Pence Nomination Means Pay-to-Play Rules for Advisors


The US media is buzzing about the events in Cleveland at the Republican National Convention this week, covering speeches from Ted Cruz to Ivanka and Melania Trump. One of the biggest announcements out of the RNC? Mike Pence, the sitting Governor of Indiana,  will serve as Trump's running mate.

The Indiana Public Retirement System has more than 29.9 billion assets under management as of last year. Because Pence plans to continue his term as state governor, this will invoke the SEC's 2010 Pay-to-Play rule and could potentially limit donations to the republican ticket.

The SEC's 2010 Pay-to-Play rule prohibits SEC registered investment advisors from contributing political donations of more than $350 to a political candidate who can influence the selection of an advisor for state accounts, like Pence. Draconian like consequences of this rule mandate that Compliance Officers handle political contribution monitoring this year with extra scrutiny.

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If Investment advisors violate this rule, they are barred from managing Indiana's pension money for two year. The rule also discourages Wall Street firms from not just giving but also soliciting funds to the Trump Pence ticket.

 “Most advisers that do business or are thinking of doing business with Indiana pension plans are taking this issue very seriously." Brenden Carroll, a senior associate at the law firm Dechert told Investment News.

As of now, this only impacts SEC registered Investment advisors, a Financial Industry Regulatory Authority Inc. pay-to-play rule for brokers has not yet been approved by the SEC. However, according to multiple reports, even firms that are not directly impacted by the rule or who do not now work with the Indiana pension fund are ramping up their monitoring and proceeding with caution.

For firms looking to streamline their monitoring with automation, the Know Your Employees (KYE) solution from MyComplianceOffice has extensive functionality, including customizable rules and alerts designed to increase compliance oversight around political contributions during the coming election and whenever regulation demands.