Investment advisors will be resitrcted in how they manage pension funds

The Securities and Exchange Commission confirmed the proposal amid widening probes of so-called pay-to-play donations by private equity and hedge fund executives, jockeying for profitable fees to manage some of the more than $2.2 trillion in assets held by public pension funds.

Thus, private investment advisers and their companies are to face new restrictions on campaign contributions to public pension fund officials. 

Top investment companies affected by the investigations include the Quadrangle Group, that, according to the court complaint in the SEC case, indirectly paid more than $1 million to Morris in connection with a $100 million New York pension fund investment.

The crackdown, set for a final decision by the SEC's five commissioners after a 60-day public comment period, would:

•Impose a two-year ban on pension fund contracts with paid advisers who have given more than $250 to any public official able to influence the fund's investments, covering donations to incumbents and challengers, and would apply to investment executives, their firms and some employees.

•Bar investment advisers and their firms from directing political action committees or intermediaries to give campaign donations to pension fund incumbents or candidates, or to a state or local political party.

•Bar investment advisers from paying placement agents, solicitors or other third parties to solicit public pension fund investment business.

•Prohibit indirect campaign contributions to pension fund officials through spouses, lawyers or companies affiliated with investment advisers.

The proposal, including a few narrowly tailored exemptions, is similar to restrictions the SEC considered but never accomplished in 1999. Repeated pay-to-play allegations in the decade since have raised new restrictions needs.