SEC Re-Proposes Rule to Curtail 'Pay-to-Play' Practices Involving State and Local Government Entities

In an apparent response to scandals involving public fund management in Connecticut, Illinois, New Mexico, New York, Ohio and Florida, on Aug. 3, 2009, the U.S. Securities and Exchange Commission ("SEC") promulgated proposed Rule 206(4)-5, which is intended to curtail practices and arrangements that the SEC believes represent "pay-to-play" practices, and arrangements engaged in by registered investment advisers, certain hedge fund managers that rely on the "private adviser" exemption from registration as an investment adviser under the Advisers Act, and certain other investment advisers. Under Proposed Rule 206(4)-5, such "pay-to-play" practices and arrangements would be deemed fraudulent, deceptive and manipulative acts or practices under Section 206 of the Investment Advisers Act of 1940 ("Advisers Act"). These practices include, directly or indirectly, making or soliciting political contributions (e.g., gifts, loans, or other things of value) to government officials (e.g., incumbents, candidates, and successful candidates, including their election committees), and using third-party solicitors, in an effort to influence the hiring of an investment adviser by, or to obtain investment advisory business from, a government entity (e.g., any state or political subdivision thereof, including state agencies and officers, agents or employees of any state, political subdivision or agency).

Proposed Rule 206(4)-5 re-proposes many of the same restrictions and requirements that the SEC included in a 1999 rule proposal that also was designed to prevent certain investment advisers from participating in "pay-to-play" practices affecting the management of public pension plans. Like the 1999 proposed rule, proposed Rule 206(4)-5 is modeled in large part after rules G-37 and G-38 of the Municipal Securities Rulemaking Board ("MSRB"), which address "pay-to-play" practices in the municipal securities markets. As such, an investment adviser that is dually registered as an investment adviser and a broker-dealer, and is already subject to these MSRB rules, or is affiliated with a broker-dealer that is subject to these MSRB rules, may already have policies and procedures in place that could be adapted, with some modifications, for purposes of proposed Rule 206(4)-5.

The following discusses the SEC's rationale for proposing Rule 206(4)-5, and the scope and requirements of proposed Rule 206(4)-5. Various factors for a covered investment adviser to consider relating to proposed Rule 206(4)-5, and the related proposed amendments to the recordkeeping requirements under Rule 204-2 of the Advisers Act, also are discussed. The proposing release for proposed Rule 206(4)-5 can be found at www.sec.gov/rules/proposed/2009/ia-2910.pdf. The comment period for proposed Rule 206(4)-5 ends Oct. 6, 2009.

The SEC's Rationale for Proposed Rule 206(4)-5

In addition to MSRB Rules G-37 and G-38, the activities of an investment adviser soliciting business from, and providing advisory services to, a public fund client may (depending upon the adviser) be subject to the general anti-fraud provisions in Section 206 under the Advisers Act, the solicitor disclosure requirements under Rule 206(4)-3 under the Advisers Act, the "Cash Solicitation Rule," the code of ethics and compliance program requirements under Rule 204A-1 and Rule 206(4)-7 under the Advisers Act, and certain state laws (e.g., state procurement statutes, common law fraud, and certain general unfair and deceptive practice laws). Despite this existing regulation, the SEC believes that more specific regulation of the "pay-to-play" practices of an investment adviser is necessary given the services an investment adviser may provide to public funds, the current size of the public funds market, and the increasing role an investment adviser may play in "pay-to-play" practices (as evidenced by the scandals involving public fund management in Connecticut, Illinois, New Mexico, New York, Ohio and Florida).

According to the SEC, public pension funds have more than $2.2 trillion in assets, which represents approximately one-third of all U.S. pension funds. Public fund assets are held, administered and managed by elected officials who typically hire an investment adviser (or multiple advisers) to help manage the funds, in exchange for advisory fees paid by the funds or select investment products to which the investment adviser(s) provides advisory services in exchange for advisory fees. According to the SEC, the fairness of the selection process can be easily manipulated since the selection process is left solely to the elected officials or their appointees.

The SEC believes that investment advisers that seek to influence the award of advisory contracts or the selection of investment products by public entities by making or soliciting political contributions to those officials who are in a position to influence the awards or selections, compromise their fiduciary obligations. The SEC believes that such practices negatively affect the management of public funds and may be harmful to the public funds and their participants, because the public funds may be higher fees to investment advisers seeking to recoup their contributions and/or because, in the absence of arm's-length negotiations, an investment adviser may obtain greater fees, soft dollars, and other ancillary benefits at the expense of the public funds and their participants.

