Alternative Pay to Play Recordkeeping Requirements Approved for Advisers to Registered Funds


On September 12, the staff of the SEC’s Division of Investment Management (Staff) issued a no-action letter to the Investment Company Institute (ICI) approving alternativerecordkeeping requirements for investment advisers to registered investment companies under the “pay to play” rules. The no-action relief, which is available only to investment advisers with respect to advisory services rendered to certain registered investment companies, should facilitate compliance with the rules by advisers to exchange-traded funds, mutual funds whose shares are held in omnibus accounts and funds that are otherwise offered through financial intermediaries.

“Pay to Play” Recordkeeping Requirements

In July 2010, the SEC adopted Rule 206(4)-5 (the Pay to Play Rule) under the InvestmentAdvisers Act of 1940, as amended (the Advisers Act) to prohibit certain “pay to play” activities by investment advisers. The Pay to Play Rule generally prohibits advisers from (i)receiving compensation from a government client for two years after the adviser, certain of its employees or its third-party solicitors make contributions to candidates or elected officials of the government client and (ii) soliciting contributions or payments to officials or political parties of a government client or prospective government client and, subjectto certain exceptions, paying third parties to solicit government entities.

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