October 29, 1999
Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549-0609
Re: Political Contributions by Certain Investment Advisers
(Release No. IA-1812; File No. S7-19-99)
Dear Mr. Katz:
I oppose the proposed rule concerning political contributions by certain registered investment advisers and their senior executives. As a member of the investment committee of a registered investment adviser, I cannot support the rule because it unduly restricts my freedom to express my political views by supporting candidates of my choice. Undoubtedly, political candidates betray their constituents' trust when they exchange government business for contributions. In our firm's many years' experience as a registered investment adviser we have never been so pressured. Even if these abuses are routine, I believe that the Commission's desired end can be achieved by less restrictive means. As proposed, however, the rule is a cure that is worse than the disease.
The First Amendment affords greatest protection to political speech and expressions. There is no debate that supporting a candidate financially is a protected form of expression. Although Congress may regulate campaign contributions in federal elections, regulating contributions in state and local elections - to the extent required by the rule - is contrary to the spirit and intent of federalism. The mere threat of this type of regulation was abhorrent to the Constitution's authors. The Federalist No. 59 is instructive: "Suppose an article had been introduced into the Constitution, empowering the United States to regulate the elections for the particular States, would any man have hesitated to condemn it, both as an unwarrantable transposition of power, and as a premeditated engine for the destruction of the State governments?" The proposed rule represents just this sort of transposition of power. The "pay to play" issue, if it exists, is properly regulated by the states and local governments whose constituents (for example, government pension plan participants) are in the best position to evaluate the need for regulation.
Moreover, investment advisers are often in the best position to evaluate a proposed candidate because of the adviser's familiarity with the goals and objectives of the governmental client. Eliminating the adviser's voice from the debate may harm (rather than benefit) the interests of the candidate's constituents.
For these reasons, I cannot support the rule and respectfully suggest the Commission abandon it.
Very truly yours,
Robert J. Lowe