Pay to Play Q&A

Pay to Play Q&A


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Full video transcript available below:


Welcome, thank you all for joining our webinar today hosted by MyComplianceOffice and Cipperman Compliance Services. With that I'll hand it over to Todd. Thank you. Does 2064-3 apply to a private contracting with a solicitor, is the question?


Sure. Sure does. Anytime an advisor pays a third party 20643 the solicitation rule is implicated. Depending what you mean by private. As I said earlier on very often is that person is acting in a solicitation role, or that entity probably has to register as an investment advisor, or be associated with a registered investment advisor to accept those payments. Yes, absolutely it does.


Okay. What are the implications for dual registrants?


Yeah, that's always a hard one, so on both the payer and the recipient side. On the recipient side the dual registrants got to decide am I taking a broker/dealer compensation, and all the disclosure and requirements that go with that. Particularly if it's an individual paying your override, or your broker/dealer, or is it a solicitation payment potentially outside your broker/dealer if you're an independent RIA, and you just use a BD. That's really hard, and the same on the other side. If you're a payer, or you're on the 34 Act, Exchange Act regime, or are you under the Advisors Act, you're paying a solicitation payment. You really got to decide, and obviously the two parties can't treat this differently, because that doesn't work. You sort of got to get on the same page, what is this? Is this brokerage compensation, or is this advisory compensation? I can tell you FINRA will look at that. No surprise. FINRA thinks all solicitation payments are broker/dealer commissions the SEC will look at it as solicitation payments. You got to really decide what it is, and stick with that regulatory treatment.


Okay. Let's take one or two more. Isn't there a first amendment right with political donation?


Yeah, I've gotten that question mostly from private equity firms. Yes, you certainly have a first amendment right to make a political contribution, which means you can't be thrown in jail for making a political contribution, but people need to understand when you're a registrant that's not a right it's a privilege, and the SEC has a lot of authority to make it's own rules, and if they want to restrict people from managing assets for those who make a political contribution they can say, "Look, we're not putting you in jail we're just saying you can't manage those assets. You can make all the political contributions you want." No I think this idea that you have some sort of first amendment right is sort of a fallacious argument. Whether I agree with it or not.


Okay. Great. We'll take one more question. Do these rules for a political contribution apply for President or Congress?


Not really. As I referenced earlier it really applies to public plans, and there's really no federal public plan that you can manage. In essence it doesn't key that in ironically enough. The federal government exempted themselves, so no it really only applies to public plans which are run by the states.


Interesting. Okay that was not the answer I was expecting. If anyone has anymore questions, or questions that weren't answered during the session we have our contact us information up here, and we'll make sure to get those questions answered. Most likely by Todd, so thank you everybody. This presentation and a video recording will be out next week as well as follow up materials, and resources over the coming weeks. Please remember to subscribe to our blog at the MCO website, and Todd also has a blog, and follow us on Twitter to get notification of these resources. If you could please take a moment to fill out the survey after today's webinar, and if you would like to know more again please don't hesitate to let us know, and let us know how we did on that survey too. Thank you everyone so much for joining today, and the webinar has now ended.



This webinar was co-hosted with Cipperman Compliance Services, LLC

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