TO: Jonathan G. Katz, Secretary
Securities and Exchange Commission

FROM: Gary Findlay

SUBJECT: Proposed Rules on Pay to Play (File No. S7-19-99)

DATE: October 28, 1999


In my earlier response to the proposed pay-to-play rules I was primarily focused on correcting erroneous material which had been included regarding the retirement system I administer. The purpose of this memo is to address the issues from a big picture standpoint and suggest what I believe to be a constructive alternative to the present proposal.

The downside of opposing the existing proposal is, of course, that it could be interpreted as an endorsement of pay-to-play. Accordingly, let me begin by saying that I firmly believe that influence peddling of any variety within the public retirement fund universe should be identified and eliminated. Even though I believe the present proposal to be well intended, I find it to be technically and conceptually flawed in at least the following respects:

My recommendation is that you go back to the drawing board and make use of the tried and true method of using sunshine as a disinfectant. That is, require investment advisors (organizations and individuals within organizations) to disclose on their ADVs amounts paid (in hard and soft dollars) to organizations (including PACs and political parties) and/or individuals positioned to influence hiring and firing decisions. Furthermore, require investment advisors to annually provide their clients with a subset of the ADV identifying amounts paid to organizations and individuals having any connection with the client's organization. (A similar report should be provided to prospective clients.)

While considerable effort would be required in developing the details, such an arrangement would put the burden where it belongs and position the public press to play the whistle blowing role.