The SEC has announced that it is extending the deadline for investment advisers to comply with its pay-to-play rule ban against third-party solicitations in order to have an “orderly transition”.  The SEC is making this accommodation to account for its delay in defining the term “municipal advisor”, which is exempted from the ban.  This extension will allow investment advisers and third-party solicitors additional time to adjust their respective compliance policies and procedures.

The pay-to-play rules were adopted to curb such practices.  It bars investment advisers from paying third-parties to solicit governmental customers, unless the solicitor is registered with the SEC as an investment adviser or broker-dealer subject to similar restrictions.  In June 2011, the SEC included municipal advisers to the rule’s list of exempted solicitors, but the SEC has yet to define “municipal advisors”, making full compliance an impossible task. 

Notwithstanding the definitional gap, the extra time will allow investment advisers and third-party solicitors the capacity to develop their policies and procedures for their pay-to-play rules.  Investment advisers and third-party solicitors should use this window to their advantage to further develop their policies and procedures, lest you be unprepared for when the SEC finally defines a municipal advisor.