registered advisers to maintain prevent fraudulent and manipulative
40We note, however, that subsequent to our
certain records regarding political proposal, AFSCME, which represents 1.6 million conduct.
contributions and government clients. State and local employees and retirees, issued a The Commission regulates investment
As discussed in more detail below, our report that strongly endorses sanctions to prevent advisers under the Investment Advisers
pay to play activities. AFSCME, Enhancing Public
proposed rule departed in some respects Act of 1940. Section 206(1) of the
Retiree Pension Plan Security: Best Practice Policies
from the MSRB rules to reflect for Trustees and Pension Systems (2010), available Advisers Act prohibits an investment
differences between advisers and at http://www.afscme.org/docs/AFSCME-report- adviser from employ[ing] any device,
broker-dealers and the scope of the pension-best-practices.pdf. scheme or artifice to defraud any client
statutory authority we have sought to 41See, e.g., Common Cause Letter; Comment
Letter of Fund Democracy/Consumer Federation of
exercise.
America (Oct. 6, 2009) (‘‘Fund Democracy/ (Oct. 7, 2009) (‘‘Fidelity Letter’’); Comment Letter of
We received some 250 comment Consumer Federation Letter’’). Sutherland Asbill & Brennan LLP (Oct. 6, 2009)
letters on our proposal, many of which 42See, e.g., Comment Letter of the Investment (‘‘Sutherland Letter’’); Comment Letter of the
were from advisers, third-party Adviser Association (Oct. 5, 2009) (‘‘IAA Letter’’) Investment Company Institute (Oct. 6, 2009) (‘‘ICI
solicitors, placement agents, and their (noting ‘‘support [for] measures to combat pay to Letter’’); Comment Letter of the Massachusetts
play activities, i.e., the practice of investment Mutual Life Insurance Company (Oct. 6, 2009)
representatives.37Public pension plans advisers or their employees making political (‘‘MassMutual Letter’’); Comment Letter of Skadden,
and their officials were divided—some contributions intended to influence the selection or Arps, Slate, Meagher & Flom LLP (Oct. 6, 2009)
embraced the rule, including one that retention of advisers by government entities. Pay to (‘‘Skadden Letter’’); Comment Letter of the Managed
stated that the rule is an important play practices undermine the principle that Funds Association (Oct. 6, 2009) (‘‘MFA Letter’’).
means to ‘‘increase transparency and advisers are selected on the basis of competence, 44See, e.g., Comment Letter of Ounavarra Capital,
qualifications, expertise, and experience. The LLC (Aug. 28, 2009) (‘‘Ounavarra Letter’’) (noting
public confidence in the investment practice is unethical and undermines the integrity that banning third-party marketers in the municipal
activities of all public pension funds,’’38 of the public pension plan system and the process securities industry did not adversely affect most
while others were critical, arguing, for of selecting investment advisers.’’); Comment Letter bankers’ ability to conduct basic marketing whereas
of John R. Dempsey (Aug. 8, 2009) (‘‘Dempsey banning third-party marketers for small advisers
Letter’’) (noting applause for efforts ‘‘to stop the could have a stronger impact on advisers that have
Securities Rulemaking Board (Oct. 23, 2009) ‘pay-to-play’ practice which only serves to either no or very limited marketing capability of
(‘‘MSRB Letter’’); Comment Letter of Common Cause undermine public trust in investment advisors and their own); Comment Letter of MVision Private
(Oct. 6, 2009) (‘‘Common Cause Letter’’). regulators.’’); Comment Letter of Barry M. Gleicher Equity Advisers USA LLC (Sept. 2, 2009) (‘‘MVision
32See MSRB rule G–37(b). Our proposal, like (Sept. 7, 2009) (noting strong support for the Letter’’) (arguing that, whereas placement agents for
MSRB rule G–37, was designed to address our proposal ‘‘with no modifications. * * * The Rule is municipal bond offerings are usually regulated
concern that pay to play activities were necessary to curb elaborated practices that would entities, the restrictions in the municipal securities
‘‘undermining the integrity’’ of the relevant market, deprive taxpayers and beneficiaries of cost effective arena were targeted at consultants who offer only
in particular the market for the provision of and honest administration of pension funds’’); Tobe their contacts and influence with government
investment advisory services to government entity Letter. officials and provided no valuable services to the
clients. See Blount, 61 F.3d at 939 (referring to the 43See, e.g., IAA Letter (‘‘We respectfully submit, financial services industry or investors); Comment
MSRB’s concerns that pay to play practices were however, that the structure of the MSRB rules is not Letter of Kalorama Capital (Sept. 8, 2009) (arguing
‘‘undermining the integrity of the $250 billion appropriately tailored to the investment advisory that a better analogy, at least with respect to the
municipal securities market’’ as its motivation for business. * * * We believe the Commission should operation of third-party marketers, is to the licensed
proposing MSRB rule G–37). make significant changes to the Proposal, which professional presenting an IPO to a pension fund).
33Proposed rule 206(4)–5(a)(1). See also MSRB would permit it to accomplish its important For further discussion of these comments, see
rule G–37(b). goals.’’); Comment Letter of Wesley Ogburn (Aug. 4, section II.B.2(b) of this Release.
34Proposed rule 206(4)–5(a)(2)(ii). See also MSRB 2009) (‘‘Ogburn Letter’’); Comment Letter of the 45See, e.g., Comment Letter of the Committee on
rule G–37(c). Third Party Marketers Association (Aug. 27, 2009) Investment Management Regulation and the
35See MSRB rule G–38(a). (‘‘3PM Letter’’); Comment Letter of Preqin (Aug. 28, Committee on Private Investment Funds of the
36Proposed rule 206(4)–5(a)(2)(i). 2009) (‘‘Preqin Letter I’’) (suggesting that Association of the Bar of the City of New York (Oct.
