Earlier this month Joe Birkenstock was quoted in the IA Watch Weekly Briefing, discussing SEC pay to play.

“Advisers should take away great skepticism from the SEC [in this case] that segregating your operations like this means that you’re exempt from registration,” says Joseph Birkenstock, a partner with Sandler Reiff Lamb in Washington, D.C. The agency expects virtually all firms (except for venture capital and single-family offices) above a certain asset threshold to register, he adds. The relatively modest penalty assessed to TL Ventures suggests the Commission took into account the firms’ defense – that they were exempt-reporting advisers and thus not subject to the pay-to-play rule, continues Birkenstock.

Most of his clients have adapted to the pay-to-play rule with the motto “just don’t give contributions,” he states. Others hold to a policy that, if there’s any doubt, don’t allow the political contribution. The enforcement case presented “zero doubt” of a violation because the mayor of Philadelphia and the state’s governor clearly have influence over their respective employee public pensions, Birkenstock says. Some lower-level candidates can be tougher to figure out, arguing for caution to avoid the rule’s painful two-year time-out.

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