Goldman Sachs Group Inc. banned all of its partners from making campaign contributions to state and local candidates running for office, as well as state or local officials running for federal office.
As of Sept. 1, every partner is considered a “restricted person” prohibited from engaging in political activities or making campaign gifts to those candidates or officials, according to an Aug. 29 internal memo sent to partners.
“The policy change is meant to prevent inadvertently violating pay-to-play rules, particularly the look-back provision, when partners transition into roles covered by these rules,” the New York-based firm said in the memo, reported earlier Tuesday by Politico. “The penalties for failing to comply with these rules can be severe and include fines and a ban on the firm from doing business with government clients in a particular jurisdiction for a period of at least two years.”
The Securities and Exchange Commission enacted the pay-to-play rule in 2010 after a series of scandals involving money managers accused of trying to improperly influence state officials to win investment-management business. Some of that influence included arranging political contributions.
This year, the rule extends to the presidential race since Republican nominee Donald Trump chose Indiana Governor Mike Pence, a sitting state official, as his running mate.
Goldman Sachs already requires all employees to get approval for proposed political contributions, according to a corporate governance statement, to screen for possible violations.
The new policy also is designed to minimize damage to Goldman Sachs’s reputation that could be caused by “any false perception that the firm is attempting to circumvent pay-to-play rules, particularly given partners’ seniority and visibility,” according to the memo.
Goldman Sachs is no stranger to controversy when it comes to pay-to-play rules. In 2013, a former investment banker agreed to be barred from the securities industry for five years and pay $100,000 to resolve U.S. claims that he made improper contributions to the Treasurer of Massachusetts at the same time he was seeking state underwriting business.
Goldman Sachs had earlier agreed to pay $14.4 million. The banker, Neil Morrison, worked on the then-Treasurer’s unsuccessful run for governor from November 2008 to October 2010 while he was employed by the bank.