Say what you will about cumbersome bureaucracy, sometimes all those pages of rules do exactly what they were intended to do.
Case in point: Rule 206 (4)-5, adopted by the Securities and Exchange Commission in 2010 to squash “pay to play” practices, a reference to the overly cozy relationships between some investment advisers who contributed to the campaigns of elected officials, then benefited from awarded contracts controlled by those very same officials.
The phenomenon was the focus of the first Student Scholar Series presentation of the 2013-14 academic year, held on Feb. 19th at The Catholic University of America’s Columbus School of Law.
DeCarlo McLaren, an LL.M. student scheduled to graduate in 2015, discussed “Regulating Pay to Play Practices” before a luncheon audience of faculty, staff, and students.
McLaren (left) a staff member for Congressman John Lewis (D-GA), is pursuing a career in tax and securities regulation. He is the first LL.M. candidate to deliver a Student Scholar Series presentation.
McLaren said that “the rules regarding pay-to-play practices were not that explicit” in past years, and the SEC felt it had to take a stronger and clearer stand on the matter.
The rule the commission adopted four years ago has three key elements.
- It prohibits an investment adviser from receiving compensation from a government entity for two years after making a contribution to a government official who can influence the hiring of an investment advisor
- It prohibits an advisory firm from soliciting contributions from others for an elected official who is in a position to influence the selection of the adviser
- It prohibits an adviser from paying a third party to solicit a government client on behalf of the investment adviser, unless that third party is a registered investment adviser
McLaren believes the rule achieves its intended public policy goals by fostering fair competition for government contracts, untainted by how much money and to which elected official contributions are made.
“I believe this rule will further evolve to protect investors and maintain the integrity of the securities industry,” concluded McLaren.
Jeffrey S. Puretz (left) CUA Law Class of 1981, served as respondent. Puretz has taught as an adjunct at the law school, currently serves on its Board of Visitors, and is a practice group leader in Dechert LLP’s financial services group.
Established by Professor A.G. Harmon in 2009, the Columbus School of Law Student Scholars Series was instituted to recognize notable legal scholarship produced by members of the student body during the academic year and to foster the skills associated with presenting and defending that scholarship in a professional conference-style setting.
Two more presentations are on tap for this semester:
March 26, 2014
April 23, 2014