New Pay-to-Play Rule Does Not Allow Payments to State-registered Advisers
New SEC Rule 206(4)-5 governing pay-to-play practices for government plans does not allow payments to solicitors registered with a state rather than the SEC. In the Release, the SEC argues that it considered an outright ban on payments to third party solicitors because of the potential for abuse but allowed payments to SEC-registered investment advisers over whom the SEC “has direct oversight authority.” In a footnote, the SEC states specifically that state-registered advisers are not eligible. Also included as permissible solicitors are registered broker-dealers subject to acceptable rules. The SEC indicated that FINRA will soon adopt such rules. Firms will have one year to comply.