The SEC also does not believe that the disclosures required under the Cash Solicitation Rule are sufficient to protect the participants and beneficiaries of public funds, and believes that MSRB Rules G-37 and G-28 have been successful in curtailing the "pay-to-play" practices of broker-dealers in the municipal securities business. Like the MSRB rules, proposed Rule 206(4)-5, if adopted as proposed, will specifically regulate and curtail the "pay-to-play" practices of certain investment advisers that the SEC appears to be most concerned about, and will require such investment advisers to maintain records that will enable the SEC to more readily examine the practices of such investment advisers.

Who Would Need to Comply with Proposed Rule 206(4)-5 ("Covered Investment Advisers")

Investment Advisers Registered or Required to be Registered, and 'Private Advisers'

An investment adviser registered or required to be registered under Section 203 of the Advisers Act would need to comply with proposed Rule 206(4)-5. An investment adviser that is not registered under the Advisers Act in reliance on the "private adviser" exemption from registration under Section 203(b)(3) (e.g., many hedge fund managers) would need to comply with proposed Rule 206(4)-5 if it is adopted as proposed. Proposed Rule 206(4)-5 would apply to these types of investment advisers when such investment advisers seek to provide, or do provide, investment advisory services for compensation to government entities. A "government entity" includes any state or political subdivision of a state, including (1) any agency, authority or instrumentality or political subdivision, (2) a plan program or pool of assets sponsored or established by a state or political subdivision or any agency, authority or instrumentality thereof, and (3) officers, agents or employees of the state or political subdivision or any agency, authority or instrumentality thereof, acting in their official capacity.

Managers of Covered Investment Pools

Except in one instance involving publicly offered registered investment companies (which is discussed below), the restrictions and requirements of proposed Rule 206(4)-5 also would apply to an investment adviser that manages a "covered investment pool" in which a government entity invests or is solicited to invest. For purposes of proposed Rule 206(4)-5, and the proposed amendments to the recordkeeping requirements in Rule 204-2, an investment adviser to a covered investment pool in which a government entity invests or is solicited to invest would be treated as though that investment adviser were providing or seeking to provide investment advisory services directly to the government entity.

A "covered investment pool" would include: (1) a registered investment company under Section 3(a) of the Investment Company Act of 1940 ("1940 Act"), and (2) a company (such as a "private fund," "hedge fund," "private equity fund," "venture capital fund" or "collective investment trust") that would be an investment company under Section 3(a) of the 1940 Act, but for an exclusion provided from the definition of "investment company" under Sections 3(c)(1), 3(c)(7) or 3(c)(11) of the 1940 Act. Proposed Rule 206(4)-5 would apply only to the investment adviser that manages a covered investment pool. If the covered investment pool is a publicly offered registered investment company, the two-year "time-out" restriction in proposed Rule 206(4)-5 (which is discussed below) would apply only when the investment company is included in a plan or program of a government entity, such as a 529 plan, a 403(b) plan, a 457 plan, or other investment program or plan sponsored or established by a government entity. The two-year "time out" restriction would not be applicable if a government entity would invest its pension fund assets in a publicly offered registered investment company outside of a plan or program sponsored or established by the government entity.

Companies Not Covered

If proposed Rule 206(4)-5 is adopted as proposed, a company that is exempt from registering as an investment adviser under the Advisers Act because of an available exception or exemption other than the "private adviser" exemption in Section 203(b)(3), would not be required to comply with proposed Rule 206(4)-5. For example, banks, broker-dealers and other individuals or entities exempt from the definition of an "investment adviser" under Section 202(a)(11) would not be directly subject to proposed Rule 206(4)-5. In fact, the SEC specifically noted that a bank maintaining a collective investment trust would not be directly subject to the proposed rule if the bank falls within the exclusion from the definition of "investment adviser" in Section 202(a)(11)(A) of the Advisers Act. A state registered investment adviser, an intra-state investment adviser, an adviser with only insurance companies as clients, an investment adviser that is a charitable organization, an adviser that is a plan described in Section 414(e) of the Internal Revenue Code of 1986 or certain associated persons of such a plan, and certain commodity trading advisors also would not be directly subject to proposed Rule 206(4)-5 to the extent that such a company falls within the other exemptions in Section 203(b) of the Advisers Act. While a bank or other excluded company would not be directly subject to proposed Rule 206(4)-5 if it is adopted as proposed, given proposed Rule 206(4)-5(d), which prohibits a covered investment adviser from doing indirectly what it cannot do directly, the activities of a bank or other excluded company could be indirectly subject to proposed Rule 206(4)-5 to the extent that such a bank or other excluded company acts in concert with a covered investment adviser to allow the covered investment adviser to do indirectly what the covered investment adviser could not do directly under proposed Rule 206(4)-5.

