October 29, 1999
Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
Re: Proposed Rule 206(4)-5 -- File No. S7-19-99
Dear Mr. Katz:
The Securities Industry Association ("SIA")1appreciates this opportunity to comment on Proposed Rule 206(4)-5 ("Rule") which the Securities and Exchange Commission ("SEC") proposed on August 4, 1999. The SEC proposed the Rule to eliminate the so-called "pay-to-play" practice in the solicitation of investment advisory business from governmental entities. To achieve this purpose, the proposed Rule is modeled after the SEC approved Municipal Securities Rulemaking Board ("MSRB") Rule G-37, which went into effect in 1994 to eliminate pay-to-play in the municipal securities industry. In particular, Rule 206(4)-5 prohibits an investment adviser from providing investment advisory services to a government entity for compensation for two years if the investment adviser, its executive officer, solicitor, or a PAC controlled by the investment adviser, executive officer, or solicitor makes a contribution to certain government officials.
The notice of proposed rulemaking for Rule 206(4)-5 states that the evidence gathered by the SEC "suggests strongly that political contributions can play a significant role in the selection of investment advisers." Although the SIA believes that these instances are rare compared to the many thousands of adviser relationships that exist with governmental entities, the SIA supports the goal of the Rule, which is to eliminate even the vestiges of pay-to-play that may exist in the industry. Indeed, this is also the purpose behind Rule G-37 and in the over five years that Rule
G-37 has been in effect, we have reason to believe that it has successfully eliminated pay-to-play in the municipal securities industry. However, because of the difficulty in policing the activities of employees covered under Rule G-37 coupled with the automatic two year ban on municipal securities business, with virtually no exemptions from the ban being granted, Rule G-37 has also unfairly banned firms as a result of either inadvertent or innocent contributions which had nothing to do with obtaining or retaining municipal securities business. Consequently, we are concerned that Rule G-37 has had a negative effect on the municipal securities industry, which was not intended by the rule.
Even if Rule G-37 were properly tailored for the municipal securities industry, which it is not, its provisions which have been imported into proposed Rule 206(4)-5 are definitely overbroad and unadministerable in the context of the investment adviser industry.2 For example, SIA estimates that out of the 664,000 individuals who are in the security and commodity brokerage and related services in this country, only about 2,700 to 4,000 are affected by Rule G-37. In contrast, as currently drafted, Rule 206(4)-5 may affect up to 300,000 individuals employed by investment advisers and countless others, such as outside consultants, lawyers and accountants who may refer governmental entities for investment advisory services. Given that Rule 206(4)-5 will cover approximately a hundred times as many individuals as Rule G-37, it will be that much more difficult for investment adviser firms to police their covered employees' and outside solicitors' activities. This problem is compounded by the fact that employees and non-employees who are covered under Rule 206(4)-5 are not as centralized as those covered under Rule G-37 (i.e., Municipal Finance Professionals ("MFPs") tend to all work with or in the municipal securities department). Indeed, Rule 206(4)-5 covers employees who are de-centralized and spread throughout a firm and also covers outside solicitors.
As a result of Rule 206(4)-5's unduly broad scope, there is a great likelihood that the Rule will indiscriminately impose a two year ban on businesses whose employee either gives an inadvertent contribution or a contribution which was never intended to influence the selection of an investment adviser. By depleting the pool of such well-qualified investment advisers from which public funds may select asset managers, Rule 206(4)-5 will actually harm participants and beneficiaries of public funds rather than protect them, which is the reason for proposing the Rule in the first place.
The following comments are intended to suggest ways in which Rule 206(4)-5 can address pay-to-play without disproportionately harming investment advisers or public funds and to account for the differences between the investment adviser and municipal securities industries. Indeed, the Rule must be tailored to get at circumstances under which there is a reasonable possibility that a contribution is being provided to influence the selection of an adviser without capturing inadvertent or innocent contributions. To this end, the SIA recommends that the SEC, among other things, (1) narrow the definition of solicitor; (2) eliminate or reduce the two year ban; (3) raise the $250 de minimis exemption to $1,000 and have it apply to all contributors; and (4) eliminate or reduce the two year look back period.
