SEC Postpones Action on ‘Pay-to-Play’ Rule

The Securities and Exchange Commission won’t take final action, at least for now, on its proposal to curb political donations in the multitrillion-dollar public pension fund business, an SEC spokesman said.

The proposed “pay-to-play” rule, in the works for several months, is on hold until a new SEC chairman is named and has had a chance to review it, an SEC spokesman said.

SEC Chairman Arthur Levitt, a crusader against pay-to-play, is expected to step down by mid-February. President Bush has yet to nominate Levitt’s successor.

Pay-to-play occurs when public officials select firms to manage state or local pension funds for firefighters, bus drivers and other public workers on the basis of political contributions rather than competence.

The SEC proposed in August 1999 that fund managers be required to forgo compensation for two years from states and localities whose elected officials accepted contributions from them.

The rule, opposed by state and local officials and financial advisors, was modeled after a 1994 rule curbing pay-to-play in the $1.5-trillion municipal bond market.