Proposed Recordkeeping Requirements

The recordkeeping requirements under Rule 204-2 under the Advisers Act that have been proposed by the SEC along with proposed Rule 206(4)-5 (which are discussed below), would apply to an investment adviser registered or required to be registered with the SEC that has or seeks a government entity client, or that manages a covered investment pool in which a government entity invests or is solicited to invest.

The "Pay-to-Play" Restrictions under Proposed Rule 206(4)-5 and Applicable Exceptions/Exemptions

Restrictions on Political Contributions – the 'Two-Year' Time Out

Under proposed Rule 206(4)-5, it would be unlawful for a covered investment adviser to provide investment advisory services for compensation to a government entity within two years after a "contribution" to an "official" of the government entity is made by the covered investment adviser, or any "covered associate" of the covered investment adviser (including a person who becomes a covered associate within two years after the contribution is made). A "contribution" would include any gift, subscription, loan, advance or deposit of money, or anything of value made for the purpose of influencing any election for federated, state or local office, payment of debt incurred in connection with any such election or transition, or inaugural expenses of the successful candidate for state or local office. In the proposing release for proposed Rule 206(4)-5, the SEC clarified that, similar to MSRB Rule G-37, a "contribution to an official, as opposed to a committee, for inauguration or transition expenses would be a contribution under the proposed rule." The SEC also clarified that inaugural or transition expenses of a successful candidate for federal office would not be considered a "contribution," and that contributions to political parties would not be covered by the two-year "time out" restriction, unless they are means to do indirectly what could not be done directly under proposed Rule 206(4)-5 (although contributions to state and local political parties would, in any event, be subject to the restrictions on coordination and solicitation of political contributions and the recordkeeping amendments to Rule 204 2 (both of which are discussed below)).

A restricted "official" would include any incumbent, candidate and successful candidate (including any election committee of such a person) for an elective office that either (1) is directly or indirectly responsible for, or can influence the outcome of, the hiring of an investment adviser by a government entity or (2) has the authority to appoint any person who is directly or indirectly responsible for, or can influence the outcome of, the hiring of an investment adviser by a government entity. In the proposing release for proposed Rule 206(4)-5, the SEC noted that it would be "the scope of the authority of the particular office or an official, not the influence actually exercised by the individual, that would determine whether the individual has influence over the awarding of an investment advisory contract . . .."

A "covered associate" of a covered investment adviser includes (1) any general partner, managing member or "executive officer" of the covered investment adviser, or other individual with a similar status or function, (2) any employee who solicits a government entity for the investment adviser, and (3) any political action committee ("PAC") controlled by the covered investment adviser or by any person described in the preceding clauses (1) and (2). An "executive officer" of a covered investment adviser includes (i) the president, (ii) any vice president in charge of a principal business unit, division or function (such as sales, administration or finance), or (iii) any other executive officer of the investment adviser who, in each case, in connection with his or her regular duties: (x) performs, or supervises any person who performs, investment advisory services for the covered investment adviser (e.g., a portfolio manager), (y) solicits, or supervises any person who solicits, for the covered investment adviser, including with respect to investors for a covered investment pools (e.g., internal sales people), and (z) supervises, directly or indirectly, any persons described in the preceding clauses (x) and (y) (e.g., the president of the covered investment adviser). The SEC excluded a third-party solicitor from the "covered associate" definition (and, therefore, from two-year "time out" restriction), but subjected a third-party solicitor to the restrictions on the use of a third-party solicitor under proposed Rule 206(4)-5 (which restrictions on the use of a third-party solicitor are discussed below). A limited partner of a covered investment adviser also would not be considered a "covered associate"; however, a covered investment adviser should consider whether a limited partner that engages in solicitation or distribution activities for the covered investment adviser or a covered investment pool managed by the covered investment adviser, and that receive compensation under the applicable limited partnership agreement or another agreement for such services, would be considered a third-party solicitor for purposes of the restrictions on the use of a third-party solicitor under proposed Rule 206(4)-5.