S2 37Other commenters included pension plans and institutional private equity investors polled favored 26, 2009) (‘‘NY City Bar Letter’’) (arguing that
E
UL their officials, trade associations, law firms, and a private equity specific proposal rather than broker-dealer rules have sufficient safeguards and
with R pinu Fbliilce iNnote. rSe7s–t 2gr5o–u0p6s a. rCeo amvamileanbtlse loentt ethrse s ubmitted rseelcyuirnigti eosn i tnhdeu fsrtarmy)e; wCoormkm freonmt Ltheett emr uonf iDciepcahle rt LLP tihnatet rafedroep wtinitgh tthraed pirtioopnoasle ddi sptariyb tuot ipolna y rule will
OD Commission’s Web site at: http://www.sec.gov/ (Oct. 22, 2009) (‘‘Dechert Letter’’); Comment Letter arrangements); Dechert Letter; Sutherland Letter;
R
X6B1P co3m8mCoemntms/esn7-t1 L8e-t0t9e/rs o7f1 N80e9w.s Yhtomrkl .C ity Comptroller oSfe cthuer iCtioems omf itthteee S oenct Fioend eorfa Bl uRseignuelsast iLoanw o fo f the MF46AP Larettitceur.l ar comments on the various aspects of
DX William C. Thompson, Jr. (Oct. 6, 2009) American Bar Association (Oct. 13, 2009) (‘‘ABA our proposal are summarized in the corresponding
K1 (‘‘Thompson Letter’’). Letter’’); Comment Letter of Fidelity Investments sub-sections of section II of this Release.
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41022 Federal Register/Vol. 75, No. 134/Wednesday, July 14, 2010/Rules and Regulations
or prospective client.’’47Section 206(2) Investment advisers that seek to the expense of the pension plan, thereby
prohibits an investment adviser from influence the award of advisory using the pension plan’s assets for the
engaging in ‘‘any transaction, practice, contracts by public pension plans, by adviser’s own purposes.55
or course of business which operates as making political contributions to, or As we discuss above, pay to play
a fraud or deceit upon any client or soliciting them for, those officials who practices are rarely explicit and often
prospective client.’’48The Supreme are in a position to influence the hard to prove.56In particular, when pay
Court has construed section 206 as awards, compromise their fiduciary to play involves granting of government
establishing a Federal fiduciary obligations to the public pension plans advisory business in exchange for
standard governing the conduct of they advise and defraud prospective political contributions, it may be
advisers.49 clients.53In making such contributions, difficult to prove that an adviser (or one
We believe that pay to play is the adviser hopes to benefit from of its executives or employees) made
inconsistent with the high standards of officials who ‘‘award the contracts on political contributions for the purpose
ethical conduct required of fiduciaries the basis of benefit to their campaign of obtaining the government business, or
under the Advisers Act. We have chests rather than to the governmental that it engaged a solicitor for his or her
authority under section 206(4) of the entity’’54or by retaining a contract that political influence rather than
Act to adopt rules ‘‘reasonably designed might otherwise not be renewed. If pay substantive expertise.57Pay to play
to prevent, such acts, practices, and to play is a factor in the selection or practices by advisers to public pension
courses of business as are fraudulent, retention process, the public pension plans, which may generate significant
deceptive or manipulative.’’50Congress plan can be harmed in several ways. contributions for elected officials and
gave us this authority to prohibit The most qualified adviser may not be yield lucrative management contracts
‘‘specific evils’’ that the broad antifraud selected or retained, potentially leading for advisers, will not stop through
provisions may be incapable of to inferior management or performance. voluntary efforts. This is, in part,
covering.51The provision thus permits The pension plan may pay higher fees because these activities create a
the Commission to adopt prophylactic because advisers must recoup the ‘‘collective action’’ problem in two
rules that may prohibit acts that are not contributions, or because contract respects.58First, government officials
themselves fraudulent.52 negotiations may not occur on an arm’s- who participate may have an incentive
length basis. The absence of arm’s- to continue to accept contributions to
4715 U.S.C. 80b–6(1). length negotiations may enable advisers support their campaigns for fear of being
4815 U.S.C. 80b–6(2). to obtain greater ancillary benefits, such disadvantaged relative to their
49Transamerica Mortgage Advisors, Inc. v. Lewis, as ‘‘soft dollars,’’ from the advisory opponents. Second, advisers may have
444 U.S. 11, 17 (1979); SEC v. Capital Gains relationship, which might be used for an incentive to participate out of
Research Bureau, Inc., 375 U.S. 180, 191–192
the benefit of the adviser, potentially at concern that they may be overlooked if
(1963).
they fail to make contributions.59Both
5015 U.S.C. 80b–6(4).
51S. Rep. No. 1760, 86th Cong., 2d Sess. 4, 8 206(4) remains substantially similar to that of the stealth in which these practices
(1960). The Commission has used this authority to section 14(e) and section 15(c)(2) of the Securities occur and the inability of markets to
adopt seven rules addressing abusive advertising Exchange Act. See also Prohibition of Fraud by properly address them argue strongly for
practices, custodial arrangements, the use of Advisers to Certain Pooled Investment Vehicles,
the need for us to adopt the type of
solicitors, required disclosures regarding advisers’ Investment Advisers Act Release No. 2628 (Aug. 3,
financial conditions and disciplinary histories, 2007) [72 FR 44756 (Aug. 9, 2007)] (stating, in
proxy voting, compliance procedures and practices, connection with the suggestion by commenters that 55Cf. In re Performance Analytics, et al.,
and deterring fraud with respect to pooled section 206(4) provides us authority only to adopt Investment Advisers Act Release No. 2036 (June 17,
investment vehicles. 17 CFR 275.206(4)–1; prophylactic rules that explicitly identify conduct 2002) (settled enforcement action in which an
275.206(4)–2; 275.206(4)–3; 275.206(4)–4; that would be fraudulent under a particular rule, investment consultant for a union pension fund
275.206(4)–6; 275.206(4)–7; and 275.206(4)–8. ‘‘We believe our authority is broader. We do not entered into a $100,000 brokerage arrangement with
52Section 206(4) was added to the Advisers Act believe that the commenters’ suggested approach a soft dollar component in which the investment
in Public Law 86–750, 74 Stat. 885, at sec. 9 (1960). would be consistent with the purposes of the consultant would continue to recommend the
See H.R. Rep. No. 2197, 86th Cong., 2d Sess., at 7– Advisers Act or the protection of investors.’’). investment adviser to the pension fund as long as
8 (1960) (‘‘Because of the general language of section 53See Proposing Release, at section I; Political the investment adviser sent its trades to one
206 and the absence of express rulemaking power Contributions by Certain Investment Advisers, particular broker-dealer).
