William & Mary Business Law Review


2014 William & Mary Business Law Review Best Student Note Award


In the past decade, public pension plans and their outside investment advisers have been at the center of scandals involving bribery, blatant asset mismanagement, and widespread corruption. In response to this corruption, the U.S. Securities and Exchange Commission and many state legislatures have adopted laws addressing “pay-to-play,” the custom of making political contributions or other payments to state or local officials in return for an opportunity to “play”—invest the public pension fund money. This Note examines certain pay-to-play legislation enacted by state and local governments seeking to regulate investment advisers and public pension plans through the promulgation of lobbying regulations. As such, the Note will provide an in-depth analysis of the laws arising from the original governmental bodies to create this type of pay-to-play: New York City and the State of California. The Note will examine this trend in other states and look at another layer of regulations, coming not from states, but from public pension plans themselves. Finally, this Note will discuss the transaction costs associated with this trend and propose a compliance protocol for investment advisers, laying out the most efficient method by which investment advisers can attempt to comply with the multitude of pay-to-play regulations.