Donohue: SEC May Allow Registered Solicitors in Final Pay-to-Play Rules; ADV Rule Coming

In a recent speech, Andrew Donohue, the SEC’s Director of the Division of Investment Management, suggested some changes to the proposed pay-to-play rule and predicted the new ADV Rule. With respect to pay-to-play, Mr. Donohue acknowledged commenters concern that the SEC allow an exception for solicitors that are “legitimate placement agents that are subject to similar pay-to-play regulation.” He said that the SEC was working with FINRA in this regard. Separately, he said that the Division of Investment Management plans to adopt the ADV amendments introduced in March of 2008, which would reflect a more narrative presentation.

OUR TAKE: Allowing managers to retain placement agents so long as they are registered as broker-dealers (or, presumably, investment advisers) and subjecting them to similar pay-to-play regulations, would be a reasonable approach to regulating solicitation activities for public plans. It would drive unregulated entities either out of business or to legitimate regulation. With respect to ADV reform, we support it and welcome it.

http://www.sec.gov/news/speech/2010/spch022510ajd.htm