OCIE Issues Pay-to-Play Risk Alert

The SEC office of Compliance Inspections and Examinations has issued a National Examination Risk Alert about pay-to-play practices. The Alert addresses practices under MSRB Rule G-37, which restricts political campaign contributions to issuers of municipal securities with whom a firm intends to do business. During examinations, OCIE found many firms that failed to (i) observe the two-year look-back ban on political contributions, (ii) keep records of covered personnel, (iii) file relevant forms, and (iv) implement procedures. OCIE provided certain practices that firms use to ensure compliance: (a) training all covered and potentially covered personnel; (b) requiring certifications; (c) engaging in internet and e-mail surveillance of political activities; (d) reviewing political contributions of non-covered and potential employees in case of a promotion; (e) requiring pre-clearance of all contributions; and (f) separating review personnel from possible job action.