1. Definition of Solicitor Should Be Narrowed
The term "solicitor" is defined as any person who solicits any client for, or refers any client to, an investment adviser. As drafted, the term could include even those persons who solicit private clients for business other than investment advisory service, thus potentially covering thousands of salespersons in a given firm. SIA believes that this was an oversight on the part of the SEC in that such broad reading would cover many thousands of individuals in a given firm who have nothing to do with investment advisory services. The definition should thus be amended to only include persons who regularly solicit for compensation governmental entities for investment advisory services.
The notice of proposed rulemaking states that the term "solicitor" includes third-parties (i.e., outside persons) who solicit or refer clients. SIA believes that outside persons should not be included in this definition. Indeed, covering outside solicitors imposes an unreasonable burden on investment advisers. In particular, it is difficult to control and closely monitor the activities of outside persons and unreasonable to expect investment advisers to be able to monitor outside persons in the same manner that it monitors in-house employees, especially given that a mistake will result in a two year ban. Moreover, outside solicitors usually represent more than one firm, thus making it difficult to know on whose behalf the solicitor makes any given contribution. For these reasons, a contribution by an outside consultant under Rule G-37 does not trigger a ban, although under a proposed amendment to Rule G-38, a broker dealer will be required to disclose such contribution in a quarterly report.
Regardless of whether the term "solicitor" includes third parties, the term is too broad in that it captures individuals who have little or no interest in influencing government officials in connection with investment advisory business and prohibits them from making otherwise legitimate contributions. For example, if an employee happens to solicit covered investment advisory business on only one occasion or is not compensated for such solicitation activity, it is improbable that the solicitor will make a contribution to influence a government official in connection with that solicitation. Also, the Rule would ban a firm if a solicitor who is soliciting business in New York makes a contribution to a relative or friend in California.
To avoid such overbreadth when it comes to solicitors, the Rule should be narrowed as follows. The term "solicitor" should be limited to those who (1) are compensated directly by an investment adviser for soliciting covered investment advisory business and (2) solicit covered investment advisory business on more than an incidental basis. Also, the ban should only apply if such solicitor contributes to an official of a governmental entity which he or she is soliciting for investment advisory business. Please note that this is consistent with the proposed amendment to MSRB Rule G-38, which requires a broker dealer to report the contributions made by its outside consultants to officials of the issuers with whom the consultant has communicated to solicit municipal securities business. MSRB, Request for Comment (April 19, 1999).
2. Eliminate the Two Year Ban on Receiving Compensation for Investment Advisory Services
A covered contribution under Rule 206(4)-5 triggers a two year ban on receiving compensation for investment advisory services provided to a governmental entity. In addition, the notice of proposed rulemaking states that because of an investment adviser's fiduciary duties, "[a]n adviser subject to the prohibition would likely be obligated to provide (uncompensated) advisory services until the government client finds a successor."
This two year ban on providing compensated advisory services goes well beyond what is necessary to address the pay-to-play that may exist in the investment adviser industry and unduly harms the members of the industry as well as the participants and beneficiaries of the public funds which they represent. As described above, the two year ban on business under Rule G-37 has taken its toll on the municipal securities industry by unduly banning firms from engaging in municipal securities business. Rule 206(4)-5's two year ban will have an even greater impact given the larger size of the investment adviser industry and the broader scope of Rule 206(4)-5. Indeed, the ban will deprive participants and beneficiaries of public funds of well qualified advisers and drive up the cost of investment advisory services due to higher compliance costs.
In addition, unlike the municipal securities industry where a broker dealer's relationship with a governmental issuer is episodic in nature, investment advisers provide services to a public fund on an ongoing basis, with relationships between a public fund and an investment adviser sometimes lasting for decades. Please note that although Rule 206(4)-5 merely prohibits a firm from accepting compensation for advisory services and not from providing such services, the practical result of the ban will be that advisers will be economically compelled to end its relationship with a governmental entity. Indeed, most investment adviser agreements have a provision under which a party may terminate the relationship without cause usually within thirty (30) days, but no more than sixty (60) days, of giving notice. Imposing a ban under which an adviser must, as a practical matter, sever such long-standing relationships will be particularly harmful to the participants and beneficiaries of the public funds given the great deal of public fund-specific knowledge amassed by the adviser during that time. It will be difficult, if not impossible, for a public fund to hire a comparable replacement adviser especially if the first adviser achieved superior performance.
