Politics adapts to ‘pay-to-play’ ban
SEC regulation could put a dent in fund-raising
The Securities and Exchange Commission’s vote last week to tighten rules on “pay-to-play’’ in the public pension arena could put a dent in fund-raising for Massachusetts Treasurer Timothy P. Cahill as he runs for governor and for other politicians across the country.
Politicians who oversee public pension plans routinely raise campaign money from financial firms. Cahill, who as treasurer serves as chairman of the state pension board, has raised thousands of dollars from workers in the financial and real estate sectors.
Last week, the SEC ruled that if an investment firm contributes to a politician who oversees a pension fund, it cannot manage money for that fund for two years.
The ban, which also applies to consultants for investment firms, is aimed at rooting out a pervasive practice of contributing to pension fund overseers in order to win their business.
The rule means Cahill and anyone who runs for treasurer — as well as Governor Deval Patrick, who controls three board seats at the $44 billion Massachusetts state pension fund — will face new restrictions.
In June, for example, Cahill raised $2,350 from Fidelity Investments executives, according to the state’s Office of Campaign and Political Finance. Fidelity manages about $640 million for the state pension fund, in high-yield bonds and international equities. Under the new SEC rule, Fidelity employees probably would not be able to make such contributions.
Fidelity spokeswoman Anne Crowley said, “We comply with all rules and regulations, and will remain in compliance as new regulations come into effect.’’
Scott Harshbarger, a former Massachusetts attorney general who has pressed for campaign finance reforms and has worked on a number of governance projects, said the SEC rule is long overdue. He said Massachusetts does have measures to prevent any one person from dictating which firms manage the state’s pension money. Still, he said, the new rule is important.
“It really is simply applying fundamental conflict and appearance-of-conflict laws to where money and power intersect,’’ Harshbarger said. “This ban eliminates a practice that was very prevalent among the marketers at these firms.’’
Earlier this year, the Globe reported that Cahill received $106,365 in campaign donations between 2002 and 2005 from real estate lawyers, brokers, and property managers with ties to an investment manager who was overseeing $500 million in Massachusetts state pension money. The fund-raising was legal, but it would not be permissible under the new rule.
A spokeswoman for Cahill’s campaign, Amy Birmingham, said, “We will follow all applicable fund-raising laws, as we always have.’’
Catherine Gropp, a spokeswoman for the Massachusetts Pension Reserves Investment Management board who works in Cahill’s Treasury office, said: “We will be reviewing the new SEC regulations to see what effect they would have here in Massachusetts. As always, PRIM expects its investment managers to comply with any state or federal regulations that are put into effect.’’
Governor Patrick’s reelection campaign raised $1,550 from investment industry executives in the first half of June, including $200 from a Fidelity employee, according to state campaign finance records. Patrick’s campaign was still reviewing the new SEC rule, spokesman Alex Goldstein said. “We’ll certainly take a look at it and review the impact.’’
The rule will apply to gubernatorial candidates, such as Republican Charlie Baker, as well as to those running to replace Cahill as state treasurer.
Harshbarger said the new rule will have the effect of shielding public officials from certain temptations, as well as the appearance of a conflict of interest.
“This is actually a big protection for most public officials,’’ he said.
Beth Healy can be reached at email@example.com.