Synopsis: On August 3, 2009, the SEC released proposed Rule 206(4)-5 under the Investment Advisers Act of 1940 that would restrict investment adviser “pay to play” practices. Among other items, the proposed rule would prohibit an investment adviser from (i) receiving compensation for providing advisory services to a government entity for two years after a contribution to any public official of such government entity that is in a position to influence the award of advisory business, and (ii) paying any third party to solicit government business. The Lowenstein Sandler Investment Management Group Client Alert issued August 12, 2009 analyzes the proposed rule and its potential impact on investment advisers.

Status: The SEC is currently soliciting comments on the proposed rule. The comment period is scheduled to end on October 6, 2009.