New York City Comptroller William Thompson is urging Securities and Exchange Commission chairman Mary Schapiro to implement a comprehensive ban on political contributions from investment advisers who are compensated for providing services to public pension funds.
In a letter sent to Schapiro yesterday, Thompson said the restrictions should be modeled on the Municipal Securities Rulemaking Board's existing Rule G-37 restrictions on dealers' political contributions as well as a 1999 SEC proposal that failed to get off the ground in part because of congressional opposition.
Under G-37, dealers cannot engage in negotiated municipal securities business with an issuer for two years if they or their municipal financial professionals, or MFPs, contribute to issuer officials who can influence the award of muni bond business. MFPs, however, can contribute up to $250 to any issuer official for whom they can vote.
Schapiro already has announced that the SEC may repropose a similar ban on political contributions from investment advisers this summer that would be modelled on the 1999 proposal.
Asked about Thompson's letter yesterday, SEC spokesman John Nester said the commission's pension fraud efforts are intended to root out corruption involving the securities markets and government officials.
"As part of those efforts, we are seriously reconsidering the 1999 proposal that would have triggered a ban on investment advisers from managing state pension funds for two years on the basis of certain political contributions," he said. "We expect to formally propose new rules as early as July."
Thompson's request comes amid ongoing investigations by New York State Attorney General Andrew Cuomo and the SEC into a massive pay-to-play scheme involving the state's pension fund that have led to enforcement actions against numerous individuals and firms and spread to other states.
In March, Cuomo indicted - and the SEC filed civil charges against - Henry "Hank" Morris, a top political adviser and chief fundraiser for former state Comptroller Alan Hevesi and David Loglisci, former deputy comptroller and chief investment officer for the retirement fund. The charges alleged the men steered state pension fund investment business to private equity firms and hedge funds in return for millions of dollars of kickbacks.
Since then, the probes have spread to other states, including Texas, New Mexico and California, and have touched numerous firms, including the Quadrangle Group, a private equity firm formerly run by Steven Rattner, President Obama's frontman on auto industry bailout efforts. Cuomo has subpoenaed roughly 100 investment firms and their agents and has joined with some attorneys general in 36 other states on a task force on pension pay-to-play practices.
In the most recent developments, Cuomo announced Tuesday that Julio Ramirez Jr., an unlicensed placement agent formerly associated with Los Angeles-based broker-dealers DAV/Wetherly Financial LP and Park Hill Group LLC, pled guilty to state securities fraud charges for entering into corrupt arrangements with Morris to secure investments from the New York state pension fund for Wetherly clients and others.
The SEC filed a civil suit against Ramirez the same day in federal court in Manhattan, charging he aided and abetted securities and investment fraud violations by demanding that Aldus Equity Partners, an investment management firm, pay kickbacks to obtain investment business from the New York pension fund.
Last month, Aldus and its managing partner, Saul Meyer, were charged by Cuomo and the SEC in connection with alleged New York pension fund kickback scheme.
