Starting in March 2011, investment advisers who have government clients must keep records of campaign contributions made to elected officials or candidates. But these records are kept secret–buried in internal files, out of the public eye, and available for perusal only by certain government officials.

The new rules were established by the U.S. Securities and Exchange Commission (SEC) after years of "pay to play" scandals rocked multiple cities and states, in which investment advisers representing large public pension programs used various schemes to funnel campaign contributions to elected officials or candidates. In addition to requiring investment advisers to keep records of campaign contributions and lists of their government clients, the new rules prohibit advisers from representing government entities for two years after the adviser makes a contribution over a certain amount.

"Elected officials who allow political contributions to play a role in the management of…assets and who use these assets to reward contributors violate the public trust. Moreover, they undermine the fairness of the process by which public contracts are awarded," states the SEC rule, issued in July 2010.

"Similarly, investment advisers that seek to influence government officials' awards of advisory contracts by making or soliciting political contributions to those officials compromise their fiduciary duties to the pension plans they advise and defraud prospective clients."

Similar rules administered by the Municipal Securities Rulemaking Board, which have been in place since the mid-1990s, require broker-dealers involved in issuing municipal securities to report their campaign contributions publicly. (You can find them here.) But under the SEC rules, investment advisers' contribution records are available only internally and to agency staff when they conduct examinations of particular investment advisers.

While journalists and members of the public can look up campaign contributions by investment advisers kept by local and state governments, depending on the state or city in question, not all such records are available online or in good quality. And it is not always a simple matter to determine the government client list for a particular adviser–a list which investment advisers must now also keep.

When issuing the rule, the SEC estimated that public pension plans have more than $2.6 trillion of assets and represent one-third of all U.S. pension assets, and noted that the management of these funds affect publicly held companies and the securities markets, not to mention taxpayers and future state and municipal retirees.

Scandals involving "pay to play" schemes have surfaced in New York, New Mexico, Illinois, Ohio, Connecticut, and Florida, and new ones pop up frequently. When he was attorney general of New York State, Gov. Andrew Cuomo, D-N.Y., launched a broad investigation–one that is ongoing and has spread to other states–of pay-to-play schemes connected to the pension fund for Empire State workers. 

In a 2009 report, USA Today found that more than two dozen firms that have been mentioned in corruption investigations gave at least $1.97 million in campaign contributions to officials with potential influence over the funds's investments. However, such journalistic inquiries are limited to available records–in this particular case to campaign finance records maintained by the National Institute of Money in State Politics, which include state, but not municipal records.

About the data

What: investment advisers' campaign contribution records and government client lists

Where: investment advisers keep internal records

Availability: not available to the public

Usability: not available, so not usable