SECURITIES AND EXCHANGE COMMISSION

17 CFR PART 275

RELEASE NO. IA-3403; File No. S7-36-10

TECHNICAL AMENDMENT TO RULE 206(4)-5: POLITICAL CONTRIBUTIONS BY 

CERTAIN INVESTMENT ADVISERS

AGENCY: Securities and Exchange Commission.

ACTION: Final rule; technical amendment.

SUMMARY: The Securities and Exchange Commission (“Commission”) is making a technical 

amendment to the definition of “covered associate” in rule 206(4)-5 under the Investment 

Advisers Act of 1940 (“Advisers Act”) to correct an inadvertent error in the rule as published in 

the Federal Register on July 19, 2011.

EFFECTIVE DATE: [insert date of publication in the Federal Register]

FOR FURTHER INFORMATION CONTACT: Vanessa M. Meeks, Attorney-Adviser, or 

Melissa A. Roverts, Branch Chief, at (202) 551-6787 or IArules@sec.gov, Office of Investment 

Adviser Regulation, Division of Investment Management, U.S. Securities and Exchange 

Commission, 100 F Street, NE, Washington, DC 20549-8549. 

SUPPLEMENTARY INFORMATION:

I. Background

The Commission adopted rule 206(4)-5 in July 2010 to prohibit an investment adviser 

from providing advisory services for compensation to a government client for two years after the 
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adviser or certain of its executives or employees (“covered associates”) make a contribution to 

certain elected officials or candidates.

1

 In November 2010, the Commission proposed new rules 

and rule amendments under the Advisers Act to implement provisions of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act.

2

 In that release, the Commission also proposed 

several amendments to rule 206(4)-5, including a minor change to the rule’s definition of a 

“covered associate” to replace the word “individual” with the word “person.”3 The proposed 

change would have specified that a legal entity, not just a natural person, that is a general partner 

or managing member of an investment adviser would meet the definition of “covered 

associate.”4

In June 2011, the Commission adopted many of the new rules and rule amendments set 

forth in the Implementing Proposing Release, including amendments to rule 206(4)-5.

5

 The 

Commission specified in the “Discussion” section of the Implementing Adopting Release that it 

was not adopting the proposed amendment to the definition of “covered associate,” i.e., that the 

definition would continue to use the word “individual.”6

 1 Political Contributions by Certain Investment Advisers, Investment Advisers Act Release No. 

3043 (July 1, 2010) [75 FR 41018 (July 14, 2010)].

 However, the text of rule 206(4)-

5(f)(2)(i) published in the “Text of Rule and Form Amendments” section of the Implementing 

2 Rules Implementing Amendments to the Investment Advisers Act of 1940, Investment Advisers 

Act Release No. 3110 (Nov. 19, 2010) [75 FR 77052 (Dec. 10, 2010)] (“Implementing Proposing 

Release”). 

3 See id. at section II.D.1. 

4 Id.

5 See Rules Implementing Amendments to the Investment Advisers Act of 1940, Investment 

Advisers Act Release No. 3221 (June 22, 2011) [76 FR 42950 (July 19, 2011)] (“Implementing 

Adopting Release”).

6 Id. at n.340 (“We are not, however, adopting an amendment we proposed to specify that a legal 

entity, not just a natural person, that is a general partner or managing member of an investment 

adviser would meet the definition of “covered associate” in the rule. Upon reflection, it would 

broaden the application of the rule more than we intended.”).
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Adopting Release, and subsequently in the Federal Register, incorrectly reflected the 

replacement of the word “individual” with the word “person,” as though that proposed change 

had been adopted. To correct this mistake, the Commission is making a technical amendment to 

rule 206(4)-5(f)(2)(i) to replace the word “person” with the word “individual.” 

II. Certain Findings

Under the Administrative Procedure Act (“APA”), notice of proposed rulemaking is not 

required when an agency, for good cause, finds “that notice and public procedure thereon are 

impracticable, unnecessary, or contrary to the public interest.”7

 The Commission is making a 

technical amendment to rule 206(4)-5 to reflect the Commission’s stated intent in the 

Implementing Adopting Release. The Commission finds that because the amendment is 

technical and is being made solely to correct a mistake, publishing the amendment for comment 

is unnecessary.8

The APA also requires publication of a rule at least 30 days before its effective date 

unless the agency finds otherwise for good cause.9

 7 5 U.S.C. 553(b).

 For the same reasons described above with 

respect to notice and opportunity for comment, the Commission finds that there is good cause 

for this technical amendment to take effect on [insert date of publication in the Federal 

Register].

8 For similar reasons, the amendment does not require analysis under the Regulatory Flexibility Act 

(“RFA”) or analysis of major rule status under the Small Business Regulatory Enforcement 

Fairness Act. See 5 U.S.C. 601(2) (for purposes of RFA analysis, the term “rule” means any rule 

for which the agency publishes a general notice of proposed rulemaking); and 5 U.S.C. 804(3)(C) 

(for purposes of Congressional review of agency rulemaking, the term “rule” does not include 

any rule of agency organization, procedure or practice that does not substantially affect the rights 

or obligations of non-agency parties).

9 See 5 U.S.C. 553(d)(3).
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The amendment the Commission is adopting does not make substantive or material 

modifications to any collection of information requirements as defined by the Paperwork 

Reduction Act of 1995, as amended.10

The Commission is sensitive to the costs and benefits of its rules. The rule amendment 

the Commission is adopting today is technical and is being made solely to correct a mistake 

and therefore will have minimal, if any, economic effect.

III. Statutory Text and Text of Amendment

We are adopting this technical amendment to rule 206(4)-5 under the authority set forth 

in sections 206(4) and 211(a) of the Advisers Act.11

List of Subjects in 17 CFR Part 275

Reporting and recordkeeping requirements; Securities.

TEXT OF AMENDMENT

For the reasons set out in the preamble, Title 17, Chapter II of the Code of the Federal 

Regulations is amended as follows:

PART 275—RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940

1. The authority for Part 275 continues to read in part as follows: 

Authority: 15 U.S.C. 80b-2(a)(11)(H), 80b-2(a)(17), 80b-3, 80b-4, 80b-4a, 80b-6(4), 80b6a, and 80b-11, unless otherwise noted.

 10 44 U.S.C. 3501, 3507.

11 15 U.S.C. 80b-6(4) and 80b-11(a).
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* * * * *

2. Section 275.206(4)-5 is amended by revising paragraph (f)(2)(i) to read as 

follows:

§ 275.206(4)-5 Political contributions by certain investment advisers.

* * * * *

(f) * * *

(2) * * *

(i) Any general partner, managing member or executive officer, or other individual 

with a similar status or function;

* * * * *

Elizabeth M. Murphy

Secretary

Dated: May 8, 2012