SEC Extends Compliance Date For Ban On Use Of Third Party Marketers

Author:Mr Scott Gluck
Profession:Venable LLP

Last week the Securities and Exchange Commission issued a Final Rule extending the date by which investment advisers are required to comply with the ban on the use of third-party marketers under Rule 206(4)-5 (the Federal Pay-to-Play Rule"). This ban had been set to go into effect this Wednesday, June 13.

The ban will now take effect nine months after the SEC issues a final rule defining the term, "municipal advisor," and creating a process for municipal advisors to register with the SEC (under the 1934 Securities and Exchange Act). The rule regarding municipal advisors is expected to be issued later this year. The proposed rule was issued in December, 2010, and an interim final rule is set to expire on September 30, 2012.

The Federal Pay-to-Play Rule went into effect last year and, among other things, restricts the ability of investment advisers, and their "covered associates," to make political contributions to candidates and elected officials who have the ability to influence investment decisions by government entities, primarily public pension funds. A prohibited contribution triggers a two-year ban on compensation.

The Federal Pay-to-Play Rule also prohibits an adviser from paying any...

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