On October 6, 2009, Caplin & Drysdale's Political Activity Law Group submitted comments to the Securities and Exchange Commission on its proposed rule to regulate political contributions by certain investment advisers. Read our comments below.

October 6, 2009

Via Electronic Mail: rule-comments@sec.gov

Elizabeth Murphy


U.S. Securities and Exchange Commission

100 F Street, NE

Washington, DC 20549

Re: File Number S7-18-09; Political Contributions by Certain Investment Advisers

Dear Ms. Murphy:

We appreciate this opportunity to comment on the Securities and Exchange Commission’s laudable efforts to protect investors by addressing “pay to play” practices in the investment advisory industry.1 The need for this action is evidenced by the Commission’s recent enforcement action in New York, charging state officials and a private party with a fraudulent scheme to extract kickbacks in connection with the management of pension funds, as well as similar cases brought by state authorities in Connecticut, New Mexico, Illinois, Ohio, and Florida.2 These efforts will go a long way to curb or eliminate corruption in the award of investment management business for public funds.

We also urge the Commission to consider some of the ways in which this proposal could be improved. As a firm with deep and broad expertise in campaign finance laws, state pay to play laws, and Municipal Securities Rulemaking Board (“MSRB”) Rule G-37, we at Caplin & Drysdale3 are in a position, based on first-hand experience, to offer constructive criticism on some potential, unintended complications that may arise if the proposal is passed in its current form. We are, therefore, pleased to suggest some ways in which these unintended consequences could be avoided.

Our comments are divided into two sections. First, we will address the ways in which this rule could intersect with federal and state campaign finance laws and what issues this may present. Second, we will comment on ways to effectively implement the rule, building on our experience helping investment advisers comply with similar state and local pay to play rules. To read the full version of the comments, click here.

All comments the SEC has received are available on its website at http://www.sec.gov/comments/s7-18-09/s71809.shtml.