Thus, SIA believes that instead of the two year ban, pay-to-play can be adequately addressed by creating a rule that prohibits a covered contribution and by treating a violation of such prohibition like any other violation of SEC rules (i.e., alleged violators are referred to the SEC enforcement process and administrative fines may be imposed commensurate with the violation). Indeed, creating such a rule will permit the SEC to tailor penalties to a violation without having to rely on an automatic and inflexible two year ban no matter how innocent a contribution. Please note that when drafting Rule G-37, the MSRB and the SEC created the two year ban on municipal securities business because of concerns under the Constitution's First Amendment. In particular, they created the fiction that the two year ban was not a penalty but rather a choice (i.e., a choice between doing business or making a contribution) and thus Rule G-37 did not violate a person's First Amendment right to engage in political speech through contributions. This constitutional concern underlying the two year ban, however, was eliminated in Blount v. SEC, where the Court of Appeals held Rule G-37 to be constitutional on grounds other than the two year ban. 61 F.3d 938 (D.C. Cir. 1995).3
If the ban feature is not eliminated, as suggested above, it should be narrowed to only prohibit the wrongdoer, i.e., the contributor, from receiving compensation in connection with investment advisory services. Thus, if a solicitor or executive makes a contribution, only those individuals should be banned from receiving compensation and not the firm.
Also, the Rule should ban an investment adviser only in connection with entering into a new advisory relationship with a public fund and not in connection with a public fund to which an adviser is already providing services. Making a public fund replace its adviser in midstream harms the fund far more than the adviser.4 Based on this same reasoning, the MSRB stated in an interpretation that Rule G-37's ban does not prohibit a broker dealer from continuing "to execute certain issue-specific contractual obligations in effect prior to the date of the contribution." MSRB, Interpretation (February 21, 1997). Rather, Rule G-37's ban only prohibits a broker dealer from entering into new contractual obligations. See id.
Please note that even if the SEC decides not to adopt any of these alternatives, it should, at the very least, not require investment advisers to provide advisory services to a public fund for free while the fund finds a replacement. This draconian result is unwarranted, if not unprecedented, and further aggravated by the lack of a clear standard as to how long an adviser must provide such free services.
3. The $250 Exemption Should Be Increased and Apply Across the Board
Rule 206(4)-5 exempts contributions by an individual solicitor or executive officer which do not exceed $250 per election and is made to a candidate for whom the contributor is entitled to vote. This exemption should apply across the board -- i.e., to candidates for whom the contributor is not entitled to vote. Indeed, there is no correlation between whether a contributor is entitled to vote for a candidate and the likelihood of a contribution being made for the purpose of obtaining investment advisory business. Employees of a firm who are involved in investment advisory services are usually de-centralized and frequently contribute to candidates, for whom he or she cannot vote, for personal reasons unrelated to obtaining investment advisory services. For example, an employee may give to a candidate because of a personal relationship with the candidate (e.g., to a family member or personal friend) or because the employee supports the views and principles for which a candidate stands. Also, it is difficult for an individual to know, when making a contribution, each and every candidate for whom he or she is entitled to vote. This is especially the case when one is dealing with state or local candidates with small districts. Jurisdictional lines separating districts often change and once the 2000 census is completed, there will be significant redrawing of federal, state and local district lines. Thus, by limiting this exemption to candidates for whom the contributor is entitled to vote, the Rule increases the likelihood of an executive officer or solicitor triggering the two year ban through an inadvertent or innocent contribution.
In addition to applying across the board, this exemption should also be increased from $250 to $1,000, thus more accurately reflecting an amount under which corrupt influence is unlikely. In fact, Congress created the $1,000 per election limit under the Federal Election Campaign Act of 1971, as amended, ("FECA") because contributions under that amount were not deemed to result in corrupt influence. See Buckley v. Valeo, 424 U.S. 1, 29 (1976). This change would also do away with the unfair discrepancy created between federal candidates who are state or local officials (and thus subject to Rule 206(4)-5's $250 de minimis exemption) and those who are not (and thus only subject to FECA's $1,000 limit).
