SEC and State Attorneys General focus on pay-to-play

Regulatory brief
Download the SEC and State Attorneys General focus on pay-to-play

The recent probe into "pay to play" practices associated with state and local pension plan investments continues to expand in scope. The nearly two-year probe by the New York Attorney General (NYAG) and the SEC led to March indictments against a top political adviser to the former New York State Controller and the Controller's Chief Investment Officer on charges that they allegedly participated in a fraudulent multi-million dollar scheme involving kickbacks from investment management firms seeking to manage the assets of the New York State Common Retirement Fund.

Since then the probe has continued to expand as cases have been brought against another New York state political leader and the founder of a $7 billion hedge fund. The NYAG has also issued subpoenas to approximately 100 investment managers regarding their use of placement agents. It appears now that the probe is spreading into other states and the NYAG has established a task force to share investigative information with 36 other states probing potential abuses related to government pension funds.