SEC Adopts Rule to Curtail 'Pay to Play' Practices Involving State and Local Government Entities


The U.S. Securities and Exchange Commission ("SEC") has adopted Rule 206(4)-5 (the "Pay to Play Rule") under the Investment Advisers Act of 1940 ("Advisers Act") to curtail what the SEC believes presents "pay to play" practices and arrangements involving state and local government entities, including public pension plans. The SEC also adopted certain amendments to the recordkeeping requirements under Rule 204-2 (the "Recordkeeping Rule") and the cash solicitation rule under Rule 206(4)-3 (the "Cash Solicitation Rule").

The new Pay to Play Rule was published in the Federal Register on July 14, 2010. The new Rule and the amendments to the Recordkeeping Rule and the Cash Solicitation Rule become effective on September 13, 2010. Compliance with the Pay to Play Rule generally is required for covered investment advisers by March 14, 2011, except that covered investment advisers are not required to comply with the Pay to Play Rule's prohibition on paying third parties to solicit business from state and local government entities except in compliance with the Pay to Play Rule until September 13, 2011. September 13, 2011 also is the compliance date for covered investment advisers to registered investment companies that are covered investment pools. Covered investment advisers must comply with the amended Recordkeeping Rule by the same date that their compliance with the Pay to Play Rule is required. Finally, compliance with the amended Cash Solicitation Rule is required by September 13, 2011.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Reed Smith | Attorney Advertising

Written by:


Reed Smith on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.