Thus, under proposed Rule 206(4)-5, if a covered investment adviser or one of its executives or employees who is a covered associate makes a political contribution to an elected official in a position to influence the selection of the covered investment adviser, the covered investment adviser would be barred for two years from providing investment advisory services for compensation to the applicable government entity, either directly or through a covered investment pool. The two-year "time out" restriction would not limit the covered investment adviser from receiving compensation from other government entities as to which triggering contributions have not been made.

Under proposed Rule 206(4)-5, the two-year "time out" would continue in effect after a covered associate who made a triggering contribution left the covered investment adviser; thus, an investment adviser would be required to "look back" in time to determine whether it would be subject to any business restrictions under proposed Rule 206(4)-5 when employing or engaging a covered associate. The covered investment adviser that employed the covered associate at the time of the triggering contribution would be subject to the "time out" restriction for the full two years, regardless of whether the covered associate remains employed by that covered investment adviser; another covered investment adviser that hires the covered associate would become subject to the "time out" restriction for the portion of the two-year "time out" period remaining at the time the covered associate is hired.

Proposed Rule 206(4)-5 would contain a de minimis exception that would permit a covered associate who is a natural person to make aggregate contributions of up to $250 per election (e.g., primary and general for a total of up to $500) to any one official (e.g., a candidate or incumbent) if the covered associate is entitled to vote for the official (i.e., the covered associate's principal residence would need to be in the locality in which the official seeks election) at the time the contribution is made. The $250 limit would apply per covered associate and would not be an aggregate limit for all of a covered investment adviser's covered associates.

Proposed Rule 206(4)-5 also would contain an exception from the two-year "time out" restriction for covered investment advisers who discover an improper contribution of $250 or less that triggers the two-year "time out" restriction within four months of the date of the contribution, and the contributor obtains a return of the contribution within 60 calendar days of the date of discovery of such contribution by the investment adviser. This exception would be available only with respect to contributions made by a covered associate of the covered investment adviser to officials other than those for whom the covered associate was entitled to vote at the time of the contributions and that, in the aggregate, do not exceed $250 to any one official, per election. A covered investment adviser would not be entitled to rely on this exception more than twice in any 12-month period, and would not be permitted to rely on this exception more than once with respect to contributions by the same covered associate of the covered investment adviser, regardless of the time period. If this exception is not available, proposed Rule 206(4)-5 contemplates that covered investment advisers may apply for an exemption from the two-year "time out" restriction (the exemption provisions in proposed Rule 206(4)-5 are discussed below).

The two-year "time out" restriction under proposed Rule 206(4)-5 would require a covered investment adviser to give consideration (under its compliance policies and procedures, organizational chart, hiring practices, investment management agreements, applicable law, etc.) as to how the covered investment adviser would comply with the restriction and, if necessary, take advantage of the available exceptions. For example, the SEC indicated in the proposing release for proposed Rule 206(4)-5 that a covered investment adviser that becomes subject to the two-year "time out" restriction "would likely, at a minimum, be obligated to provide (uncompensated) advisory services for a reasonable period of time until the government finds a successor to ensure its withdrawal did not harm the client, or the contractual arrangement between the adviser and the government client might obligate the adviser to continue to perform under the contract at no fee." Regarding covered investment advisers that manage registered investment companies that are covered investment pools, the SEC also noted in the proposing release that the options for restricting the receipt of compensation by a covered investment adviser that becomes subject to the two-year "time out" restriction are more limited, because of both 1940 Act provisions and potential tax consequences, and the provisions of the Employee Retirement Income Security Act of 1974 may impact compensation arrangements relating to collective investment trusts. In the case of a registered investment company, the SEC suggested that one approach that would meet the requirements of proposed Rule 206(4)-5 would be for the covered investment adviser of the registered investment company to waive its advisory fee for the investment company as a whole in an amount approximately equal to the fees attributable to the government entity. Given the above discussion, a covered investment adviser may want to consider analyzing potential modifications to its policies and procedures, organization chart, hiring practices, and its investment management agreements now in the event that the two-year "time out" restriction in proposed Rule 206(4)-5 (or some version of it) would ultimately be adopted by the SEC.

