SEC Publishes Proposed Placement Agent Rules
The SEC today released a series of proposed rules that would effectively bar private equity firms from using placement agents, when soliciting capital commitments from government-sponsored organizations (public pensions, etc.). The rules also would prohibit investment advisors from soliciting such commitments within two years of making a political contribution to a system official, and also would require that that investment advisors keep records of all political contributions made by its employees (contributions under $250 would be excluded, so long as the contributor is legally entitled to vote for the recipient). All of this is intended to combat pay-to-play scandals, which have been uncovered in states like New York, Illinois, New Mexico, Ohio and Connecticut. And I completely agree with the ban on political contributions (which extends to other "gifts"). Unfortunately, the umbrella placement agent ban is a broad overreach that will severely hamper new and small investment firms from raising fund capital. Hopefully, a compromise will be reached, whereby the implicit payoffs are banned but the legitimate placement agent work can be maintained. Two other minor thoughts while reading through the 114-page proposal (entire doc posted below): (1) There is no mention of contributions by the spouse of an investment advisor, even though such contributions are commonplace. (2) There is no mention of whether
