To: Jonathan G. Katz
| From: | Sandra Sanchez |
| Lucy Rodriguez | |
| Rosy Inguanzo |
Subject: Proposed Rule (File No. S7-19-99)
Date: September 10, 1999
The following memorandum is being submitted as a public comment as a result of independent review and research of (File No. S7-19-99).
Proposed Rule:
SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 275
(Release No. IA-1812; File No. S7-19-99)
RIN 3235-AH72
Political Contributions by Certain Investment Advisers http://www.sec.gov/rules/proposed/ia-1812.htm
SUMMARY: The Commission is publishing for comment a new rule under the Investment Advisers Act of 1940 that would prohibit an investment adviser from providing advisory services for compensation to a government client for two years after the adviser or any of its partners, executive officers or solicitors make a Contribution to certain elected officials or candidates. The Commission also is proposing rule amendments that would require a registered adviser that has government clients to maintain certain records of the political contributions made by the adviser or any of its partners, executive officers or solicitors. The new rule and rule amendments would address "pay to play" practices in the investment adviser industry.
Targeted Stakeholder Groups
Investment Advisors: Investment advisers are in the business of giving advice
about securities to clients. For instance, if they receive compensation for giving advice to a specific person on investing in stocks, bonds, or mutual funds, they are investment advisers. Some investment advisers manage portfolios of securities and pension plans.
Government/Political Leaders: Local, State or Federal leader regardless of party/affiliation.
Taxpayers/Investors: The public at larger. Registered voters. Investors.
The following questionnaire was reviewed with individuals that represented the stakeholder groups:
_______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________
*The above information is being collected for the purpose of submitting a Public Comment to the SEC only.
Political leaders, Investment Advisors & the Public contacted via phone, fax or email:
Mayor Joe Carollo |
Max Berger |
Commissioner Willy Gort |
Rafael Diaz-Ballart |
Commissioner Joe Sanchez |
Charles Hazlett |
Commissioner JL Plummer |
Patric Gretch |
Commissioner Tomas Regalado |
Nelson Sambrano |
Commissioner Arthur Teele |
Fidelity Investment |
Commissioner Betty Ferguson |
James Pepper |
Commissioner Dorin Rolle |
Lincoln Capital Group |
Commissioner Barbara Carey |
Steve Stem |
Commissioner Gwen Margolis |
Market Consulting Group |
Commissioner Bruno Barreiro |
Investment Mang. & Res. |
Commissioner Pedro Reboredo |
Union Investment Group |
|
Commissioner Jimmy Morales |
Capital Intl Sec Group |
|
Commissioner Katy Sorenson |
Paine Webber |
|
Commissioner Dennis Moss |
Prudential Securities |
|
Commissioner Javier Souto |
Alberto Espinoza |
|
Commissioner Miguel Diaz de la Portilla |
Andres Lopez |
|
Commissioner Miriam Alonso |
Andrea Peschiera |
|
Commissioner Natacha Millan |
Camille chouza |
|
Carlos Walters |
|
|
Howard C Forman |
Daniel Sanchez |
|
Al Gutman |
Daniel Yatcher |
|
Kendrick Meek |
Elsa Mariaca |
|
Mario Diaz-Balart |
Hugo Olortogui |
|
Ronald Silver |
Jaime Alzate |
|
Robero Casa |
Jaime Sanchez |
|
Daryl L Jones |
Javier Rincon |
|
Kenneth Gotlieb |
Joshua Sanchez |
|
Luis Rojas |
Josue Castro |
|
Willie Logan |
Juan lega |
|
Frederica Wilson |
Javier Mendoza |
|
Sally Heyman |
Karen Matute |
|
Elaine Bloom |
Leslie Negron |
|
Gustavo A Barreiro |
Luis Fernandez |
|
Beryl Roberts |
Milton Corrales |
|
James Bush, III |
Mel Drucker |
|
Rudy Garcia |
YolyFernandez |
|
Carlos Valdes |
Bob Konopka |
|
J Alex Villalobos |
Pamela Wright |
|
Manuel Prieguez |
Jorge De Apodaca |
|
Gaston Cantens |
Madeleine Valdes |
|
Alex Diaz De La Portilla |
Lopez Miguel |
|
Annie Betancourt |
Hector "El Paisa" |
|
Carlos Lacasa |
Antonia Ayala |
|
Larcenia Bullard |
Martha Montenegro |
|
John Cosgrove |
Hernan Gonzales |
|
Ken Sorensen |
Total interviewed:95
Aware of rule:8%
Estimated Cost:
Less than $5000/yr 20%
$5001 to $10,000/yr9%
$10,001 to $30,000/yr18%
Above $30,000/yr17%
No idea or no answer36%
In favor of rule:21%
Opposed:30%
No idea or no answer49%
Comments:
Submitted8%
Direct to the agency4%
No comment88%
Public Opinion:
Jorge de Apodaca:
"I believe that in order to maintain an "arms length" relationship between government and the private sector, we must have rules in place that would discourage "pay and play" activities".
