One week after receiving Senator Bob Bennett of Utah's letter urging the SEC to expand its ongoing "pay-to-play" investigation
to include practices related to securities class actions, SEC Chairman Mary Schapiro wrote back with the SEC's response: No can do.
In his July 7, 2009, letter, Sen. Bennett asked the SEC to examine whether there is a practice of law firms making campaign donations to officials who oversee government pension plans so that they can subsequently be selected to represent those funds as plaintiffs in securities class actions. “Sweetheart deals that result from generous campaign contributions by investment companies and law firms take money out of the pockets of retired teachers, firefighters, police officers and other public employees who are members of pension funds," he wrote. "Public employees need to be assured that there is no ‘pay-to-play’ or conflict of interest occurring on the part of the elected officials controlling the funds.”
Sen. Bennett sought to have the SEC broaden its ongoing “pay-to-play” investigation into more than two dozen pension fund managers and financial firms to also include law firms and attorneys selected to file securities class action lawsuits for pension plans.
In her July 14 letter responding to Sen. Bennett, however, Schapiro explained that reviewing these contributions made by law firms as Bennett requested would go beyond the SEC's jurisdiction. She stated that
The Commission's review of pay-to-play practices involving public pension funds relates to fund managers and other financial firms that are subject to Commission regulation under the securities laws. In light of our statutory mandate, our ongoing review necessarily focuses on those entities and conduct that falls squarely within our jurisdiction.
A copy of Schapiro's letter to Sen. Bennett is available here