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Pay to Play. New York State Common Retirement Fund Fraud.

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Presentation on theme: "Pay to Play. New York State Common Retirement Fund Fraud."— Presentation transcript:

1 Pay to Play

2 New York State Common Retirement Fund Fraud

3

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5 Pay to Play SEC Proposed Rule IA osed/2009/ia-2910.pdf osed/2009/ia-2910.pdf Comment Period ended Oct. 6

6 Pay to Play Restricts Political Contributions Bans Third Party Solicitors

7 Who is covered: Any investment adviser registered (or required to be registered) with the Commission, or unregistered in reliance on the exemption available under section 203(b)(3) of the Advisers Act (15 U.S.C. 80b- 3(b)(3))

8 Covered Politicians Incumbent or candidate for elective office who: (i) Is directly or indirectly responsible for, or can influence the outcome of, the hiring; or (ii) 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 for government funds

9 Safe Harbor Contributions of no more than $250 in the aggregate Entitled to vote for the official

10 Record Keeping Keep a record of all political contributions Five year tail

11 Placement Agents SEC alleges that third-party solicitors have played a central role in each of the enforcement actions involving pay to play schemes.

12 Placement Agents

13 Eliminating placement agents as a group because there were a few bad actors who have tarnished the industry is analogous to eliminating Major League Baseball because several of its players behaved illegally. - Steven Schwarzman The Blackstone Group

14 Penalty: Two Year Prohibition on Compensation

15 Say on Pay

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17 Corporate and Financial Institution Compensation Fairness Act of 2009 (H. R. 3269)

18 Say on Pay Requires that any proxy for an annual shareholders meeting provide for a separate shareholder vote to approve executive compensation

19 Say on Pay - Section 4 New federal regulations requiring each covered financial institution to disclose incentive-based compensation arrangements to determine whether the compensation: 1.is aligned with sound risk management; 2.is structured to account for the time horizon of risks; and 3.meets other criteria appropriate to reduce unreasonable incentives offered by such institutions for employees to take undue risks.

20 Say on Pay - Section 4 covered financial institution means: (D)an investment advisor, as such term is defined in section 202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)) With assets of more than $1 billion

21 Say on Pay - Disclosure Disclose incentive-based compensation to determine whether the compensation: 1.is aligned with sound risk management; 2.is structured to account for the time horizon of risks; and 3.meets other criteria appropriate to reduce unreasonable incentives offered by such institutions for employees to take undue risks.

22 Say on Pay - Prohibitions Prohibition on incentive-based compensation that-- 1.could threaten the safety and soundness of covered financial institutions; or 2.could have serious adverse effects on economic conditions or financial stability.

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