• New York City Launches Initiative to Register Investment Managers as Lobbyists
  • April 26, 2011
  • Law Firm: Proskauer Rose LLP - New York Office
  • Beginning in late December, 2010, the New York City Clerk’s Office sent letters with respect to New York City’s Lobbying Law (the Lobbying Law) to private equity, hedge fund and other alternative asset managers doing business with New York City’s five public pension plans (the NYC Plans). The Clerk asserted that the managers’ employees were acting as lobbyists, and thus subject to the Lobbying Law, when attempting to influence the NYC Plans’ investment decisions.

    Lobbying is broadly defined under the Lobbying Law to include “any attempt to influence . . . any determination of a board or commission” of New York City. A person or entity may be required to register under the Lobbying Law if he or it anticipates spending $2,000 or more in lobbying activities over the calendar year.  Both projected expenses and lobbyist compensation count toward meeting the $2,000 threshold. Employees that have other duties beside lobbying need to include only the portion of their compensation that corresponds to the portion of their business time spent lobbying in New York City.

    Potential lobbyists are required to register online, using New York City’s “e-lobbyist” system. Limited information on registered lobbyists is publicly available on a searchable database, including the name and business address of the manager and its lobbyist employees, the names of the NYC Plans lobbied and the subject of the lobbying (such as solicitation of investment capital).

    Once registered, the relevant rules provide that a lobbyist employee may not be compensated on a contingent basis. In other words, paying a sales commission with respect to a NYC Plan’s investment probably is prohibited. However, paying a year-end discretionary bonus based on overall employee performance probably is not. Also, once registered, lobbyists must submit periodic reports detailing expenses, compensation paid with respect to lobbying, campaign contributions to New York City officials, and other activities.

    Some potential exemptions from registration may be available under the Lobbying Laws, but the Clerk’s office has not yet offered formal guidance (although such guidance is expected). For example, the Lobbying Laws exempt from registration “prospective contractors who - appear before city contracting officers or employees in the regular course of procurement planning,” provided that (i) such persons provide actual services under the contract, and (ii) such persons do not lobby actual elected officials and their deputies. Put in practical terms, this exemption would appear to shelter a manager’s staff members who actually provide investment management services (such as portfolio managers) as long as they do not solicit the New York City Comptroller (who sits on the boards of the NYC Plans) or the NYC Plan’s Chief Investment Officer, who is a Deputy Comptroller.

    However, the Clerk’s office so far has given limited and at times conflicting guidance as to whether it will interpret this or other exemptions as applicable in the case of investment managers. The Clerk’s office has indicated that it will grant temporary registration extensions until it issues formal guidance. Clients should consult with their assigned attorney at the firm to determine whether to apply for extensions.

    It should be noted that in a letter dated March 10, 2011, the New York City Lobbying Commission announced that it would hold a series of public meetings on the Lobbying Law and invited interested parties to submit written comments to [email protected].