in that section, there has always been a question as Investment Advisers Act Release No. 1812 (Aug. 4, 56Cf. Blount, 61 F.3d at 945 (‘‘no smoking gun is
to the scope of the fraudulent and deceptive 1999) [64 FR 43556 (Aug. 10, 1999)] (‘‘1999 needed where, as here, the conflict of interest is
activities which are prohibited and the extent to Proposing Release’’). As a fiduciary, an adviser has apparent, the likelihood of stealth great, and the
which the Commission is limited in this area by a duty to deal fairly with clients and prospective legislative purpose prophylactic’’).
common law concepts of fraud and deceit . . . clients, and must make full disclosure of any 57See id. at 944 (‘‘actors in this field are
[Section 206(4)] would empower the Commission, material conflict or potential conflict. See, e.g., presumably shrewd enough to structure their
by rules and regulations to define, and prescribe Capital Gains Research Bureau, 375 U.S. at 189, relations rather indirectly’’).
means reasonably designed to prevent, acts, 191–92; Applicability of the Investment Advisers 58Collective action problems exist, for example,
practices, and courses of business which are Act of 1940 to Financial Planners, Pension where participants may prefer to abstain from an
fraudulent, deceptive, or manipulative. This is Consultants, and Other Persons Who Provide unsavory practice (such as pay to play), but
comparable to Section 15(c)(2) of the Securities Others with Investment Advice as a Component of nonetheless participate out of concern that, even if
Exchange Act [15 U.S.C. 78o(c)(2)] which applies to Other Financial Services, Investment Advisers Act they abstain, their competitors will continue to
brokers and dealers.’’). See also S. Rep. No. 1760, Release No. 1092 (Oct. 8, 1987) [52 FR 38400 (Oct. engage in the practice profitably and without
86th Cong., 2d Sess., at 8 (1960) (‘‘This [section 16, 1987)]. Most public pension plans establish adverse consequences. As a result, collective action
206(4) language] is almost the identical wording of procedures for hiring investment advisers, the problems, such as those raised by pay to play
section 15(c)(2) of the Securities Exchange Act of purpose of which is to obtain the best possible practices, call for a regulatory response. For further
1934 in regard to brokers and dealers.’’). The management services. When an adviser makes discussion, see infra note 459 and accompanying
Supreme Court, in United States v. O’Hagan, political contributions for the purpose of text.
interpreted nearly identical language in section influencing the selection of the adviser to advise a 59In our view, the collective action problem we
S2 14(e) of the Securities Exchange Act [15 U.S.C. public pension plan, the adviser seeks to interfere are trying to address is analogous to the one noted
E
UL 78n(e)] as providing the Commission with authority with the merit-based selection process established in the case upholding MSRB rule G–37. See Blount,
with R ptor oapdhoyplta rcutilce’s’ athnadt tahraet ‘‘mdeafyin pirtioohniabli ta ancdt s that are bTyh eit sc opnrtorsipbuectitoivne c crleiaetnetss —a ctohne fpliucbt loifc ipnetenrseisotn plan. 6co1l Fle.c3tdiv aet a9c4t5io (n‘‘M proorbeolevmer ,t etnhderien ga ptop emaarsk eto t hbee a
OD ‘‘not themselves fraudulent * * * if the prohibition between the adviser (whose interest is in being misallocation of resources persist’’). For a
R
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DX O’Hagan, 521 U.S. 642, 667, 673 (1997). The services). regarding MSRB rule G–37, see section II.A of this
K1 wording of the rulemaking authority in section 54See Blount, 61 F.3d at 944–45. Release.
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Federal Register/Vol. 75, No. 134/Wednesday, July 14, 2010/Rules and Regulations 41023
prophylactic rule that section 206(4) of acknowledge that the two-year time out rule 206(4)–5 are in the nature of
the Advisers Act authorizes. provision may affect the propensity of conflict of interest limitations which are
investment advisers to make political particularly appropriate in cases of
A. First Amendment Considerations
contributions. Although political government contracting and highly
The Commission believes that rule contributions involve both speech and regulated industries.66Pursuant to our
206(4)–5 is a necessary and appropriate associational rights protected by the authority under section 206(4) of the
measure to prevent fraudulent acts and First Amendment, a ‘‘limitation upon Advisers Act, which we discuss above,
practices in the market for the provision the amount that any one person or we may adopt rules that are reasonably
of investment advisory services to group may contribute to a candidate or designed to prevent such acts, practices
government entities by prohibiting political committee entails only a and courses of business.
investment advisers from engaging in marginal restriction upon the As detailed in the following pages, we
pay to play practices. We have contributor’s ability to engage in free have closely drawn rule 206(4)–5 to
examined a range of alternatives to our communication.’’62Limitations on accomplish its goal of preventing quid
proposal, carefully considered some 250 contributions are permissible if justified pro quo arrangements while avoiding
comments we received on the proposal by a sufficiently important government unnecessary burdens on the protected
and made revisions to the proposed rule interest that is closely drawn to avoid speech and associational rights of
where we concluded it was appropriate. unnecessary abridgment of protected investment advisers and their covered
We believe the rule represents a rights.63 employees. The rule is therefore closely
balanced response to the developments Prevention of fraud is a sufficiently drawn in terms of the conduct it
we discuss above regarding pay to play important government interest.64We prohibits, the persons who are subject to
activities occurring in the market for believe that payments to State officials its restrictions, and the circumstances in
government investment advisory as a quid pro quo for obtaining advisory which it is triggered. The United States
services. The rule provides specific business as well as other forms of ‘‘pay Court of Appeals for the District of
prohibitions to help ensure that adviser to play’’ violate the antifraud provisions Columbia Circuit upheld the similarly
selection is based on the merits, not on of section 206 of the Advisers Act. As designed MSRB rule G–37 in Blount v.
