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Political Contributions

Monday, August 15, 2016

You might have noticed that political contributions and pay-to-play (PTP) has been a passionately debated topic this election cycle.  Now is a great time to review and possibly update your written supervisory procedures regarding political contributions.  It is advised that you ensure all Investment Adviser (IA) employees are knowledgeable of the IA’s political contribution policies and procedures as well as the ramifications of not adhering to the policies and procedures.

In 2016, the Office of Compliance Inspections and Examinations (OCIE) released their exam priorities letter in which political contributions were listed as an item of emphasis.  Specifically, OCIE will be focusing on public pension advisors.

The OCIE is requesting that private entities generate a list of employees who have made any political contributions as well as provided gifts and/or entertainment to political parties, government/municipal entities, or government officials.  This list will be used in conjuncture with a list of government entities the IA has provided services for in the past 5 years to monitor PTP violations

Pay to Play violations can even occur when on-boarding new employees.  In the case involving Angelo Gordon & Co., the IA petitioned for an exemption from the Advisers Act rule 206(4)-5’s due to hiring and on-boarding a new employee, Christopher Williams.  In 2014, Angelo Gordon & Co. hired Chris Williams as a senior investment professional to help manage an Illinois Public Pension Plan.  In 2013, before being hired by the IA, Chis Williams and his wife, residents of Illinois, had provided $892 worth of in-kind contributions to Illinois gubernatorial candidate and later governor Bruce Rauner.  This contribution along with Chris Williams’ management of an Illinois Public Pension Plan led to a PTP violation and a two-year payment timeout to the IA.

This example points out the importance of having well defined written policies and procedures regarding political contributions and pay to play.  It is advised that all employees of your firm review your policies and procedures on political contributions.

About Red Oak Compliance Solutions

Red Oak Compliance Solutions is a leading provider of intelligent compliance software, offering a range of AI-powered solutions designed to help firms of all sizes successfully navigate the increasingly complex regulatory landscape. Our suite of 17(a)-4/WORM compliant features offer risk minimization, cost reduction, and process optimization capabilities with features that are designed to evolve with our client’s needs. Our flagship advertising review software enables firms to deliver compliant content to the market with confidence, faster. Our Disclosure Management and Intelligence solution simplifies the management of disclosures, while our Registration Management solution automates and streamlines the licensing and registration process, further enhancing your internal processes. 

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