Bob Konopka:
____"TRYING TO POLICE THIS ACTION WOULD BE VERY COSTLY TO BOTH THE GOVERNMENT AND ANY ORGANIZATION TRYING TO DO WORK WITH THE GOVERNMENT.
___CORPORATIONS ACTING AS INVESTMENT ADVISORS KEEP A LARGE NUMBER OF INDIVIDUALS AS CONSULTANTS AND THESE CONSULTANTS IN TURN CONSULT WITH CONSULTANTS. SO THIS WOULD MEAN THAT ANYONE WHO IS ASSOCIATED WITH ONE OF THESE TWICE REMOVED CONSULTANTS (i.e. WIFE, SON, DAUGHTER) WHO MAKES A CONTRIBUTION TO A POLITICAL CAMPAIGN WOULD JEOPARDIZE THE ABILITY OF THIS CORPORATION TO WORK FOR THE GOVERNMENT. POSSIBLY DUE TO A $10.00 CAMPAIGN CONTRIBUTION".
Madeline Valdes:
"Its important that this proposal is approved since it would prohibit an investment adviser from providing advisory services for compensation to a government client for two years after the adviser or any of its partners, executive officers or solicitors make a contribution to certain elected officials or candidates.
It is also important that a registered adviser that has government clients maintain good records of the political contributions made by the adviser or any of its partners, executive officers or solicitors. It would be costly to the firm, but would be a good way of making people accountable for improper business dealings".
Lopez Miguel:
" I BELIEVE THE PROPOSAL WILL INCREASE FAIR BUSINESS PRACTICES AND HELP TO MINIMIZE PAY TO PLAY ARRANGEMENTS "
Hector (El Paisa):
"I feel the rule is designed to prevent corrupt practices in investments made by government figures and I agree with it for that reason"
Antonia Ayala:
"Too costly to enforce, rules are made to be broken, a way to get around it would be found".
Joshua Castro:
"The rule is in effect a regulating guide line to most scrupulous politicians
coming in to office with funds of self promoted or influence sources. It is true the proposal will contaminate other areas of investments advisory services. If you simply conform to the rules set by the government no one will be hinder with the proposal unless you contribute for your own gain".
Hernan Gonzales:
"Those who are interested will find some way to brake the law. It will be too costly and it will be worthless. The theory of the law is acceptable, but it will be very different in practice and almost impossible to control every detail on who’s the REAL CONTRIBUTOR. In other words, it will promote people to use others names and "faces" to make those contributions, so they wouldn’t be known as the real contributors in order to be free to approach".
- - - - - -
Based on our research, we the stakeholders of the proposed rule jointly oppose the rule. Although on the surface it appears that it will assist in eliminating "pay to play" activities, we feel it will cost all stakeholders above $30,000 a year (equal to or greater than 1 FTE) to maintain and enforce such a policy.
We are also in agreement with Mr. Gary Finlay, which states in his public comment "The pay to play rules, as proposed, will, if adopted, address a problem which is infinitesimal in the grand scheme of things." Emphasis on infinitesimal. " However, if that is needed as a first step, then that is a call you must make. The much bigger question which remains is when will the SEC address the insidious transactions which pervade the industry and which make pay to play (as described in the proposed rules) look more like child's play? I am speaking here of soft dollar abuses and relationships between money managers and investment consultants (gatekeepers), which lead to kickbacks, self dealing, and extortion that go completely undisclosed and cry out for regulatory attention."
As the authors of this document collected the results of their interviews over a two-week period, the headlines flash Bush Posts List of Campaign Donors on Web Site New York Times, September 10, 1999.
Actions such as Governor Bush’s are honest and commendable. It is an example of disclosure that is appropriate for public review. However, we ask, what about those candidates that don’t have nearly the resources that Gov. Bush has to do daily disclosures? Who’s money paid for that? Ours! This activity is just as abusive of campaign funds as the expense to endorse the above rule.
By the same token, do we want Investment Advisors to refrain from advising political figures on what to do with our hard-earned dollars for a 2-yr. period? No, we don’t. Not for a second because they’ll pay for the "dog and pony" show instead of investing in Americans.
In conclusion, what do we want? We want the agency to look more closely at improper investment activity that continues to be bypassed and severely punish the abusers. We want credible Investment Advisors to continue to counsel our politicians because they know not what they do with our all-mighty dollar!