SEC slaps Ancora Advisers with $100,000 fine for pay-to-play violations

The firm made political contributions and then provided adviser services to public agencies

Dec 19, 2018 @ 1:36 pm

By Bruce Kelly

The Securities and Exchange Commission on Tuesday censured and slapped a $100,000 fine on Ohio registered investment advisory firm Ancora Advisors for violating industry rules that forbid advisers from contributing to political campaigns of officials in governments that they do business with.

Based in suburban Cleveland, Ancora has $4.6 billion in client assets and counts high-net-worth individuals, corporations and other institutions as clients, according to its Form ADV.

SEC rules prohibit certain investment advisers from providing services for compensation to a government client for two years after the adviser, certain executives or employees make a campaign contribution to certain elected officials or candidates who can influence the selection of investment advisers.

One Ancora executive made a total of $44,408 in campaign contributions from 2013 to 2017 to various politicians: the governor, the state treasurer and a candidate for governor. Another firm employee made a $2,500 contribution in 2017 to a candidate for governor.

However, after making the contributions, the two Ancora executives requested that the money be returned.

Pay-to-play allegations in the RIA industry are uncommon. The most notable, recent pay-to-play scandal involving the investment advice industry was the 2016 bribery scheme involving the $184 billion New York State Common Retirement Fund, one of the largest public pension funds in the country.

Ancora agreed to the settlement without admitting or denying the SEC's findings.

In a statement provided by Ancora's chief compliance officer, Jason Geers, Ancora said the pay-to-play snafu was not deliberate.

"During a routine audit conducted regularly as part of our commitment to regulatory compliance, the firm recently discovered a violation of SEC regulations regarding political contributions," according to the statement. "A few employee political contributions dating back several years were made that exceed the $350 limit an employee is allowed to make in certain political contests while also providing investment management services to public clients of the state.

"Upon discovery, we began working with the SEC to provide any necessary information to help them assess the nature of the violation, which was inadvertent," according to the firm's statement.

Unnamed executives at Ancora made campaign contributions to candidates and then soon after began providing advisory services to public institutions in Ohio, according to the SEC's settlement. From October 2010 to the present, Ancora provided investment advisory services to a public pension system for employees of an Ohio public agency.

Between January 2013 and June 2017, two Ancora employees made campaign contributions to unnamed candidates for elected office in Ohio, according to the SEC. Those offices had influence over selecting investment advisers for a public pension system in Ohio and a public university. Within two years, Ancora provided advisory services for compensation to both the public pension system and public university, according to the SEC.

The campaign contributions should have triggered a two-year time-out from Ancora providing advisory services for compensation to the state pension system and university.

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