the amount of money given to a discussed in our Proposing Release, SEC.67Indeed, the Blount opinion has
particular candidate for office, while ‘‘pay to play’’ arrangements are served as an important guidepost in
respecting the rights of industry inconsistent with an adviser’s fiduciary helping us shape our rule.68
participants to participate in the obligations, distort the process by which
political process. The rule is not unique; investment advisers are selected, can distort the adviser selection process. The
Congress, for instance, has barred harm advisers’ public pension plan solicitation and coordination restrictions relate only
Federal contractors from making clients and the beneficiaries of those to fundraising activities and would not prevent
advisers and their covered employees from
contributions to public officials.60 plans, and can have detrimental effects expressing support for candidates in other ways,
Before we address particular aspects on the market for investment advisory such as volunteering their time.
of the rule, we would like to respond to services.65The restrictions inherent in 66See In the Matter of Self-Regulatory
commenters’ assertions that the fact that Organizations; Order Approving Proposed Rule
the rule’s limitations on compensation Change by the Municipal Securities Rulemaking
62Buckley v. Valeo, 424 U.S. 1, 20 (1976). See Board Relating to Political Contributions and
are triggered by political contributions also SpeechNow.org, et al. v. FEC, 599 F.3d 686 Prohibitions on Municipal Securities Business and
represents an infringement on the First (D.C. Cir. 2010); McConnell v. FEC, 540 U.S. 93, Notice of Filing and Order Approving on an
Amendment guarantees of freedom of 135–36 (2003). Accelerated Basis Amendment No. 1 Relating to the
speech and association.61These 63Buckley, 424 U.S. at 25. See also FEC v. Effective Date and Contribution Date of the
Wisconsin Right to Life, Inc., 551 U.S. 449 (2007); Proposed Rule, Exchange Act Release No. 33868
commenters acknowledge that selection
Republican Nat’l Comm. v. FEC, No. 08–1953, 2010 (Apr. 7, 1994) [59 FR 17621 (Apr. 13, 1994)] (noting,
of an investment adviser by a U.S. Dist. LEXIS 29163 (D.D.C. Mar. 26, 2010) (three in connection with the Commission’s approval of
government entity should not be a ‘‘pay judge panel). This standard is lower than the strict MSRB rule G–37, that the restrictions inherent in
back’’ for political contributions, but scrutiny standard employed in reviewing such that pay to play rule ‘‘are in the nature of conflict
forms of expression as independent expenditures. of interest limitations which are particularly
argue that the rule impermissibly
Under the higher level of scrutiny, a restriction appropriate in cases of government contracting and
restricts the ability of advisers and must be narrowly tailored to serve a compelling highly regulated industries.’’).
certain of their employees to governmental interest. Blount, 61 F.3d at 943. See 6761 F.3d at 947–48.
demonstrate support for State and local also Citizens United v. FEC, 130 S. Ct. 876 (2010) 68Notwithstanding the Blount decision, some
officials. (distinguishing restrictions on ‘‘independent commenters asserted that subsequent Supreme
The Commission is sensitive to, and expenditures’’ from restrictions on ‘‘direct Court jurisprudence, including Randall v. Sorrell,
contributions’’ and leaving restrictions on direct 548 U.S. 230 (2006), and Citizens United, 130 S. Ct.
has carefully considered, these contributions untouched while striking down a 876 (decided following the closing of the comment
constitutional concerns in adopting the restriction on independent expenditures as period for rule 206(4)–5), would result in the
rule. Though it is not a ban on political unconstitutional). We note that in Blount, 61 F.3d proposed rule being found unconstitutional because
contributions or an attempt to regulate at 949, the court upheld MSRB rule G–37 even it is not narrowly tailored to advance the
assuming that strict scrutiny applied. For the Commission’s interests in addressing pay to play by
State and local elections, we reasons stated by the court in that decision, we investment advisers. See, e.g., Callcott Letter I;
believe that Rule 206(4)–5 would be upheld under Callcott Letter II; NASP Letter; American Bankers
602 U.S.C. 441c. a strict scrutiny standard as well as under the Letter. We disagree. The cases cited by commenters
61See, e.g., Comment Letter of W. Hardy Callcott standard the Supreme Court has applied to are distinguishable. Citizens United deals with
(Aug. 3, 2009) (‘‘Callcott Letter I’’); Comment Letter contribution restrictions. certain independent expenditures (rather than
of W. Hardy Callcott (Jan. 21, 2010) (‘‘Callcott Letter 64Blount, 61 F.3d at 944. contributions to candidates), which are not
II’’); Comment Letter of the National Association of 65See Proposing Release, at section I. The implicated by our rule. Randall involved a
Securities Professionals, Inc. (Oct. 6, 2009) (‘‘NASP prohibitions on solicitation and coordination of generally applicable State campaign finance law
ES2 Letter’’); Comment Letter of Caplin & Drysdale, campaign contributions are justified by the same limiting overall contributions (and expenditures),
UL Chartered (Oct. 6, 2009) (‘‘Caplin & Drysdale overriding purposes which support the two-year which the Court feared would disrupt the electoral
D with R aLnedtt eFri’’n);a Cnocimalm Menart kLeettst eArs osfo cthiaet iSoenc u(Orictite. s5 ,I n2d0u09st)r y tpirmeve eonutt c pirrcouvmisivoennst.i oTnh eo fp trhoev tiismioen so uart ep irnotveinsidoends tion psuroffciceisesn bty r elismouitricnegs aa ncadn mdioduantet ’as saubcilcietyss tfou la mass
O (‘‘SIFMA Letter’’); ABA Letter; Sutherland Letter; cases where an investment adviser has or is seeking campaign. Randall, 548 U.S. at 248–49. By contrast,
R
X6B1P C20o0m9m) (e‘‘nIMt L Ceottmerp olifa InMc eC Loemttpelri’a’)n; Cceo mLLmCe (nOt cLte. t6te, r of tgoo veestranbmliesnht ae nbutistyin. eAsbs sreenlat ttihoensseh irpes wtriitchti oa ns, obuurt rrautlhee irs ins oat fao cguenseedra el fpfororth tiob ictoiomnb oart lqiumidit aptrioon q,u o
DX the American Bankers Association (Oct. 6, 2009) solicitation and coordination of contributions could payments by investment advisers seeking
K1 (‘‘American Bankers Letter’’). be used as effectively as political contributions to Continued
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41024 Federal Register/Vol. 75, No. 134/Wednesday, July 14, 2010/Rules and Regulations
First, the rule is limited to evidenced by a contribution.72 because of their authority to influence
contributions to officials of government Furthermore, the rule takes the form of the award of advisory business.78
entities who can influence the hiring of a restriction on providing compensated
B. Rule 206(4)–5
an investment adviser in connection advisory business following the making
with money management mandates.69 of contributions rather than a We are today adopting new rule
These restrictions are triggered only in prohibition on making contributions in 206(4)–5 under the Advisers Act that is
