SEC Staff Issues Guidance on "Pay-to-Play" Rule

On March 22, the staff of the Division of Investment Management (Staff) of the Securities and Exchange Commission (SEC) provided guidance on Rule 206(4)-5 (Rule) under the Investment Advisers Act (Advisers Act)—the so-called "Pay-to-Play" Rule.¹ The Rule was adopted on July 1, 2010² and the compliance date was March 14, 2011.³ The Staff's guidance may assist advisers in fine-tuning their compliance programs, although we note that the guidance does not account for recently proposed amendments to the Rule.

Compliance Dates—Records of Government Entity Clients

• As of March 14, 2011, advisers subject to the Rule (with one exception) were required to begin keeping records of all "government entities" to which they provide or have provided advisory services. The one exception is for advisers to registered investment companies that are "covered investment pools" under the Rule. Those advisers must begin keeping records on September 13, 2011 of all "government entities"