4. Two-Year Look Back Should Be Reduced
Rule 206(4)-5 has a two year look back in that a contribution made by an individual two years prior to qualifying or being newly hired as an investment adviser's executive officer or solicitor would trigger the two year ban for that investment adviser. This provision was apparently included to avoid an investment adviser getting around the Rule by using past contributions of newly hired executive officers or solicitors to influence a public fund's selection of an adviser. However, going back two years is excessive and unwarranted. It is unlikely that a contribution made that long ago by an individual would serve to influence a public fund's selection of an adviser. Also, the Rule already has a provision prohibiting an indirect violation. Thus, the SIA believes that the look back period should either be eliminated or significantly reduced to thirty (30) days.
If the look back is not eliminated for all of those who qualify as solicitors or executive officers, it should, as an alternative, be eliminated for new hires and those who become covered as a result of a merger or acquisition. It is difficult, if not impossible, for an investment adviser to be accountable for the contributions that a new hire, who was previously unassociated with the adviser, may have made in the last two years. Unlike an employee, whose contributions can be tracked, although with difficulty, by his or her employer, an adviser essentially has to rely on a new employee's word as to the contributions he or she made in the last two years. Indeed, even asking a prospective employee about his or her contributions and making a hiring decision based upon those contributions may open up an investment adviser to claims of discrimination. Moreover, it is attenuated to believe that an individual who made a contribution while working for another company or in a different industry did so to influence a public fund's selection of an investment adviser on behalf of his or her prospective employer.
If the SEC does not change the look back requirement, it should, at the very least, create a good faith standard for determining a new hire's past contributions. For example, investment advisers may be permitted to rely on written representations made by new hires in determining their past contributions.
5. Exemptions from the Two Year Ban Should Be Granted to Avoid Disproportional Consequences
Under Rule 206(4)-5, the SEC may grant exemptions from the Rule's two year ban after considering factors such as the public interest and whether the adviser has established procedures to ensure compliance with the Rule. As mentioned in the notice of proposed rulemaking, the purpose behind this exemption provision is "to avoid consequences disproportionate to the violation." In other words, exemptions should be granted when a contribution has little or no chance of influencing an official of a governmental entity. Thus, the Rule should allow for an automatic exemption if an investment adviser causes a covered contribution to be refunded by a candidate's campaign within a reasonable time (e.g., thirty (30) days) after the adviser discovers the contribution. It is highly unlikely that a contribution which is refunded by a candidate in such manner will influence that candidate. Also, the possibility of an automatic exemption will create a great incentive on the part of an adviser to diligently enforce its compliance procedures and ferret out covered contributions.
Please note that given the breadth of Rule 206(4)-5 and its potential to capture inadvertent and innocent contributions, SIA believes that the SEC will be inundated with exemption requests and will have to devote significant resources in connection with the exemption process. Thus, in addition to granting automatic exemptions for refunded contributions, the exemption process should be further streamlined and narrowed to properly accommodate the expected volume of exemption requests. In particular, due to a large number of exemption applications and staff shortages, the exemption process in the SEC's Investment Management Division is already lengthy, often taking six (6) months to a year for even relatively straightforward "cookie cutter" exemptions. Such delay in the context of granting exemptions from the Rule's two year ban would be disastrous because it will imperil the long-standing relationship that the adviser may have with the governmental entity in question. To avoid this unfair result, the Rule should require the SEC to make determinations on exemption requests within thirty (30) days of the submission of the request or be deemed to have granted an exemption if it does not make a determination within that time period. Also, an investment adviser which has submitted an exemption request should be permitted to accept compensation for advisory services provided to a governmental entity during the pendency of the request.
Moreover, for the sake of avoiding undue harm to the investment adviser industry and to public funds, SIA agrees with the purpose behind Rule 206(4)-5's exemption provision (i.e., to ensure that the consequences are not disproportionate to the violation). However, SIA is concerned that this purpose may not be achieved in the implementation of the exemption process. In particular, Rule
G-37's exemption provision, which lists the same factors and has ostensibly the same purpose as Rule 206(4)-5, has been administered in a way which has resulted in broker dealers being unfairly and disproportionately banned from business. The National Association of Securities Dealers ("NASD"), which administers Rule G-37's exemption process, has not, as a practical matter, been considering the factors listed in Rule G-37's exemption provision. Rather, at the prompting of the SEC and the MSRB, the NASD has only been granting exemptions under three very narrow circumstances -- (1) where the contribution was intentionally made by a disgruntled employee to sabotage his or her employer; (2) where small incremental contributions made to a particular candidate aggregate over the $250 de minimis exemption (e.g., $255); and (3) where a ban is triggered because a person who made a contribution becomes a MFP as a result of a merger or acquisition.5 59 Fed. Reg. 30376 (June 13, 1994); MSRB Q&A #4 (June 15, 1995); MSRB Q&A #3 (June 29, 1998). Please note that there has been no instance of a Rule G-37 ban being triggered because of a contribution made by a disgruntled employee or because of incremental contributions aggregating over $250. Also, in the cases involving mergers and acquisitions, the NASD has only granted conditional exemptions.
