With Indiana Gov. Pence on ticket, advisers need to be careful with donations

Investment advisers whose firm may wind up working with the state of Indiana better think twice before making campaign contributions to the Republican presidential ticket.
This week in Cleveland at the party convention, the GOP nominated real estate mogul and reality TV star Donald Trump for president and Indiana Gov. Mike Pence as his running mate.
Mr. Pence will continue to serve as the Hoosier state’s governor during the campaign. That means so-called pay-to-play rules kick in for registered investment advisers who donate to the Republican ticket. Under Securities and Exchange Commission rules, firms that contribute to a candidate for office who could influence the selection of an adviser for state accounts are prohibited from working for the state for two years.
Individual advisers at the firm can make contributions of no more than $350 to a candidate for whom they can vote and $150 to those for whom they aren’t eligible to vote.
The rule was enacted in 2010 in the wake of some enforcement cases as a way to prevent advisers from currying favor with politicians through campaign donations.
“It’s going to have a chilling effect,” said Brenden Carroll, a senior associate at the law firm Dechert. “Most advisers that do business or are thinking of doing business with Indiana pension plans are taking this issue very seriously.”
A Financial Industry Regulatory Authority Inc. pay-to-play rule for brokers has not yet been approved by the SEC.
Trump supporters who have managed money for the state include the billionaires Wilbur Ross, Stephen Feinberg and Tom Barrack, according to a Bloomberg News report.
In a recent email message to Bloomberg, Mr. Ross said, “I will abide by the rules,” adding that he’s currently researching the matter “to be sure that whatever I do going forward will continue to be in compliance.” Representatives for Mr. Feinberg and Mr. Barrack had no immediate comment.
Even for a firm that is not currently doing business with the state and doesn’t plan to, the fact that Mr. Pence is on the GOP ticket is causing more reflection about political donations.
“I’d frown on it because we try to be apolitical,” said Kenneth Klabunde, founding principal of Precedent Asset Management in Indianapolis. “We have clients of every [political] leaning.”
But Mr. Klabunde, who also is the firm’s chief compliance officer, must balance his own leeriness about campaign contributions with his colleagues’ free speech rights.
(More: Democratic platform draft includes financial transactions tax, defense of DOL fiduciary rule)
They still would have to stay within the spending limits if they’re contributing to the GOP ticket because of Mr. Pence’s presence.
“If there were no other extenuating circumstances and an employee is simply passionate about supporting their candidate of choice, I’d probably end up approving it,” Mr. Klabunde said.
For advisers supporting the presumptive Democratic presidential nominee, Hillary Clinton, there are no obstacles to giving.
Jay Gagne, president of Gagne Wealth Management in Indianapolis, attended a local fundraiser for Ms. Clinton last month. He gave her the maximum $2,700 donation under campaign spending limits.
First he received approval through Raymond James Financial Services, for which he is an independent contractor.
“It has to be cleared by the firm; you can’t just go do it,” Mr. Gagne said of political donations, noting he had to fill out an internal political contribution form.
But he added, “I don’t feel restricted [in giving] to a candidate I believe in.”
Mr. Gagne also contributed to President Barack Obama’s campaigns in 2008 and 2012.

Related Topics: Securities and Exchange Commission