situations where a business relationship excess of the relevant ceilings.73 designed to protect public pension
exists or will be established in the near Fourth, the rule only applies to plans and other government investors
future between the investment adviser investment advisers that are registered from the consequences of pay to play
and a government entity.70 with us,74or unregistered in reliance on practices by deterring advisers’
Second, the rule does not in any way section 203(b)(3) of the Advisers Act, participation in such practices.79As we
impinge on a wide range of expressive that have (or that are seeking) noted in the Proposing Release, advisers
conduct in connection with elections. government clients.75It applies only to and government officials might, in order
For example, the rule imposes no the subset of the significantly broader to circumvent our rule, attempt to
restrictions on activities such as making structure their transactions in a manner
set of advisers over which we have
independent expenditures to express intended to hide the true purpose of a
antifraud authority that we believe are
support for candidates, volunteering, contribution or payment.80Therefore,
most likely to be engaged by
making speeches, and other conduct.71 our pay to play restrictions are intended
government clients to manage public
Third, it does not prevent anyone to capture not only direct political
assets either directly or though
from making a contribution to any contributions by advisers, but also other
investment pools.76
candidate, as covered employees may ways that advisers may engage in pay to
Finally, the rule is not a restriction on
contribute $350 to candidates for whom play arrangements. Rule 206(4)–5
contributions that is applicable to the
they may vote, and $150 to other prohibits several principal avenues for
public and is not intended to eliminate
candidates. A limitation on the amount pay to play activities.
corruption in the electoral process.
of a contribution involves little direct First, the rule makes it unlawful for
Rather, it is focused exclusively on
restraint on political communication, an adviser to receive compensation for
conduct by professionals subject to
because a person may still engage in the providing advisory services to a
symbolic expression of support fiduciary duties, seeking profitable government entity for a two-year period
business from governmental entities. after the adviser or any of its covered
governmental business. Comparable restrictions The rule is targeted at those employees associates makes a political contribution
targeted at a particular industry have been upheld of an adviser whose contributions raise to a public official of a government
under Randall because the loss of contributions the greatest danger of quid pro quo entity or candidate for such office who
from such a small segment of the electorate ‘‘would exchanges,77and it covers only is or will be in a position to influence
not significantly diminish the universe of funds
available to a candidate to a non-viable level.’’ contributions to those governmental the award of advisory business.81
Green Party of Conn. v. Garfield, 590 F. Supp. 2d officials who would be the most likely
288, 316 (D. Conn. 2008). See also Preston v. Leake, targets of pay to play arrangements 78See section II.B.2(a)(2) of this Release
629 F. Supp. 2d 517, 524 (E.D.N.C. 2009) (discussing the definition of ‘‘official’’ of a
(differentiating the ‘‘broad sweep of the Vermont government entity for purposes of the rule 206(4)–
statute’’ that ‘‘restricted essentially any potential 72Buckley, 424 U.S. at 21. See also section (5)). Some commenters argued that the definition of
campaign contribution’’ from a statute that ‘‘only II.B.2(a)(6) of this Release (discussing the de ‘‘official’’ we included in our proposal was
applies to lobbyists’’); In re Earle Asphalt Co., 950 minimis exceptions to covered associates’ ambiguous. See, e.g., Caplin & Drysdale Letter. In
A.2d 918, 927 (N.J. Super. Ct. App. Div. 2008), aff’d contributions triggering the two-year time out). response, we have provided additional guidance.
957 A.2d 1173 (N.J. 2008) (holding that a limitation Some commenters raised constitutional concerns See section II.B.2(a)(2) of this Release.
oconn ctaramcptoarisg na ncdo nthtreiibru ptiroinncsi pbyal gso dviedr nnmote hnat ve the roeugra prdroinpgo sthale. lSeevee,l es .ogf., tChael dlceo mtt iLneitmteirs Ie; xCcaelplctiootnt in rel7a9tRiounlseh 2ip06 b(e4t)w–5e eisn tcaorgnetrteibdu ttoo ras caonndc rceatned biudsaitnese’s s
same capacity to prevent candidates from amassing Letter II; Caplin & Drysdale Letter; IM Compliance governmental entities. It is not intended to restrict
the resources necessary for effective campaigning as Letter; Sutherland Letter. As discussed below, we the voices of persons and interest groups, reduce
the statute in Randall). One commenter expressly have both raised the amount of the de minimis the overall scope of election campaigns, or equalize
dismissed arguments that Randall would have exception in line with inflation and added an the relative ability of all votes to affect electoral
implications for the Commission’s proposed rule. additional exception. outcomes. Indeed, if investment advisers do not
Fund Democracy/Consumer Federation Letter. 73See section II.B.2(a)(1) of this Release seek government business from those to whom they
69See section II.B.2(a)(2) of this Release (discussing the two-year time out on receiving and their covered associates make contributions or
(discussing the definition of ‘‘official’’ of a compensation for advisory services). for whom they solicit contributions, the rule’s
government entity for purposes of rule 206(4)–5). 74Unless indicated expressly otherwise, each limitations will not be triggered. Rather, the rule is
70See section II.B.2(a)(1) of this Release time we refer to a ‘‘registered’’ investment adviser intended to prevent direct quid pro quo
(discussing the prohibition on compensation for in this Release, we mean an adviser registered with arrangements, fraudulent and manipulative acts and
providing advisory services to the client during rule the Commission. practices, and improve the mechanism of a free and
206(4)–5’s two-year time out). 75See section II.B.1 of this Release (discussing open market for investment advisory services for
71See Citizens United, 130 S. Ct. at 908–09 advisers covered by the rule). One commenter government entity clients. With pay to play
(noting that a government interest cannot be raised constitutional concerns by arguing that the activities, the conflict of interest is apparent, the
sufficiently compelling to limit independent rule would apply beyond the advisory business of likelihood of stealth in the arrangements is great,
expenditures by corporate entities). See also an adviser that solicits government clients, no and our regulatory purpose is prophylactic. See
SpeechNow.org, 599 F.3d at 692 (spelling out the matter how separate the other product or service Blount, 61 F.3d at 945 (describing the court’s
different standards of constitutional review offerings of the adviser are from the governmental similar characterization of MSRB rule G–37).