Indeed, the NASD continues to deny most exemption applications out-of-hand. Incredibly, the NASD even refused to grant an exemption in a case which only involved a $25 contribution. See NASD, Notice to Members 98-51 (July 1998). This result shows no concern for proportionality or a realistic assessment of the ability of a contribution to influence the selection of a broker dealer. To ensure that Rule 206(4)-5's exemption provision is not applied in such a rigid and disproportionate manner, the Rule should explicitly state that, in addition to the factors listed under the Rule, exemptions must be granted so that the consequences are not disproportionate to the violation.
6. Contributions by Executive Officers and Partners Should Not Trigger a Ban
Under Rule 206(4)-5, a contribution by a partner or executive officer triggers the two year ban. The term "executive officer" includes, among others, heads of business units and officers and employees who perform a policy-making function. SIA believes that contributions by partners and such executive officers should not trigger the two year ban because they do not, by merely being partners or executive officers, necessarily have any direct interest in or nexus with the firm's investment advisory business. For this reason, contributions by partners and executive officers under Rule G-37 do not trigger the rule's two year ban, although executive officer contributions have to be reported by the broker dealer in its quarterly G-37/G-38 Report. In this regard, Rule 206(4)-5 should parallel Rule G-37 and not expand beyond it.
Short of eliminating the ban for partners and executive officers altogether, the Rule should limit the ban so that it only applies to partners and executive officers who (1) are directly compensated in connection with investment advisory services provided to governmental entities or (2) supervise others who are compensated in connection with such investment advisory services. For example, a vice president who heads up a firm's technical group should not be covered under the Rule when he or she has nothing to do with investment advisory services.
However, if the SEC decides to continue subjecting partners and executive officers to the ban, the Rule should be modified to clarify those terms. In particular, in defining executive officer, the Rule needs to clarify what it means by "policy-making function." The SIA believes that this term should be limited to those very senior in a firm who have the authority to make policy for the entire firm. This usually covers only a handful of officers in the most senior positions in a given firm. If the term is expanded any further than this, the Rule could cover literally thousands of employees in a large size firm. Indeed, this would go well beyond SEC Rule 16a-1 which defines "officer" as someone with significant policy-making authority.
As for partners, it is unclear as to whether this only includes partners in the firm, which we believe was intended by the SEC, or individuals and entities outside the firm who partner with the firm on various transactions. Thus, the Rule should be amended to only cover "partners . . . in the investment adviser."
7. The Category of Covered Contribution Recipients Should Be Narrowed
The Rule covers contributions made to an official of a government entity (i.e., an incumbent or candidate for an office that is "directly or indirectly" responsible for or can influence the selection of an investment adviser by a public fund or to appoint an official with such influence). Given the wide variety of public funds that exist and the different ways in which they are organized, it is very difficult to know for sure which officials are involved in the adviser selection process.6 This is especially the case given the "direct or indirect" component to the definition. Indeed, an investment adviser would have the overly burdensome duty to investigate every public fund separately and try to determine if a particular official has any role in that fund's selection process.
Thus, the Rule should provide a more definitive and bright line category of covered officials. For example, the Rule could be narrowed to only cover those officials who are members of the governing board or board of trustees of a public fund. The SEC could also provide a list of specific officials that it deems to be covered. An alternative to providing such bright line category would be to provide a due diligence standard (e.g., good faith effort) for attempting to determine whether a particular official is covered under the Rule. Otherwise, there would be no end to the research or investigation that an investment adviser would have to do to ensure compliance with Rule 206(4)-5.
8. Technical Comments
1. The Rule Should Clarify What It Means By Investment Advisory Services
If a covered contribution is made, the Rule imposes a two year ban on providing investment advisory services for compensation to a government entity. However, the Rule does not define what it means by "investment advisory services." This is unlike Rule G-37 which clearly defines the term "municipal securities business." Thus, the SIA believes that the Rule should clearly define the term "investment advisory services" as those activities listed for purposes of defining "investment adviser" under the Investment Advisers Act of 1940 ("Act"). Act, § 202(11).
