August 5, 2009
The proposed rule is both necessary and appropriate.
Please give serious consideration to expanding its scope to another segment of the public-sector retirement industry: the 457 and 403(b) deferred compensation marketplaces. In those arenas, the same kinds of influence-peddling have occured.
In particular, there have been reported instances of large "endorsement" and "royalty" payments by plan administrators/recordkeepers typically registered as B/Ds to non-profit organizations (both professional associations and local government policy organizations) as well as labor unions.
Your press release states: The proposed rule also would prohibit an adviser from paying a third party, such as a solicitor or placement agent, to solicit a government client on behalf of the investment adviser. My view is that unions and non-profit associations that promote or endorse a preferred provider in the 457 and 403b markets in exchange for compensation should fall expressly under that prohibition. A troublesome jurisdictional question is whether insurance companies making these contributions can evade the SEC because they are not technically investment advisors—although they are licensed distributors of SEC-registered mutual funds.
Media attention to some of these abuses has already been published. (See Forbes magazine reports, for one example) I am willing to provide more information to SEC staff upon your request.
You will find my timely column on this topic online this Friday (8/7) if you keyword-search: Girard Miller Governing Pension Pay to Play