Introduction - Political Contributions

Political Contributions

Such contributions should never be used to procure business that should be awarded on the basis of merit only. The intent of these rules is to preserve market integrity. What follow are the rules as they apply to registered investment advisers and municipal securities firms.

  1. Registered Investment Advisors (Rule 206 (4)-5): Under the Investment Advisers Act of 1940, is designed to deter the practice of "pay-to-play." After making a political contribution to certain elected officials or candidates, the adviser may not provide advisory services to a government client for a fee for two years. Advisors are also prohibited from arranging to pay any third party to solicit advisory business on the advisor's behalf, unless that third party satisfies certain criteria that would include the pay-to-play rules. When the advisor is seeking or providing government business, it may not solicit or coordinate contributions to certain elected officials or candidates or payments to political parties. The proscriptions apply when an advisor manages a government entity's assets through a "covered investment pool," a registered investment company that is a fund option in a participant directed government retirement arrangement, such as a Section 457 plan. Should such funds be commingled in an omnibus account, not uncommon, the advisor must register these investment companies in accordance with the rules. Compliance in this area is designed to ensure transparency in the advisor's dealings with government officials and agencies.
  2. Municipal Securities Dealers (Rule G-37): also designed to prevent "pay-to-play" practices, the rule bans the broker, dealer or municipal securities dealer; any municipal finance professional associated with such broker, dealer or municipal securities dealer; or any political action committee controlled by the broker, dealer or municipal securities dealer or by any municipal finance professional, from doing business with issuers for two years after making certain contributions to issuer officials other than small permissible ones. The exception is that municipal finance professionals (MFPs) may make a contribution of $250.00 per election to issuer officials for whom they are permitted to vote. Dealers, MFPs, their political action committees (PACs) and non-MFP executive officers must disclose contributions to state and local political parties. These individuals may not make indirect contributions in an effort to circumvent the rules, nor may they solicit or coordinate contributions when engaging or attempting to engage municipal securities business.


Related Articles
  1. Professionals

    5 Reasons Financial Advisors Still Choose Mutual Funds

    Take a look at five primary reasons why financial advisors still choose to recommend mutual funds over other types of investment vehicles.
  2. Professionals

    The Basics of Financial Securities Licenses

    The Financial Industry Regulatory Authority (FINRA) offers several licenses that correspond to specific businesses or investments.
  3. Your Practice

    CFA Vs. Series 7: Which is Easier

    Find out which is exam is easier: The Chartered Financial Analyst (CFA) exam, or the Series 7 securities exam for registered representatives.
  4. Professionals

    Internal Advisor Consultant: Career Path & Qualifications

    Discover more about the responsibilities of an internal advisor consultant, the average salary he can expect and the qualifications he will need for the job.
  5. Brokers

    Broker-Dealer Industry 101: The Landscape

    Independent broker-dealers are a great choice for experienced, self-starter planners who have established practices.
  6. Personal Finance

    RIAs and Brokers: What's the Difference?

    RIAs and brokers are held to different standards when providing investment advice. Here's how they differ.
  7. Trading Systems & Software

    Steps to Starting Up an Independent Broker Dealer

    Launching your own broker-dealer is a lot of work, but the potential payoff is great, both personally and financially.
  8. Professionals

    How To Answer Option Questions On The Series 7 Exam

    Learn how to answer option questions on the Series 7 exam. Pass your Series 7 exam with the help of these tips.
  9. Professionals

    Series 55

    FINRA Series 55 Exam Guide
  10. Professionals

    Series 62

    FINRA Series 62 Exam Guide
RELATED TERMS
  1. No results found.
RELATED FAQS
  1. Do financial advisors need to pass the Series 7 exam?

    Learn about the various securities licensing exams, such as the Series 7 exam, and which licenses are required for financial ... Read Answer >>
  2. Do financial advisors have to be licensed?

    Understand why all financial advisors have to be licensed, and identify the specific licenses you must obtain to carry out ... Read Answer >>
  3. What are the differences between the Series 6 exam and the Series 7 exam?

    Learn about the regulatory exams needed to become a limited or registered representative and the main differences between ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center