California Extends “Pay-to-Play” Laws to Certain Placement Agents

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Recently the Fair Political Practices Commission (FPPC) provided guidance regarding the new California law regulating placement agents as lobbyists. Specifically, the FPPC provided guidance on the limitations to the registration exceptions carved out under the new law, including what activities and communications constitute “the competitive bidding process” and are therefore exempted by the Registered Investment Advisor Exception, whether it is possible to be systematically exempt from registering as a lobbyist for subsequent lobbying under the Registered Investment Advisor Exception, and whether local placement agents qualify for exemption from the law under either the One-Third Exception or the Registered Investment Advisor Exception.

What Is the New California Law Regulating Placement Agents As Lobbyists?

In the wake of accusations involving influence peddling and pay to-play at the California Public Employees’ Retirement System, California recently enacted Assembly Bill 1743 (AB 1743) which extended the reach of the Political Reform Act of 1974 by including “placement agents” in the definition of “lobbyist.” Specifically, AB 1743 requires “placement agents” to register as lobbyists with the state if they sell, or are seeking to sell, the securities, assets, or services of an “external manager” to California state public retirement systems.

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