The title to this post says it all:
The Securities and Exchange Commission on Wednesday tightened restrictions against “pay-to-play” practices in the municipal securities market.
The measure was another attempt to close loopholes that agency officials said have allowed political influence to corrupt aspects of the $2.6 trillion public pension business.
The five-member commission voted unanimously to bar investment managers who make political contributions to officials with influence over public pension funds from managing those funds for two years.
The commission also barred investment managers from paying a third party to solicit pension business on their behalf unless the third party is registered with the S.E.C. or other regulators and therefore subject to similar pay-to-play bans.
But the commission stepped back from its original proposal, which would have placed an outright ban on third-party solicitations of pension-management business. Commission staff recommended the partial ban after investment advisers and fund managers complained that they often lacked the resources to secure pension business on their own, causing them to rely instead on consultants and brokers to gain access.
Mary Schapiro, the chairwoman of the S.E.C., called pay-to-play “an unspoken, but entrenched and well-understood practice.” The commission has made several attempts in recent years to crack down on pay-to-play, which Ms. Schapiro said can “favor large advisers over smaller competitors, reward political connections rather than management skill, and — as a number of recent enforcement cases have shown — pave the way to outright fraud and corruption.”
I suppose it is impossible to outlaw everything that should be illegal, but sometimes you see something and you have to wonder why it was ever allowed.