established by the Supreme Court for restrictions on business. ABA Letter. But we believe we have made 80Proposing Release, at section II.A.
independent expenditures and direct clear that the rule’s time out provisions, which are 81Rule 206(4)–5(a)(1) makes it unlawful for any
contributions). Some commenters expressed designed to eliminate quid pro quo arrangements investment adviser covered by the rule to provide
concern, for example, that rule 206(4)–5 may quell and ameliorate market distortions, apply only with investment advisory services for compensation to a
S2 volunteer activities, deter employees of investment respect to the provision of advisory services to government entity within two years after a
ULE advisers from running for office, or chill charitable government clients, which is consistent with our contribution to an official of the government entity
with R cNoAnStrPib Luettitoenr.s .W See eh, aev.ge. ,e xCparpelsinsl y& cDlaryrisfdieadle t hLaett ter; aIIu.Bth.2o(rai)t(y1 u) nofd tehri tsh Ree Aledavsies.e rs Act. See section iass smoacdiaet eb,y a sth dee ifninveedst imne tnhte a rduvleis, eorf othr ea ninyv ceosvtmereendt
OD volunteer activities and charitable contributions 76See section II.B.1 of this Release. adviser (including a person who becomes a covered
R
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DX would not be subject to the contribution limitation. whose contributions could trigger the two-year time incumbent, candidate or successful candidate for
K1 See infra notes 157 and 139, respectively. out). elective office of a government entity if the office
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Federal Register/Vol. 75, No. 134/Wednesday, July 14, 2010/Rules and Regulations 41025
Importantly, as we noted in the advisers.86As discussed below, proposal, although we have made
Proposing Release, rule 206(4)–5 would commenters persuaded us that the certain modifications described
not ban or limit the amount of political objective of the rule in eliminating pay below.91
contributions an adviser or its covered to play activities of advisers could be
1. Advisers Subject to the Rule
associates could make; rather, it would preserved if the third parties they hire
impose a two-year time out on are themselves registered investment Rule 206(4)–5 applies to registered
conducting compensated advisory advisers subject to Commission investment advisers and certain advisers
business with a government client after oversight or are broker-dealers subject to exempt from registration. In particular,
a contribution is made.82This first pay to play restrictions imposed by a it applies to any investment adviser
prohibition is substantially similar to registered national securities association registered (or required to be registered)
our proposal. However, as discussed that the Commission must approve. with the Commission, or unregistered in
below, we have made certain Third, the rule makes it unlawful for reliance on the exemption available
modifications to some of the definitions an adviser itself or any of its covered under section 203(b)(3) of the Advisers
of terms in this prohibition.83 associates to solicit or to coordinate: (i) Act (15 U.S.C. 80b–3(b)(3)).92The rule
Second, the rule generally prohibits Contributions to an official of a would not, however, apply to most
advisers from paying third parties to government entity to which the small advisers that are registered with
solicit government entities for advisory investment adviser is seeking to provide State securities authorities instead of the
business unless such third parties are investment advisory services; or (ii) Commission,93or advisers that are
registered broker-dealers or registered payments to a political party of a State unregistered in reliance on exemptions
investment advisers, in each case or locality where the investment adviser other than section 203(b)(3) of the
themselves subject to pay to play is providing or seeking to provide Advisers Act.94
restrictions.84That is, an adviser is investment advisory services to a We received limited comment on this
prohibited from providing or agreeing to government entity.87We are adopting aspect of the rule. One commenter
provide, directly or indirectly, payment this aspect of the rule as proposed. explicitly agreed with the scope of our
to any person for solicitation of Fourth, as it is not possible for us to proposed rule, noting that it would
government advisory business on behalf anticipate all of the ways advisers and capture most, if not all, advisers that
of such adviser unless that person is government officials may structure pay provide discretionary management with
registered with us and subject to pay to to play arrangements to attempt to evade respect to public pension fund assets,
play restrictions either under our rule or the prohibitions of our rule, the rule regardless of whether they are
the rules of a registered national includes a provision that makes it registered.95Other commenters
securities association.85This represents unlawful for an adviser or any of its recommended that the rule apply more
covered associates to do anything
a modification from our proposal, which
included a flat ban without an exception indirectly which, if done directly, 91See section II.B.2(e) of this Release.
for any brokers or investment would result in a violation of the rule.88 92Rule 206(4)–5(a)(1) and (2). Section 203(b)(3)
This provision in the rule we are [15 U.S.C. 80b–3(b)(3)] exempts from registration
adopting today is identical to our any investment adviser that is not holding itself out
is directly or indirectly responsible for, or can to the public as an investment adviser and had
influence the outcome of, the hiring of an proposal.89 fewer than 15 clients during the last 12 months. We
investment adviser or has the authority to appoint Finally, for purposes of our rule, an are including this category of exempt advisers
any person who is directly or indirectly responsible investment adviser to certain pooled within the scope of the rule in order to make the
for or can influence the outcome of the hiring of an investment vehicles in which a rule applicable to the many advisers to private
investment adviser. See section II.B.2(a)(2) of this investment companies that are not registered under
government entity invests or is solicited
Release. the Advisers Act.
