10 Investment Advisory Firms Charged With Pay-to-Play Violations Following Campaign Contributions

Investing

Published: January 18, 2017 8:55 am

Last Updated: January 12, 2020 3:46 pm

The U.S. Securities and Exchange Commission (SEC) recently announced that 10 investment advisory firms have agreed to pay penalties ranging from $35,000 to $100,000 in an effort to settle charges that they violated the SEC’s investment adviser pay-to-play rule by receiving compensation from public pension funds within two years after campaign contributions made by the firms’ associates.

According to the SEC, investment advisers are subject to a two-year timeout from providing compensatory advisory services either directly to a government client or through a pooled investment vehicle after political contributions were made to a candidate who could influence the investment adviser selection process for a public pension fund or appoint someone with such influence.

The agency found that these 10 firms violated the two-year timeout by accepting fees from city or state pension funds after their associates made campaign contributions to elected officials or political candidates with the potential to wield influence over those pension funds.

Without admitting or denying the findings, the 10 firms consented to the findings. The firms are censured and must pay the following monetary penalties:

Adams Capital Management: $45,000
Aisling Capital: $70,456
Alta Communications: $35,000
Commonwealth Venture Management: $75,000
Cypress Advisors: $35,000
FFL Partners: $75,000
Lime Rock Management: $75,000
NGN Capital: $100,000
Pershing Square Capital Management: $75,000
The Banc Funds Company: $75,000

LeeAnn Ghazil Gaunt, chief of the SEC Enforcement Division’s Public Finance Abuse Unit, commented:

The two-year timeout is intended to discourage pay-to-play practices in the investment of public money, including public pension funds. Advisory firms must be mindful of the restrictions that can arise from campaign contributions made by their associates.

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