SEC Issues Risk Alert on Pay-to-Play Practices

These concerns include:

• Compliance with the rule’s ban on doing business with a municipal issuer within two years of a political contribution to officials of the issuer by any of the firm’s municipal finance professionals
• Possible recordkeeping violations
• Failure to file accurate and complete required forms with regulators regarding political contributions
• Inadequate supervision

The Risk Alert identifies practices that examiners have seen some firms use to comply with applicable federal, state and local rules on contributions. These include training programs for municipal finance professionals, self-certification of compliance with restrictions on political contributions, surveillance for unreported political contributions, and preclearance or restrictions on political contributions when permitted by state or local law. The Risk Alert stresses that the practices are described only to inform firms about approaches being used to strengthen compliance efforts; these practices may not be applicable to a particular firm, and other practices may be appropriate to consider instead.