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Pay to PlaySay on Pay
Doug CorneliusChief Compliance OfficerBeacon Capital Partners, LLC
Shifting Regulatory Landscape in the US and Abroad
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Pay to Play
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Pay to PlayNew York State Common Retirement Fund Fraud
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Pay to Play• SEC Proposed Rule IA-2910• http://www.sec.gov/rules/propo
sed/2009/ia-2910.pdf• Comment Period ended Oct. 6
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Pay to Play• Restricts Political
Contributions• Bans Third Party Solicitors
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Who is covered:Any investment adviser registered (or required to be registered) with the Commission, or unregistered in reliance on the exemption available under section 203(b)(3) of the Advisers Act (15 U.S.C. 80b-3(b)(3))
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Covered PoliticiansIncumbent or candidate for elective office who: (i) Is directly or indirectly responsible for, or can influence the outcome of, the hiring; or (ii) Has authority to appoint any person who is directly or indirectly responsible for, or can influence the outcome of, the hiring, of an investment adviser for government funds
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Safe Harbor• Contributions of no more than
$250 in the aggregate• Entitled to vote for the official
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Record Keeping• Keep a record of all political
contributions• Five year tail
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Placement Agents• SEC alleges that third-party
solicitors have played a central role in each of the enforcement actions involving pay to play schemes.
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Placement Agents
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Placement Agents“Eliminating placement agents as a group because there were a few bad actors who have tarnished the industry is analogous to eliminating Major League Baseball because several of its players behaved illegally.”
- Steven Schwarzman The Blackstone Group
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Penalty:Two Year Prohibition on Compensation
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Say on Pay
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Say on PayCorporate and Financial Institution Compensation Fairness Act of 2009 (H. R. 3269)
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Say on PayRequires that any proxy for an annual shareholders meeting provide for a separate shareholder vote to approve executive compensation
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Say on Pay - Section 4New federal regulations requiring each covered financial institution to disclose incentive-based compensation arrangements to determine whether the compensation:
1. is aligned with sound risk management; 2. is structured to account for the time horizon of
risks; and 3. meets other criteria appropriate to reduce
unreasonable incentives offered by such institutions for employees to take undue risks.
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Say on Pay - Section 4covered financial institution means:
(D) an investment advisor, as such term is defined in section 202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11))
With assets of more than $1 billion
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Say on Pay - DisclosureDisclose incentive-based compensation to determine whether the compensation:
1. is aligned with sound risk management; 2. is structured to account for the time
horizon of risks; and 3. meets other criteria appropriate to
reduce unreasonable incentives offered by such institutions for employees to take undue risks.
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Say on Pay - ProhibitionsProhibition on incentive-based compensation that--
1. could threaten the safety and soundness of covered financial institutions; or
2. could have serious adverse effects on economic conditions or financial stability.