The State of California and the City of New York have taken legislative or interpretative action that broadens the definition of a lobbyist to potentially require placement agents, other third-parties and internal marketing personnel of investment advisory firms to register as lobbyists with the appropriate government agencies.¹ This memorandum provides a brief summary of the key requirements of each jurisdiction’s lobbyist registration process and ongoing reporting requirements. For background information on the State of California’s legislative action, please refer to our memorandum to clients dated January 6, 2011.

California

Initial Registration

• An investment advisory firm that employs a lobbyist (including any third-party marketer, placement agent or internal employee who acts for compensation as a finder, solicitor, marketer or broker) who solicits business from California state retirement funds generally must register with the Secretary of State.²
• A separate information sheet must be included for each lobbyist who lobbies a California state retirement fund.
• The firm must pay a $50 fee for each lobbyist.

Ongoing Requirements

• Registration must be renewed annually, including its certification statements for each lobbyist.
• Each lobbyist must take an ethics course biennially in California.
• Lobbyists and the investment advisory firms that retain or employ them must file quarterly reports including itemized activity expenses and other lobbying-related payments as well as all contributions of $100 or more made to elected state officers or candidates to state office. Firms’ quarterly reports must include an aggregate of the salaries paid to lobbyists.

Related Rules and Restrictions

• Lobbyists may not make gifts aggregating more than $10 per month to certain public officials.
• Lobbyists may not make campaign contributions to elected state officers (or candidates for elected state office) if they are registered to lobby the governmental agency of the elected state officers or for which the candidates are seeking election.
• Lobbyists and the investment advisory firms that retain or employ them must maintain records for five years, including supporting documentation, of expenses, contributions and other payments.
• Lobbyists may not accept or agree to accept any payment in any way contingent upon the defeat, enactment or outcome of any proposed legislative or administrative action.

New York City

Michael A. Cardozo, Corporation Counsel at the Law Department of the City of New York, issued an opinion on March 31, 2010 (the “Opinion”) concerning the application of New York City’s Lobbying Law to placement agents who solicit New York City pension funds. The Opinion contained a footnote indicating that the opinion’s analysis “applies to all third-parties, as well as employees, regardless of the terminology used to identify them, who are retained or employed by investment firms to influence investment decisions” made by New York City’s five pension funds.³ Under the Opinion, “lobbyist” includes placement agents, other “third-parties, as well as employees, regardless of the terminology used to identify them, who are retained or employed by investment firms” to influence determinations of the New York City Comptroller (or members of his staff) and/or the boards of trustees (or members of their staffs) of New York City’s pensions funds. Investment advisory firms that pay more than $2,000 in the aggregate to internal personnel who solicit business from New York City pension funds are also treated as lobbyists for purposes of determining registration and filing obligations, in which case both the investment advisory firm and qualifying personnel (as discussed below) would have to comply with the requirements.

Initial Registration

• Each lobbyist who reasonably anticipates over $2,000 in earnings and expenses in the coming year must register with the City Clerk within 15 days of being retained but no later than 10 days from actually incurring or receiving reportable compensation and expenses.
• Each lobbyist must pay a $150 fee.
• Each lobbyist who is retained or employed pursuant to a written agreement of retainer or employment must submit a copy of such agreement and if the retainer or employment is oral, a statement of the substance of such retainer or employment is required.

Ongoing Requirements

• Each lobbyist must:
  • re-file the registration statement annually and file bi-monthly periodic reports due 15 days after the end of each two-month period;
  • disclose compensation paid or owed by the lobbyist employer and expenses expended, received or incurred; and
  • disclose fundraising and political consulting activity bi-monthly.
• Firms expending over $2,000 annually in reportable compensation and expenses for lobbying in New York City must file an annual report disclosing lobbyist compensation and expenses.

Related Rules and Restrictions

For at least five years, each lobbyist and lobbyist employer (regardless of whether the employer is a lobbyist) must maintain detailed records of all compensation and expenditures of at least $50 and the names and addresses of every person by whom compensation is paid or for whom expenditures are made.
Firms may not retain or employ any lobbyist for compensation, the rate or amount of which compensation is in any way contingent or dependent upon legislative, executive or administrative action, and no lobbyist may accept such a retainer or employment.

This memorandum serves only to highlight the lobbyist registration and ongoing disclosure requirements. If you have any questions concerning the above requirements for lobbyist registration, please contact your primary attorney in the Investment Management Group at Seward & Kissel.

______________________________________________________

¹ Gov. Arnold Schwarzenegger of California signed Assembly Bill No. 1743, which contained a broadened definition of who is a “lobbyist” subject to registration requirements, into law on September 30, 2010. Please see the discussion under “New York City” for a discussion of that jurisdiction’s interpretive action.

² There are two exceptions to California lobbyist registration. Please see our January 6, 2011 memorandum for a discussion of the exceptions.

³ The pension funds are: the New York City Employees’ Retirement System, the New York City Police Pension Fund, the New York Fire Department Pension Fund, the New York City Teachers’ Retirement System and the New York City Board of Education Retirement System.