Given the prompt four-month discovery requirement within the exception discussed above, and the recordkeeping requirements that would be imposed under proposed Rule 206(4)-5 (which are discussed below), a covered investment adviser also may want to consider whether to require its covered associates to report political contributions, and certify that no triggering contributions have been made, on a quarterly basis at the same time they provide other required code of ethics certifications or more frequently. Covered investment advisers also may want to consider whether to require that any political contribution by a covered associate be pre-cleared and approved in advance.

Restrictions on Coordination and Solicitation of Political Contributions

Proposed Rule 206(4)-5 would prohibit a covered investment adviser, and the covered investment adviser's covered associates, from coordinating, or soliciting any person or PAC to make, (1) any contribution to an official of a government entity to which the investment adviser is providing or seeking to provide investment advisory services, or (2) "payment" to a political party of a state or locality where the investment adviser is providing or seeking to provide investment advisory services to a government entity. A "payment" would include any gift, subscription, loan, advance, or deposit of money or anything of value. For purposes of this prohibition, "soliciting" would include communicating, directly or indirectly, for the purpose of obtaining or arranging a contribution or payment. Under this restriction, a "gatekeeper" arrangement, where political contributions or payments are arranged by an intermediary, who then distributes or directs contributions or payments to elected officials or candidates, would be prohibited.

Restrictions on Use of Third-Party Solicitors

Proposed Rule 206(4)-5 would prohibit a covered investment adviser, and the covered investment adviser's covered associates, from providing or agreeing to provide, directly or indirectly, payment to any third party (e.g. a solicitor or placement agent) to "solicit" a government entity for investment advisory services on behalf of such covered investment adviser. This prohibition would not prevent a covered investment adviser from making a payment to (1) a "related person" (i.e., an affiliate of the covered investment adviser that, directly or indirectly, would be controlling or controlled by the covered investment adviser or under common control with the covered investment adviser), or, if the related person would be a company, an employee of that related person, or (2) an executive officer, general partner, managing member (or, in each case, a person with similar status or function), or an employee of the covered investment adviser, for soliciting a government entity for investment advisory services on behalf of the covered investment adviser. For purposes of this prohibition, "soliciting" would include communicating, directly or indirectly, for the purpose of obtaining or retaining a client for, or referring a client to, an investment adviser. An investment adviser should remember that, although payments to the related/affiliated companies and individuals above would not be prohibited by Rule 204(4)-5, the Cash Solicitation Rule would still apply to such payments for solicitation activities.

Restrictions on Indirect Political Contributions and Solicitations

Proposed Rule 206(4)-5 also would make it unlawful for a covered investment adviser, or a covered investment adviser's covered associates, to do anything indirectly that, if done directly, would result in a violation of proposed Rule 206(4)-5. Thus, as the SEC indicated in its press release relating to proposed Rule 206(4)-5, the proposed rule would prohibit a covered investment adviser and the covered investment adviser's covered associates from engaging in "pay-to-play" conduct indirectly, such as by directing or funding contributions through third parties such as spouses, lawyers, or companies affiliated with the covered investment adviser, if that conduct would violate proposed Rule 206(4)-5 if the covered investment adviser did it directly; this provision would prevent covered investment advisers from circumventing proposed Rule 206(4)-5 by directing or funding contributions through third parties.

Ability to Seek Exemptive Relief from the Two-Year 'Time Out'

As part of proposed Rule 206(4)-5, the SEC is contemplating that a covered investment adviser may apply for exemptive relief from the restrictions on political contributions, i.e., the two-year "time out." The SEC, upon application, would be able to conditionally or unconditionally exempt an investment adviser from this restriction. Presumably, the SEC could exempt a covered investment adviser from the two-year "time out" restriction where a covered investment adviser discovers improper contributions that trigger the two-year "time out" restriction only after they have been made, where another exception is not available, and where the imposition of the restriction is unnecessary to achieve the intended purpose of proposed Rule 206(4)-5.

