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SEC fines four investment advisors over alleged ‘pay-to-play’ violations

On Behalf of | Sep 30, 2022 | Regulatory Investigations

The Securities and Exchange Commission has charged four advisory firms with violating the commission’s ‘pay-to-play’ rules, Financial Advisor reports.

The SEC levied fines totaling about $300,000 in the case. The firms charged were Asset Management Group of Bank of Hawaii, which was fined $45,000; Canaan Management LLC, $95,000; Highland Capital Partners LLC, $95,000; and StarVest Management Inc., $70,000.

The pay-to-play rules, Rule 206(4)-5 under the Investment Advisers Act of 1940, were adopted in 2010. They prohibit investment advisors from providing advisory services for compensation to a government client for two years after the advisor made a contribution to certain elected officials or candidates. The four firms were accused of earning advisory fees from government entities within the two-year period. They were also separately charged with making, or allowing associates to make, prohibited contributions of $350 or more.

“The four investment advisers violated the pay-to-play rule by continuing to receive compensation from government entities within two years after campaign contributions to elected officials or candidates for elected office who had influence over the selection of investment advisers for advisory services for government entities (or who could appoint someone who had such influence),” the SEC said.

As part of the settlement with the SEC, the firms did not admit or deny the findings but did agree to the civil financial penalties along with a cease-and-desist order and a censure.

The attorneys at Lewitas Hyman include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. If your firm is facing an investigation from a regulatory agency, please contact Lewitas Hyman at (888) 655-6002 or through our online contact form.