2. The Recordkeeping Requirement Should Not Apply to Contributions Made to a Political Action Committee
The Rule requires that investment advisers keep records of contributions made to political action committees ("PACs"). SIA believes that such contributions should be outside the recordkeeping requirements. Indeed, Rule G-37 does not require a broker dealer to report or keep records of contributions made to PACs.
Even if the Rule retains this recordkeeping requirement for PAC contributions, it should at the very least specify whether it only includes a state or local PAC or also includes federal PACs. Please note that federal PACs are established for the purpose of giving to federal candidates and thus should not be covered.
The SIA has taken steps to ensure that the comments described above take a balanced and reasonable approach to pay-to-play. Indeed, the Rule, as it is currently drafted, would unduly burden and harm the investment advisers as well as the participants and beneficiaries of public funds, whom the Rule is supposed to protect. The overbreadth of the Rule will capture innocent and inadvertent contributions and, as a practical matter, force well-qualified advisers to sever long-standing relationships with public funds. The Rule will also compel advisers to prohibit a large segment of its employees and outside consultants from participating in legitimate political expression in an effort to ensure compliance with the Rule. At the same time, the SEC will be overwhelmed with requests seeking exemptions from the two year ban. Thus, to truly protect participants and beneficiaries of public funds, as well as the investment adviser industry, the SEC should incorporate the comments contained herein.
Also, as demonstrated by the comments in this letter, there are considerable flaws in the Rule as it is currently drafted. Given the extent of these problems and the seriousness of this Rule, the SEC should, after considering these comments, re-propose the Rule and re-circulate it for comment.
If you have any questions or if we can be of any assistance, please call Michael D. Udoff at (212)618-0509.
Jean M. Reid
Investment Adviser Committee
cc: Paul F. Roye
Robert E. Plaze
1 . The Securities Industry Association brings together the shared interests of more than 740 securities firms to accomplish common goals. SIA member-firms (including investment banks, broker-dealers, and mutual fund companies) are active in all U.S. and foreign markets and in all phases of corporate and public finance. The U.S. securities industry manages the accounts of more than 50-million investors directly and tens of millions of investors indirectly through corporate, thrift, and pension plans. The industry generates more than $300 billion of revenues yearly in the U.S. economy and employs more than 600,000 individuals. (More information about the SIA is available on its home page: http://www.sia.com
2 . It is interesting that the notice of proposed rulemaking states in its Section on Paper Reduction Act that the Rule will result in an average of 235.83 burden hours per adviser. The SEC underestimates this figure because it bases the figure on Rule 204-2 of the Investment Adviser's Act and not on Rule G-37, which is a better model given its similarity to the Rule. Indeed, one of SIA's member firms has 200 to 300 individuals who are subject to Rule G-37 and as a result it has had to dedicate 4 individuals (2 Clerical part-time (approximately ¼ of their time), 1 attorney (approximately 10% of his time) and 1 municipal securities executive (approximately 10% of his time)) to compliance with Rule G-37. Because many more individuals will be covered under Rule 206(4)-5, as currently drafted, the resources that a firm must dedicate to compliance will have to be much more.
3 . Please note that the SIA does not, by this statement, concede in any way the constitutionality of proposed Rule 206(4)-5.
4 . To avoid the possibility of a firm rewarding an official shortly after being selected as a public fund's adviser, the Rule may be drafted so that a contribution would trigger a ban if made within a certain time period (e.g., 30 or 60 days) after entering into an adviser relationship with a governmental entity.
5 . In a Q&A issued on June 29, 1998, the MSRB attempted to clarify that these circumstances should not be the only ones under which exemptions are granted. MSRB, Q&A #2 (June 29, 1998). However, the NASD has not changed its practice of limiting exemptions to these three circumstances.
6 . For example, in California, the Speaker of the House of Representatives and the President of the Senate each appoint one member of the California Public Employees Retirement System ("CALPERS"), and thus would be covered under the Rule while other State Senators and Representatives would not be covered. Also, in New Jersey, there is an unwritten Senatorial courtesy where a single Senator can block the appointment of an individual in his district. Is this indirect appointment authority?