Shifting Regulatory Landscape in the US and Abroad

Shifting Regulatory Landscape in the US and Abroad
Pay to PlaySay on Pay
Doug Cornelius
Chief Compliance Officer
Beacon Capital Partners, LLC

Pay to Play

Pay to Play
New York State Common Retirement Fund Fraud

Pay to Play
SEC Proposed Rule IA-2910
http://www.sec.gov/rules/proposed/2009/ia-2910.pdf
Comment Period ended Oct. 6

Pay to Play
Restricts Political Contributions
Bans Third Party Solicitors

Who is covered:
Any investment adviser registered (or required to be registered) with the Commission, or unregistered in reliance on the exemption available under section 203(b)(3) of the Advisers Act (15 U.S.C. 80b-3(b)(3))

Covered Politicians
Incumbent or candidate for elective office who:
(i) Is directly or indirectly responsible for, or can influence the outcome of, the hiring; or
(ii) Has authority to appoint any person who is directly or indirectly responsible for, or can influence the outcome of, the hiring,
of an investment adviser for government funds

Safe Harbor
Contributions of no more than $250 in the aggregate
Entitled to vote for the official

Record Keeping
Keep a record of all political contributions
Five year tail

Placement Agents
SEC alleges that third-party solicitors have played a central role in each of the enforcement actions involving pay to play schemes.

Placement Agents

Placement Agents
“Eliminating placement agents as a group because there were a few bad actors who have tarnished the industry is analogous to eliminating Major League Baseball because several of its players behaved illegally.”
- Steven Schwarzman The Blackstone Group

Penalty:
Two Year Prohibition on Compensation

Say on Pay

Say on Pay
Corporate and Financial Institution Compensation Fairness Act of 2009 (H. R. 3269)

Say on Pay
Requires that any proxy for an annual shareholders meeting provide for a separate shareholder vote to approve executive compensation

Say on Pay - Section 4
New federal regulations requiring each covered financial institution to disclose incentive-based compensation arrangements to determine whether the compensation:
is aligned with sound risk management;
is structured to account for the time horizon of risks; and
meets other criteria appropriate to reduce unreasonable incentives offered by such institutions for employees to take undue risks.

Say on Pay - Section 4
covered financial institution means:
an investment advisor, as such term is defined in section 202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11))
With assets of more than $1 billion

Say on Pay - Disclosure
Disclose incentive-based compensation to determine whether the compensation:
is aligned with sound risk management;
is structured to account for the time horizon of risks; and
meets other criteria appropriate to reduce unreasonable incentives offered by such institutions for employees to take undue risks.

Say on Pay - Prohibitions
Prohibition on incentive-based compensation that--
could threaten the safety and soundness of covered financial institutions; or
could have serious adverse effects on economic conditions or financial stability.

Shifting Regulatory Landscape in the US and Abroad

by Doug Cornelius on Oct 06, 2009

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Shifting Regulatory Landscape in the US and Abroad — Presentation Transcript

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