In considering whether or not to grant an exemption, the SEC would take into consideration the following factors (among other factors):

  • Whether the exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Advisers Act
  • Whether the covered investment adviser, (1) before the contribution resulting in the restriction was made, adopted and implemented policies and procedures reasonably designed to prevent violations of proposed Rule 206(4)-5; (2) prior to or at the time the contribution that resulted in such restriction was made, had no actual knowledge of the contribution; and (3) after learning of the contribution, (a) has taken all available steps to cause the contributor involved in making the contribution that resulted in such restriction to obtain a return of the contribution; and (b) has taken such other remedial or preventive measures as may be appropriate under the circumstances
  • Whether, at the time of the contribution, the contributor was a covered associate or otherwise an employee of the covered investment adviser, or was seeking such employment
  • The timing and amount of the contribution that resulted in the restriction
  • The nature of the election (e.g., federal, state or local)
  • The contributor's apparent intent or motive in making the contribution that resulted in the restriction, as evidenced by the facts and circumstances surrounding such contribution

Proposed Amendments to Recordkeeping Requirements under Rule 204-2

In connection with proposed Rule 206(4)-5, the SEC is also proposing amendments to Rule 204-2 under the Advisers Act that would require an investment adviser registered or required to register under the Advisers Act to maintain certain records relating to political contributions made by the investment adviser or the investment adviser's covered associates. Specifically, the proposed amendments to Rule 204-2 would require an investment adviser to make and keep the following records:

  • The names, titles and business and residence addresses of all covered associates of the investment adviser
  • All government entities for which the investment adviser or any of its covered associates is providing or seeking to provide investment advisory services, or which are investors or are solicited to invest in any covered investment pool to which the investment adviser provides investment advisory services, as applicable
  • All government entities to which the investment adviser has provided investment advisory services, along with any related covered investment pool(s) to which the investment adviser has provided investment advisory services and in which the government entity has invested, as applicable, in the past five years, but not prior to the effective date of the proposed rule
  • All direct or indirect contributions or payments made by the investment adviser or any of its covered associates to an official of a government entity, a political party of a state or political subdivision thereof, or a PAC. Records related to these contributions and payments would need to be listed in chronological order and indicate (1) the name and title of each contributor, (2) the name and title (including any city/county/state or other political subdivision) of each recipient of a contribution or payment, (3) the amount and date of each contribution or payment, and (4) whether any such contribution was the subject of the exception for certain returned contributions provided for under proposed Rule 206(4)-5.

A dually registered investment adviser subject to Rules 17a-3 and 17a-4, or the MSRB recordkeeping rules, would be entitled to rely on substantially similar records required to be maintained under those rules for purposes of complying with the above amendments to Rule 204-2.

Proposed Amendment to the Cash Solicitation Rule – Rule 206(4)-3

Finally, the SEC proposed a clarifying amendment to Rule 206(4)-3 that is intended to make it clear that solicitation activities involving a government entity would be subject to the restrictions set forth in proposed Rule 206(4)-5.

When Would Compliance Be Required

In the proposing release for proposed Rule 206(4)-5, the SEC indicated that the restrictions and recordkeeping requirements discussed above would apply to political contributions made on or after the effective date of the final rule, if adopted. The SEC also reminded investment advisers that investment advisers would need to have developed and adopted appropriate policies and procedures by that date. The SEC solicited comment as to whether additional time would be required to develop and adopt required policies and procedures and, if so, how long of a transition period would be necessary (e.g., 90 days, six months, or some other period of time).

Conclusion

Proposed Rule 206(4)-5, and the proposed amendments to the recordkeeping requirements under Rule 204-2, would impose new, and in some cases onerous, restrictions and requirements on investment management organizations. As discussed above, these restrictions and requirements would require investment management organizations to determine, for example, whether it, or an affiliate, would be a covered investment adviser and, if so, what modifications to compliance policies and procedures, organizational reporting lines, hiring practices, investment management agreements, etc., would be necessary to comply with proposed Rule 206(4)-5 and the proposed amendments to the recordkeeping requirements under Rule 204-2.

As you seek to digest proposed Rule 206(4)-5 and the proposed amendments to Rule 204-2 discussed above, and determine how they would apply to and affect your investment management organization, Reed Smith's Investment Management Group can assist you with that analysis. If you decide to submit a comment to proposed Rule 206(4) 5, Reed Smith's Investment Management Group also would be happy to work with your organization to prepare and submit your comment letter.