[Federal Register Volume 81, Number 188 (Wednesday, September 28, 2016)]
[Rules and Regulations]
[Pages 66526-66527]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23224]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 275

[Release No. IA-4531; File No. S7-17-16]


Political Contributions by Certain Investment Advisers: Ban on 
Third-Party Solicitation; Order With Respect to MSRB Rule G-37

AGENCY: Securities and Exchange Commission.

ACTION: Order.

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SUMMARY: The Securities and Exchange Commission (``Commission'' or 
``SEC'') is issuing an order finding that Municipal Securities 
Rulemaking Board (``MSRB'') rule G-37 (the ``MSRB Pay to Play Rule'') 
imposes substantially

[[Page 66527]]

equivalent or more stringent restrictions on municipal advisors than 
rule 206(4)-5 (the ``SEC Pay to Play Rule) under the Investment 
Advisers Act of 1940 (the ``Advisers Act'') imposes on investment 
advisers and is consistent with the objectives of the SEC Pay to Play 
Rule.

DATES: This Order was issued by the Commission on September 20, 2016.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549-1090.

FOR FURTHER INFORMATION CONTACT: Sirimal R. Mukerjee, Senior Counsel, 
Melissa Roverts Harke, Senior Special Counsel, or Sara Cortes, 
Assistant Director, at (202) 551-6787 or [email protected], Investment 
Adviser Regulation Office, Division of Investment Management, 
Securities and Exchange Commission, 100 F Street NE., Washington, DC 
20549-8549.

SUPPLEMENTARY INFORMATION: The SEC Pay to Play Rule [17 CFR 275.206(4)-
5] under the Advisers Act [15 U.S.C. 80b] prohibits an investment 
adviser from providing advisory services for compensation to a 
government client for two years after the adviser or certain of its 
executives or employees (``covered associates'') make a contribution to 
certain elected officials or candidates. Rule 206(4)-5 also prohibits 
an adviser and its covered associates from providing or agreeing to 
provide, directly or indirectly, payment to any third-party for a 
solicitation of advisory business from any government entity on behalf 
of such adviser, unless such third-party is a ``regulated person'' 
(``third-party solicitor ban''). Rule 206(4)-5 defines a ``regulated 
person'' as an SEC-registered investment adviser, a registered broker 
or dealer subject to pay to play restrictions adopted by a registered 
national securities association that prohibit members from engaging in 
distribution or solicitation activities if certain political 
contributions have been made, or a registered municipal advisor subject 
to pay to play restrictions adopted by the Municipal Securities 
Rulemaking Board (the ``MSRB'') that prohibit members from engaging in 
distribution or solicitation activities if certain political 
contributions have been made. In addition, in order for a broker-dealer 
or municipal advisor to be a regulated person under rule 206(4)-5, the 
Commission must find, by order, that these pay to play rules impose 
substantially equivalent or more stringent restrictions on broker-
dealers or municipal advisors than the SEC Pay to Play Rule imposes on 
investment advisers and are consistent with the objectives of the SEC 
Pay to Play Rule.
    On December 16, 2015, the MSRB filed with the Commission proposed 
amendments to the MSRB Pay to Play Rule to extend its application to 
municipal advisors, which the Commission published for notice and 
comment on December 23, 2015 pursuant to section 19(b)(1) of the 
Securities Exchange Act of 1934 (the ``Exchange Act'') and rule 19b-4 
thereunder (Exchange Act Rel. No. 76763 (Dec. 23, 2015) [80 FR 81710 
(Dec. 30, 2015)]). On February 17, 2016, the MSRB published a 
regulatory notice announcing that the proposed amendments to the MSRB 
Pay to Play Rule were deemed approved by the Commission under section 
19(b)(2)(D) of the Exchange Act on February 13, 2016 and that the 
effective date of the rule was August 17, 2016.
    On August 25, 2016, the Commission issued a notice of intent to 
issue an order (Investment Advisers Act Rel. No. 4512 (Aug. 25, 2016) 
[81 FR 60651 (Sept. 2, 2016)]) finding that the MSRB Pay to Play Rule 
imposes substantially equivalent or more stringent restrictions on 
municipal advisors than the SEC Pay to Play Rule imposes on investment 
advisers and is consistent with the objectives of the SEC Pay to Play 
Rule. The notice gave interested persons an opportunity to request a 
hearing and stated that an order would be issued unless a hearing was 
ordered. The Commission has not received a request for a hearing.
    Accordingly, the Commission hereby finds that the MSRB Pay to Play 
Rule imposes substantially equivalent or more stringent restrictions on 
municipal advisors than the SEC Pay to Play Rule imposes on investment 
advisers and is consistent with the objectives of the SEC Pay to Play 
Rule.

    By the Commission.

    Dated: September 20, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016-23224 Filed 9-27-16; 8:45 am]
 BILLING CODE 8011-01-P