82Proposing Release, at section II.A. to invest will be treated as though the 93Advisers with less than $25 million of assets
83See generally section II.B.2(a) of this Release. adviser were providing or seeking to under management are prohibited from registering
84Rule 206(4)–5(a)(2)(i) makes it unlawful for any provide investment advisory services with the Commission by section 203A of the
investment adviser covered by the rule and its directly to the government entity.90This Advisers Act [15 U.S.C. 80b–3A].
covered associates (as defined in the rule) to provision is substantially similar to our 94The rule would also not apply to certain other
provide or agree to provide, directly or indirectly, advisers that are exempt from registration with the
payment to any person to solicit a government Commission. See, e.g., section 203(b)(1) of the
entity for investment advisory services on behalf of 86See Proposing Release, at section II.A.3(b). Advisers Act [15 U.S.C. 8b–3(b)(1)] (exempting from
such investment adviser unless such person is a 87Rule 206(4)–5(a)(2)(ii) makes it unlawful for registration intrastate investment advisers). As
regulated person or is an executive officer, general any investment adviser covered by the rule and its explained in the Proposing Release, we believe
partner, managing member (or, in each case, a covered associates to coordinate, or to solicit any these advisers are unlikely to advise public pension
person with a similar status or function), or person [including a political action committee] to plans. See Proposing Release, at n.64 and
employee of the investment adviser. ‘‘Regulated make, any: (A) contribution to an official of a accompanying text. The rule would also not apply
person’’ is defined in rule 206(4)–5(f)(9). See section government entity to which the investment adviser to persons who are excepted from the definition of
II.B.2(b) of this Release for a discussion of this is providing or seeking to provide investment investment adviser under section 202(a)(11) of the
definition. advisory services; or (B) payment to a political party Advisers Act [15 U.S.C. 80b–2(a)(11)]. For a
85See section II.B.2(b) of this Release. While our of a State or locality where the investment adviser discussion, in particular, of the exclusion of banks
rule would apply to any registered national is providing or seeking to provide investment and bank holding companies which are not
securities association, the Financial Industry advisory services to a government entity. See investment companies from the Advisers Act’s
Regulatory Authority, or FINRA, is currently the section II.A.2.(c) of this Release. definition of ‘‘investment adviser,’’ see infra note
only registered national securities association under 88Rule 206(4)–5(d) makes it unlawful for any 274.
section 19(a) of the Exchange Act [15 U.S.C. 78s(b)]. investment adviser covered by the rule and its 95Comment Letter of the California Public
As such, for convenience, we will refer directly to covered associates to do anything indirectly which, Employees’ Retirement System (Oct. 6, 2009)
FINRA in this Release when describing the if done directly, would result in a violation of this (‘‘CalPERS Letter’’) (‘‘CalPERS agrees that the scope
exception for certain broker-dealers from the rule’s section. See section II.B.2(d) of this Release. of the proposed rule would capture most if not all
S2 ban on advisers paying third parties to solicit 89See Proposing Release, at section II.A.3(d). external managers who have discretion over the
E
UL government business on their behalf. The 90Rule 206(4)–5(c) states that, for purposes of rule investment of public pension fund assets, including
D with R Cbyo ma mreigsissitoenre’sd anuatthioonriatly steoc cuorintsieids ears sruocleias tpiornop ios sed 2in0v6e(s4t)m–5e,n atn p ionovl eisnt mwehnict ha dav gisoevre tron ma ceonvt eernetdit y heqeudigtey fmunadn amgearnsa, gtreards,i trieoanl aels ltoanteg -monanlya gmerasn, apgreirvsa, te
O governed by section 19(b) of the Exchange Act [15 invests or is solicited to invest, shall be treated as money managers, and others, regardless of whether
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DX otherwise permitted in accordance with the directly to the government entity. See section investment advisers, as defined in the proposed
K1 provisions of this subsection.’’). II.B.2(e) of this Release. rule.’’).
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41026 Federal Register/Vol. 75, No. 134/Wednesday, July 14, 2010/Rules and Regulations
broadly to all advisers that may manage significantly curbed pay to play issues.’’103Many other commenters,
assets of government entities.96The practices in the municipal securities however, sought to distinguish advisers
primary effect of such an expansion of market.101We also pointed out that our and municipal securities dealers, and
the rule would be to apply it to smaller approach would minimize the asserted that, because of the differences
firms, the regulatory responsibility for compliance burdens on firms that between the two, MSRB rule G–37 is an
which Congress has previously would be subject to both rule regimes. inappropriate model on which to base
allocated to the State securities But we requested comment on our an investment adviser pay to play
authorities.97It is our understanding proposed approach and whether rule.104Some argued that the long-term
that few of these firms manage public alternative models might be appropriate. nature of advisory relationships is
pension plans or other public funds.98 Several commenters supporting the fundamentally different from discrete
Accordingly, we have decided to adopt rule explicitly addressed the municipal underwriting transactions,
this provision as proposed. appropriateness of the MSRB approach. and consequently, the two-year time out
One, for example, asserted that the is more disruptive and severe for
2. Pay to Play Restrictions proposed rule ‘‘appropriately expands advisers and the governments that retain
(a) Two-Year ‘‘Time Out’’ for upon MSRB G–37 and G–38.’’102 them than for municipal securities
Contributions Another agreed that the MSRB rules dealers who are simply banned from
Rule 206(4)–5(a)(1) prohibits ‘‘provide an appropriate regulatory obtaining ‘‘new’’ business as opposed to
investment advisers from receiving analogy for addressing [pay to play] terminating a long-term relationship.105
compensation for providing advice to a Some commenters asserted that the
‘‘government entity’’ within two years 101See id. at n.23 (citing others, including the relationships are different because
after a ‘‘contribution’’ to an ‘‘official’’ of MSRB, who agree that the MSRB rules have been advisers provide ongoing and
effective: MSRB, MSRB Notice 2009–62,
the government entity has been made by continuous advice as a fiduciary, rather
Amendments Filed to Rule G–37 Regarding
the investment adviser or by any of its Contributions to Bond Ballot Campaigns (Dec. 4, than a one-time transaction such as an
‘‘covered associates.’’99The rule does 2009), available at http://msrb.org/msrb1/archive/ underwriting, and that advisory services
not ban political contributions and does 2009/2009-62.asp (‘‘Rule G–37, in effect since 1994, are typically subject to an open
has provided substantial benefits to the industry
not limit the amount of any political competitive bid process instead of
and the investing public by greatly reducing the
contribution. Instead, the rule imposes a direct connection between political contributions through negotiated transactions that are
ban—a ‘‘time out’’—on receiving given to issuer officials and the awarding of typical of municipal underwritings.106
compensation for conducting advisory municipal securities business to brokers, dealers We disagree that the differences
and municipal securities dealers (‘‘dealers’’), thereby
business with a government client for between municipal securities
effectively assisting with eliminating pay-to-play
two years after certain contributions are practices in the new issue municipal securities underwriting and money management
made. The two-year time out is intended market.’’); MSRB, MSRB Notice 2009–35, Request are sufficient to warrant an alternative
to discourage advisers from for Comment: Rule G–37 on Political Contributions approach. Commenters are correct that
and Prohibitions on Municipal Securities
participating in pay to play practices by municipal securities underwriters
Business—Bond Ballot Campaign Committee
requiring a ‘‘cooling-off period’’ during Contributions (June 22, 2009) (‘‘The MSRB believes provide episodic services rather than
which the effects of a political the rule has provided substantial benefits to the ongoing services often provided by
contribution on the selection process industry and the investing public by greatly money managers. But underwriters seek
reducing the direct connection between political
can be expected to dissipate. contributions given to issuer officials and the to provide repeated, if not ongoing,
Rule 206(4)–5(a)(1) is based largely on awarding of municipal securities business to services, and the imposition of a two-
MSRB rule G–37 under which a broker- dealers, thereby effectively eliminating pay-to-play year time out can have considerable
dealer is prohibited from engaging in practices in the new issue municipal securities
market.’’ [footnote omitted]); MSRB, MSRB Notice
the municipal securities business for 103Comment Letter of Credit Suisse Securities
2003–32, Notice Concerning Indirect Rule
two years after making a political Violations: Rules G–37 and G–38 (Aug. 6, 2003) (USA) LLC (Sept. 14, 2009) (‘‘Credit Suisse Letter’’).
