WASHINGTON — The Securities and Exchange Commission plans to consider whether to repropose rule changes Wednesday that would impose pay-to-play restrictions on investment advisers for states and localities, modeled partly on limits already in place for municipal broker-dealers.

The rule changes would be revised from a proposal the SEC floated in August 1999 under former chairman Arthur Levitt, who made pay-to-play restrictions and other municipal market reforms a priority during his years at the commission and then called for similar restrictions for investment advisers. The staff proposed rule changes but they were never finalized, partly in response to congressional opposition to them.

The SEC announced yesterday that it will take up the issue again on next week.

“The commission will consider whether to propose a rule to address 'pay-to-play’ practices by investment advisers,” the SEC said in its daily digest. “The proposal is designed, among other things, to prohibit advisers from seeking to influence the award of advisory contracts by public entities through political contributions to or for those officials who are in a position to influence the awards.”

The SEC is reconsidering the proposal amid ongoing investigations by New York Attorney General Andrew Cuomo and the SEC into a massive pay-to-play scheme involving that state’s largest pension fund that have led to enforcement actions against individuals and firms and spread to other states.

When first proposed in 1999, SEC staff cited reports or evidence of pay-to-play practices by advisers for state and local pension funds in 17 states.

The 1999 proposal was modeled in part on the Municipal Securities Rulemaking Board’s Rule G-37, which bans a dealer from engaging in a negotiated municipal securities business with an issuer for two years if it or its municipal finance professionals, or MFPs, make significant political contributions to officials of that issuer who influence the awarding of bond business. MFPs, however, can contribute up to $250 to any issuer official for whom they can vote.

The 1999 proposal would have prohibited an investment adviser from providing advisory services for compensation to a government for two years if the adviser or any of its partners or firm’s executive officers made a contributions to certain elected officials or candidates.

An SEC source said last month that the staff is “looking at” further modifying the 1999 proposal to reflect the MSRB’s 2005 overhaul of its Rule G-38, which completely bans dealers from using outside consultants to obtain muni business.

The draft rule changes to be considered by the five-member commission would apply only to larger financial advisers, which are subject to the Investment Advisers Act of 1940, sources said. Generally speaking, these are investment advisers with assets under management of more than $30 million. Firms managing $25 million or less in assets are regulated by the states, while firms with between $25 million and $30 million of assets can elect either state or SEC oversight, sources said.

SEC chairman Mary Schapiro first announced that the commission would reconsider the proposal last month. Testifying before the Senate Appropriations subcommittee on financial services, she said that pay-to-play practices by investment advisers to public pension plans “must be curtailed.”

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