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. Brokers

    Broker-Dealer Industry 101: The Landscape

    Independent broker-dealers are a great choice for experienced, self-starter planners who have established practices.
  3. 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.
  4. 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.
  5. 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.
  6. Professionals

    Series 55

    FINRA Series 55 Exam Guide
  7. Professionals

    Series 62

    FINRA Series 62 Exam Guide
  8. Professionals

    Series 99

    FINRA/NASAA Series 99 Exam Guide
  9. Professionals

    Series 65

    FINRA/NASAA Series 65 Exam Guide
  10. Professionals

    Series 6

    FINRA Series 6 Exam Guide
  1. No results found.
  1. Do financial advisors need to pass the Series 7 exam?

    The exact nature of a financial advisor's job responsibilities determines whether he must have a Series 7 license. If a financial ... Read Full Answer >>
  2. Do financial advisors have to be licensed?

    Financial advisors must possess various securities licenses in order to sell investment products. The specific products an ... Read Full Answer >>
  3. What are the differences between the Series 6 exam and the Series 7 exam?

    The Financial Industry Regulatory Authority (FINRA) offers a variety of licenses that must be obtained before conducting ... Read Full Answer >>
Hot Definitions
  1. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  4. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  5. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  6. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
Trading Center