Newsflash: Political Contributions to the Donald J. Trump Presidential Campaign Might Adversely Affect Advisers That Have or Are Seeking Business with Indiana Public Pension Plans

July 20, 2016

Last week, Donald J. Trump, the Republican nominee for U.S. president, selected Governor Mike R. Pence of Indiana as his running mate for vice president. The selection of Governor Pence might have implications under the SEC’s “pay-to-play” rule.

Rule 206(4)-5 under the Investment Advisers Act of 1940 (Rule) generally prohibits an investment adviser from providing advisory services for compensation to a government entity within two years after the adviser or any of its “covered associates” makes a political contribution to an “official” of that government entity. The prohibition on the receipt of compensation is generally known as a “time out” under the Rule. In addition, the Rule generally prohibits an investment adviser and its covered associates from soliciting from others, or coordinating, contributions to “officials” of government entities to which the adviser is providing, or seeking to provide, advisory services. The term “official” includes any person that, at the time of the contribution, was a sitting government official with the ability to appoint trustees of a public pension plan, as well as candidates for the office. A contribution to the campaign of an “official” (e.g., a mayor or governor) running for federal office is covered by the Rule.

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