The presumptive Republican presidential nominee Donald Trump formally announced Indiana governor Mike Pence as his running mate on Saturday, July 16th. Given Pence’s current position as a state governor, the SEC’s Pay-to-Play Rule, Rule 206(4)-5, will apply to all contributions made to the Trump/Pence campaign. The pay-to-play rule prohibits covered firms and its covered associates from making, soliciting or coordinating contributions on behalf of a covered official subject to certain de minimis exemptions. Such officials include state officials running for federal office if such state official, at the time of the contribution, is an incumbent of the government entity and:
- Is directly or indirectly responsible for, or can influence the outcome of, the hiring of an investment adviser by a government entity; or
- Has authority to appoint any person who is directly or indirectly responsible for, or can influence the outcome of, the hiring of an investment adviser by a government entity.
According to the Indiana Pension Handbook, the Indiana Public Retirement System Board of Trustees consists of nine persons appointed by the governor, currently Mike Pence.1 As a result, investment advisers of all types that manage assets for the Indiana Public Retirement System must proceed with the highest level of caution before they, or their covered associates, donate to the Trump/Pence ticket. Even inadvertent violations of the rule can prohibit investment advisers from providing services for compensation for a period of two years.
How ACA Can Help
ACA’s Analysis and Review Center performs political contribution and pay-to-play reviews for investment advisers. ACA assists firms with identifying covered associates and jurisdictions for review, and then reviews the covered associates’ reported political contributions in the selected jurisdictions using publicly available information and internal documentation provided by the firm. We also conduct a review of a firm's policies and procedures relative to the requirements imposed by Rule 206(4)-5, and provide recommended enhancements. ACA’s political contributions and pay-to-play review can help firms ensure they do not run afoul of Rule 206(4)-5 during the 2016 election cycle.
1The Indiana Public Retirement System consists of (1) the Public Employees’ Retirement Fund (PERF) (including the Public Employees’ Defined Contribution Plan); (2) the Indiana State Teachers’ Retirement Fund (TRF); (3) the State Excise Police, Gaming Agent, Gaming Control Officer, and Conservation Enforcement Officers’ Retirement Fund; (4) the Judges’ Retirement System; (5) the Prosecuting Attorneys Retirement Fund; and (6) the Legislators’ Retirement System.