contribution.100As noted above and as (‘‘The impact of Rules G–37 and G–38 has been very 104See, e.g., IAA Letter; ICI Letter; SIFMA Letter;
positive. The rules have altered the political ABA Letter; Dechert Letter; Skadden Letter;
explained in the Proposing Release, we contribution practices of municipal securities Comment Letter of Jones Day (Oct. 5, 2009) (‘‘Jones
modeled the rule on the MSRB rules dealers and opened discussion about the political Day Letter’’); Comment Letter of Simpson Thacher
because we believe that they have contribution practices of the entire municipal & Bartlett LLP on behalf of Park Hill Group LLC and
industry.’’); Letter from Darrick L. Hills and Linda its affiliates (Sept. 21, 2009) (‘‘Park Hill Letter’’);
L. Rittenhouse of the CFA Institute to Jill C. Finder, Comment Letter of Monument Group, Inc. (Sept. 18,
96These suggestions included applying the rule to Asst. Gen. Counsel of the MSRB (Oct. 19, 2001), 2009) (‘‘Monument Group Letter’’). One commenter
all registered (including SEC-registered and State- available at http://www.cfainstitute.org/ suggested, in particular, that the rule’s two-year
registered) and unregistered advisers (see, e.g., 3PM Comment%20Letters/20011019.pdf (stating, ‘‘We time out provision is outside of our authority
Letter (arguing that selective application of the rule generally believe that the existing [MSRB] pay-to- because it imposes an ‘‘automatic penalty, subject
could lead to convoluted organizational structures play prohibitions have been effective in stemming only to discretionary post facto review.’’ Comment
designed to bypass its reach and that the proposal practices that compromise the integrity of the Letter of Edwin C. Laurenson (Dec. 31, 2009). We
represents the kind of patchwork regulation that [municipal securities] market by using political disagree. The two-year time out is not a penalty.
will lead to the kind of inconsistency the contributions to curry favor with politicians in Rather, it is a ‘‘cooling-off period’’ to dissipate any
Commission is seeking to correct), and extending positions of influence.’’); Comm. on Capital Mkts. effects of a quid pro quo. A violation of the
the rule to State-registered advisers (see, e.g., Regulation, Interim Report of the Committee on provision would result from receiving, or
Comment Letter of the Cornell Securities Law Capital Markets Regulation (Nov. 30, 2006), continuing to receive, payment after making the
Clinic (Oct. 6, 2009) (‘‘Cornell Law Letter’’)). available at http://www.capmktsreg.org/pdfs/ contribution, not from the making of the
97Amendments to the Advisers Act in 1996 11.30Committee_Interim_ReportREV2.pdf (stating, contribution itself.
placed the regulatory responsibility for these upon describing MSRB Rule G–37 and the 2005 105See, e.g., IAA Letter; ABA Letter; Dechert
advisers in the hands of State regulators. See amendments to MSRB Rule G–38, ‘‘Taken together, Letter; Skadden Letter; Jones Day Letter; Park Hill
section 203A of the Advisers Act [15 U.S.C. 80b– the MSRB’s rules have largely put an end to the old Letter; Monument Group Letter. But see Credit
S2 3a] enacted as part of Title III of the National ‘‘pay to play’’ practices in municipal Suisse Letter (‘‘G–37 and G–38 provide an
ULE Securities Markets Improvement Act of 1996, Public underwriting.’’)). See also Comment letter of appropriate regulatory analogy’’); Butler Letter
with R Lscaawtt e1r0e4d– s2e9c0t,i o1n1s0 oSft taht.e 3 U4n16it e(1d9 S9t6a)t e(cs oCdoidfiee)d. in PSraonfdersas oMrso Artlaelx (aSnedpet.r 3W0,. 2B0u0t9le) r(,‘ ‘LBaurtrlye rF Laeutvteerr’ ’a) nd (p‘‘lTahy]i sw parsa catnicaelo [gmouusn itcoi pthael utynpdee rowf priatiyn tgo p palya yto
OD 98See Proposing Release, at n.64. We did not (citing Alexander W. Butler, Larry Fauver & Sandra currently under consideration by the Commission’’).
X6B1PR ruencdeeivrset aanndy icnogm. ment challenging our MMuorntiacli,p Caol rFriunpatniocne,, P22o lRit.i coafl F Iinnt.e gSrtiutyd,. a2n6d7 3–705 AB10A6 SLeeett,e er.;g D.,e IcAhAer Lt eLtettetre;r I;C SIk Laedtdteern; SLIeFttMerA; JLoentetse r;
DX 99Rule 206(4)–5(a)(1). (2009)). Day Letter; Park Hill Letter; Monument Group
K1 100Proposing Release, at section II.A.2. 102Common Cause Letter. Letter.
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