New York State Comptroller Thomas DiNapoli issued an executive order on September 23 that bans "pay-to-play" practices related to the US$116.5 billion New York State Common Retirement Fund.

The executive order prohibits the Fund from doing business with any investment adviser who has made a political contribution to the State Comptroller or a candidate for the State Comptroller. The ban parallels the proposed rule the SEC released on July 22 and similarly, will last two years from the date of the contribution. The executive order will expire on the effective date of the SEC's final rule.

The SEC final rule would also prohibit investment advisers from retaining placement agents to solicit government funds. DiNapoli instituted a ban on the involvement of placement agents with the Fund on April 22. The ban remains in effect.

SEC Chairman Mary Schapiro first mentioned the SEC proposal in late April, after New York Attorney General Andrew Cuomo unsealed indictments following a two-year investigation into alleged kickbacks related to the use of unregistered placement agents for the New York State Common Retirement Fund.

Press Release: DiNapoli Executive Order Bans Pension Fund Pay-to-Play (Sept. 23, 2009)

Executive Order: available here

Proposed SEC Rule: available here