Document ID: SEC-2016-1728-0001
Agency: sec
Document Type: Rule
Title: Political Contributions by Certain Investment Advisers: Ban on Third-Party Solicitation; Order with Respect to FINRA Rule 2030
Posted Date: 2016-09-28T04:00Z

[Federal Register Volume 81, Number 188 (Wednesday, September 28, 2016)]
[Rules and Regulations]
[Page 66526]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23225]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 275

[Release No. IA-4532; File No. S7-16-16]

Political Contributions by Certain Investment Advisers: Ban on 
Third-Party Solicitation; Order With Respect to FINRA Rule 2030

AGENCY: Securities and Exchange Commission.

ACTION: Order.

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SUMMARY: The Securities and Exchange Commission (``Commission'' or 
``SEC'') is issuing an order finding that Financial Industry Regulatory 
Authority (``FINRA'') rule 2030 (the ``FINRA Pay to Play Rule'') 
imposes substantially equivalent or more stringent restrictions on 
broker-dealers than rule 206(4)-5 (the ``SEC Pay to Play Rule) under 
the Investment Advisers Act of 1940 (the ``Advisers Act'') imposes on 
investment advisers and is consistent with the objectives of the SEC 
Pay to Play Rule.

DATES: This Order was issued by the Commission on September 20, 2016.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549-1090.

FOR FURTHER INFORMATION CONTACT: Sirimal R. Mukerjee, Senior Counsel, 
Melissa Roverts Harke, Senior Special Counsel, or Sara Cortes, 
Assistant Director, at (202) 551-6787 or IArules@sec.gov, Investment 
Adviser Regulation Office, Division of Investment Management, 
Securities and Exchange Commission, 100 F Street NE., Washington, DC 
20549-8549.

SUPPLEMENTARY INFORMATION: The SEC Pay to Play Rule [17 CFR 275.206(4)-
5] under the Advisers Act [15 U.S.C. 80b] prohibits an investment 
adviser from providing advisory services for compensation to a 
government client for two years after the adviser or certain of its 
executives or employees (``covered associates'') make a contribution to 
certain elected officials or candidates. Rule 206(4)-5 also prohibits 
an adviser and its covered associates from providing or agreeing to 
provide, directly or indirectly, payment to any third-party for a 
solicitation of advisory business from any government entity on behalf 
of such adviser, unless such third-party is a ``regulated person'' 
(``third-party solicitor ban''). Rule 206(4)-5 defines a ``regulated 
person'' as an SEC-registered investment adviser, a registered broker 
or dealer subject to pay to play restrictions adopted by a registered 
national securities association that prohibit members from engaging in 
distribution or solicitation activities if certain political 
contributions have been made, or a registered municipal advisor subject 
to pay to play restrictions adopted by the Municipal Securities 
Rulemaking Board that prohibit members from engaging in distribution or 
solicitation activities if certain political contributions have been 
made. In addition, in order for a broker-dealer or municipal advisor to 
be a regulated person under rule 206(4)-5, the Commission must find, by 
order, that these pay to play rules impose substantially equivalent or 
more stringent restrictions on broker-dealers or municipal advisors 
than the SEC Pay to Play Rule imposes on investment advisers and are 
consistent with the objectives of the SEC Pay to Play Rule.
    On December 16, 2015, the Financial Industry Regulatory Authority 
(``FINRA'') proposed a rule change (Exchange Act Rel. No. 76767 (Dec. 
24, 2015) [80 FR 81650 (Dec. 30, 2015)]) to adopt the FINRA Pay to Play 
Rule, which would establish pay to play rules for its member firms. On 
August 25, 2016, the Commission approved the FINRA Pay to Play Rule 
(Exchange Act Rel. No. 78683 (Aug. 25, 2016) [81 FR 60051 (Aug. 31, 
2016)]).
    On August 25, 2016, the Commission also issued a notice of intent 
to issue an order (Investment Advisers Act Rel. No. 4511 (Aug. 25, 
2016) [81 FR 60653 (Sept. 2, 2016)]) finding that the FINRA Pay to Play 
Rule imposes substantially equivalent or more stringent restrictions on 
brokers-dealers than the SEC Pay to Play Rule imposes on investment 
advisers and is consistent with the objectives of the SEC Pay to Play 
Rule. The notice gave interested persons an opportunity to request a 
hearing and stated that an order would be issued unless a hearing was 
ordered. The Commission has not received a request for a hearing.
    Accordingly, the Commission hereby finds that the FINRA Pay to Play 
Rule imposes substantially equivalent or more stringent restrictions on 
broker-dealers than the SEC Pay to Play Rule imposes on investment 
advisers and is consistent with the objectives of the SEC Pay to Play 
Rule.

    By the Commission.

    Dated: September 20, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016-23225 Filed 9-27-16; 8:45 am]
 BILLING CODE 8011-01-P