June 2024
Dear Clients and Friends,
Political Donations – What is the issue?
We are all aware that 2024 is the year of the election – globally more voters than ever in history will head to the polls. The UK vote in July, France announced a snap election last week and the US cast their ballots in November – to name just three countries out of the 60 plus holding elections in 2024. A couple of weeks ago both the likely US Presidential candidates held fund raising events in London.
So, this seems like an appropriate moment to remind staff of any controls you have around political contributions made by the firm or members of staff, particularly relevant if you are registered with the SEC or an Exempt Reporting Adviser and have US citizens/permanent residents employed at the firm and/or provide advisory services to any government entities.
Further, the SEC’s Pay-to-Play Rule prohibits the receipt of compensation from a government entity for advisory services for two years following a contribution to any official of that “government entity”. Even if you fall outside of the SEC requirements there could be several conflict of interest issues created by making political donations or with members of staff holding, or being connected to holders of, political office.
Clearly, for financial regulators, the intention of such policies is to mitigate the risk that political donations may give rise to a conflict, particularly influencing politicians or their political parties for business purposes. Generally, such contributions are prohibited or subject to prior scrutiny or prior approval.
What Now?
Targeted reminders can be very useful in running an effective compliance programme. So consider circulating a reminder of your firm’s policy around political donations and encourage staff seek clarification if they are unsure. Text you may wish to amend and use is as follows….;
“Given the upcoming elections in many parts of the world we wanted to remind everyone that our Political Contribution policy imposes restrictions and requirements in respect of making contributions to political parties, those holding or seeking political office and on staff members holding public positions. We ask that you carefully review these guidelines which are attached to this e-mail. In addition, these policies apply to all employees as well as spouses, and potentially other family members living with you. Any business venture entered into with, or at the request of, a political official are also covered by these policies and procedures and must be pre-approved.”
Additionally, you could ask staff to confirm that they have complied with the policy to date, such a request could ask all staff to confirm the following statement;
“I have not made any political donations or contributions to US state or local government officials during the last two years or, if I have, I have disclosed these to the Compliance Officer.”
Not only do such actions mitigate the risk that the policy is breached or conflicts arise, but it is never a disadvantage to demonstrate to a regulator that you run a pro-active compliance programme that considers the wider context in which it operates
Please contact your Judd consultants or judd@juddadvisory.com should you wish to discuss further.