Reducing and Monitoring Risk in an Election Cycle

Under SEC rules, investment advisers are prohibited from making political contributions to officials or candidates who oversee or have the power to influence the award of investment advisory contracts. These rules also apply to certain third-party service providers, such as placement agents and solicitors.

To enforce these rules, the SEC requires investment advisers to maintain records of all political contributions made by the firm, its employees, and its affiliated entities. Investment advisers are also required to adopt policies and procedures to ensure compliance with the rules.

In addition to these regulatory requirements, investment advisers should also implement controls to prevent political contributions that may violate SEC rules. These controls may include training and education programs for employees on the rules governing political contributions, as well as systems to monitor and track political contributions made by employees and affiliated entities.

Technology can enable more accurate record keeping and strengthen monitoring and tracking for a firm. One-Compliance does the following:

Automated Contribution Testing: Continuously scans a massive library of public databases to validate actual political contributions versus reported contributions and sends an alert and action plan when a discrepancy is identified.

Preventative Recommendations: Automatically recommends to employees who make contributions to take training on the company’s political contribution policy.

Restricted Lists: Creates and enforces restricted lists of states, political offices and politicians to prevent contributions that go against your policies.

Auto-Populates Annual Compliance Reports: Automatically populates annual compliance reports with findings from political contributions testing.

Overall, the SEC's regulatory focus on political contributions is an important part of ensuring that the securities industry operates in a fair and transparent manner. Investment advisers should take these rules seriously and implement controls to prevent any violations of the rules.

Read more at: Modern Compliance Management Tech - For Investment Advisors - One-Compliance