Published on Aug 21st, 2024 |

Pay-to-Play Violations | Maxwell Baker Insights

Vigilant Insights

Introduction

A Texas Firm was charged a $95,000 penalty on August 19th for violating the Pay-to-Play Rule.

This occurred because an employee had donated over $7,000 to an elected official who’s position could influence which investment managers were hired. The current Pay-to-Play Rule prohibits covered associates from donating in excess of de minimis amounts of $150 and $350 depending on who is receiving the contribution.

It is worth noting that this charge occurred despite the Firm having the contribution returned.

Vigilant Director, Maxwell Baker, Esq., was quoted in a recent FundFire article discussing the compliance implications of this recent SEC action.

Maxwell Baker Insights

Maxwell Baker Insights

This is one of many recent SEC charges related to this Rule.

As this is an election year, it is particularly important that Firms are aware of Pay-to-Play Rules and how it could affect their business.

Maxwell describes this enforcement as a “wake-up call”, reinforcing that any Firms who deal with, or could potentially deal with, public pensions and government entities must pay close attention to their pay-to-play policies and procedures.

He reminds Firms that procedures should be in place to swiftly handle any issues with contributions by covered associates.

Vigilant's Conclusion

Vigilant’s Conclusion

There are expectations that the SEC will continue to scrutinize political contributions during an election year.

Firms looking to avoid costly regulatory charges should be sure to complete a gap analysis to assess their ability to handle these situations.

Taking the necessary steps to prevent compliance errors can potentially limit the risk of large penalties in the future.

Reach out to us today to discuss how the Pay-to-Play Rule affects your business goals.

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