A private equity firm was censured, fined, and order to disgorge fees for violating the pay-to-play rule and erroneously claiming a registration exemption.  The SEC alleges that an employee of the respondent made campaign contributions to candidates for mayor and governor, each of which appointed members to the bodies that invested public pension funds.  The pay-to-play rule prohibits a firm from receiving compensation during the 2-year period following the contributions.  The SEC also charges the firm for claiming an adviser registration exemption where its assets should have been aggregated with an affiliate that was under common control and shared management and operations.

OUR TAKE: Private equity firms need to take seriously their Advisers Act’s compliance responsibilities.   More significant than the disgorgement, this firm will now have to explain to its institutional clients and prospects why it has a public enforcement order against it.  Also, the SEC will heavily scrutinize an unregistered fund sponsor that “takes a position” that it does not need to register.