In a recent article for Private Funds CFO by Jennifer Banzaca, Schulte Roth & Zabel partner Allison Scher Bernbach discussed Rule 206(4)-5 under the Investment Advisers Act of 1940, also known as the pay-to-play rule. The rule prohibits political contributions from investment managers to government officials and candidates who could potentially influence decisions about hiring public funds advisers.
Allison explains, “[t]he rule aims to prevent agreements where someone donates to a government official expecting that person, in their position of power, to award the person’s firm a contract to manage money. Yet, there is no intent or causation requirement in the rule, meaning there is no requirement that a political contribution be given with intent to or actually influences an investment decision.”
Read the article here.