(Adds comments from attorney for TL Ventures)
By Sarah N. Lynch
WASHINGTON, June 20 U.S. securities regulators
extracted a settlement from a private equity firm on Friday,
marking the first time they have filed charges over violations
of "pay to play" rules designed to prevent financial advisers
from making campaign contributions to win pension business.
The Securities and Exchange Commission said that
Philadelphia-based TL Ventures Inc will pay about $300,000 to
settle the case without admitting or denying allegations that it
continued receiving advisory fees from state and city pension
funds, even after one of its associates had donated to local
Catherine Botticelli, an attorney with Dechert LLP who
represents TL Ventures, said her client is "pleased to have this
matter behind it" and that it will continue to focus on serving
She added that the pay-to-play measure at issue "does not
require a showing of intent" to violate the rule.
The SEC first adopted new "pay to play" rules for asset
managers in 2010, amid concerns that investment advisers were
able to use campaign contributions to steer state and local
pension business their way.
The rule imposes a two-year moratorium on providing advisory
services to a government client or a pooled investment such as a
pension after a donation is made to any candidates or other
officials who are able to influence the hiring process for
pension money managers.
According to the SEC, TL Ventures continued offering
advisory services for a fee from both Pennsylvania's state
retirement system and Philadelphia's pension plan, after one of
its associates in 2011 donated $2,500 to a Philadelphia mayoral
candidate and $2,000 to the governor.
Both candidates were in a position to steer business to the
adviser because the mayor appoints three of the nine members of
the Philadelphia Board of Pensions and Retirement, and the board
that oversees the state's retirement system is comprised of
"Public pension funds are increasingly investing in
alternative investment vehicles such as hedge funds and private
equity funds," said LeeAnn Ghazil Gaunt, the head of the SEC
Enforcement Division's Municipal Securities and Public Pensions
"When dealing with public pension fund clients, advisers to
those kinds of investment vehicles should be mindful of the
restrictions that can arise from political contributions."
In addition to charging TL Ventures, the SEC on Friday also
charged an affiliate, Penn Mezzanine Partners Management L.P.,
with improperly acting as an unregistered adviser.
That firm also settled the case with the SEC. An attorney
for Penn Mezzanine could not be immediately reached for comment.
(Reporting by Sarah N. Lynch; Editing by Eric Beech and Dan