On June 30, 2010, the SEC adopted new Rule 206(4)-5 and amendments to related rules, which disqualify investment advisers, their key personnel and placement agents acting on their behalf from seeking to be engaged by a governmental client if they have made political contributions. Under the new rule, even a single prohibited contribution in any amount may result in an effective two-year disqualification of the investment adviser from receiving compensation in connection with the provision of advisory services to, or accepting investments from, a government client or plan. The SEC's new rules, which apply nationwide, are intended to fill gaps left by patchwork local regulation involving pay to play and conflicts of interest generally. In addition to the ban on political contributions, the new rules also regulate the use of placement agents and establish new recordkeeping requirements. The new rules became effective on September 13, 2010, but are subject to rolling compliance dates. Investment advisers must comply with the political contribution restrictions by March 14, 2011, and the rules regarding third-party placement agents by September 13, 2011. Given the potential consequences of a violation of the new rules, investment advisers should adopt and implement policies and procedures designed to monitor political contributions that may run afoul of the new rules, and ensure that prospective placement agents are appropriately registered. In the design of such policies and procedures, investment advisers should be mindful that many states may have adopted regulations in this area (which may go beyond the scope of the SEC rules). The Lowenstein Sandler Investment Management Group alert summarizing the SEC's rules is available here.