Vexed Bermoothes

The list of scandals during Dr. Brown’s great destructathon is so long that it’s hard to keep up.  They even overlap so that one event is eclipsed by the next, and I fear that the damage wrought on Bermuda’s community and economy will rattle on for years.

One of the early controversial events was the famous lunch for the Premier in the US which many alleged was a “pay to play” fundraiser held for investment managers interested in doing business with the Bermudian pension system.  The murkiness surrounding the event helped define the “unethical but possibly not illegal” phrase that we’ve gotten so used to hearing.

Well, here’s some clarity on the matter.  The American SEC has firmly banned “pay to play”.  It is illegal.

SUMMARY: The Securities and Exchange Commission is adopting a new rule under the Investment Advisers Act of 1940 that prohibits an investment adviser from providing advisory services for compensation to a government client for two years after the adviser or certain of its executives or employees make a contribution to certain elected officials or candidates. The new rule also prohibits an adviser from providing or agreeing to provide, directly or indirectly, payment to any third party for a solicitation of advisory business from any government entity on behalf of such adviser, unless such third parties are registered broker-dealers or registered investment advisers, in each case themselves subject to pay to play restrictions. Additionally, the new rule prevents an adviser from soliciting from others, or coordinating, contributions to certain elected officials or candidates or payments to political parties where the adviser is providing or seeking government business. The Commission also is adopting rule amendments that require a registered adviser to maintain certain records of the political contributions made by the adviser or certain of its executives or employees. The new rule and rule amendments address “pay to play” practices by investment advisers.