Presentation on theme: "Pay to Play. New York State Common Retirement Fund Fraud."— Presentation transcript:
Pay to Play
New York State Common Retirement Fund Fraud
Pay to Play SEC Proposed Rule IA osed/2009/ia-2910.pdf osed/2009/ia-2910.pdf Comment Period ended Oct. 6
Pay to Play Restricts Political Contributions Bans Third Party Solicitors
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))
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
Safe Harbor Contributions of no more than $250 in the aggregate Entitled to vote for the official
Record Keeping Keep a record of all political contributions Five year tail
Placement Agents SEC alleges that third-party solicitors have played a central role in each of the enforcement actions involving pay to play schemes.
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
Penalty: Two Year Prohibition on Compensation
Say on Pay
Corporate and Financial Institution Compensation Fairness Act of 2009 (H. R. 3269)
Say on Pay Requires that any proxy for an annual shareholders meeting provide for a separate shareholder vote to approve executive compensation
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.
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
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.
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.