• Bill Donnell

Anticipated 2021 Surge in SEC Pay-to-Play Enforcement

A recent Compliance Week article highlights that there will be a surge in pay-to-play enforcement in 2021 and outlines the importance of taking action. While there has not been significant enforcement since 2018, the article points out that it is coming and the penalties are simply too great to not have a comprehensive program and solution in place.


“The biggest issue for an advisory firm is the loss of advisory fee income for a two-year period,” said Amy Lynch, founder and president of FrontLine Compliance. “This also applies to new employees/covered associates, so firms need to make sure they are asking the right questions of new hires so they can comply with the two-year cooling off period.”


Political contributions to local, county, or state officials are all covered under the Pay-to-play rule 206(4)-5. Not only does each firm need to have a comprehensive policy around political giving, but there needs to be an efficient and accurate way to reduce the risk and manage the process.


Three, some firms take a “trust but verify” approach by allowing the firm and its covered employees to make political donations, require those donations be disclosed, but also monitor their covered employees’ political contributions and hoist the red flag when necessary.”


“There are technology solutions that can streamline the back office considerations of complying with this rule,”


Six Lambda provides a verification solution so you can actively monitor covered associates, spouses, and others subject to the law. While it is possible to search public websites for certain activity, Six Lambda’s database covers federal, state, and local contribution activity, all in one place, and it gets updated every single day. You can get notified daily of all contribution activity. Implementing our pay-to-play prevention solution can help you prepare for the 2021 surge in enforcement.


To learn more about how Six Lambda can help your firm prevent pay-to-play, please contact bill@sixlambda.com

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