For a long time, management of public pension funds has been second only to underwriting public debt offerings as one of the most notoriously crooked businesses in finance. It’s widely known that it is a ‘pay for play’ business, where politicians steer funds to the control of well-connected investment advisers. The SEC plans to crack down on this practice, according to the WSJ. We wish it luck.
The new rule would probably ban an investment manager from managing state pension money for two years after it or its senior management contribute to the campaigns of officials in the chain of command of people who oversee pension funds. The rule would apply to state and local officials.
Well, of course, the politicians are mobilizing to make sure that they don’t lose access to this money. Expect to hear arguments that the rule will be overly broad and would interfere with the constitutional rights of investment advisers to bribe politicians exercise free speech through making political donations.
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