The Top Three Political Law Risks for Hedge Funds, Private Equity Funds, and Investment Firms

Perhaps no industry faces more scrutiny and regulation of its political activities than the financial industry. Even though these rules are often not intuitive, failure to comply with them can result in big penalties, loss of business, and debilitating reputational consequences. This primer describes three sometimes overlooked risk areas for investment firms: (i) ensuring that covered employees and others affiliated with the investment firm do not make political contributions that result in “pay-to-play” problems for the firm; (ii) identifying when investor relations activities trigger state or local lobbying registration requirements; and (iii) conducting political law due diligence on prospective investments and portfolio companies. For each risk area, this advisory outlines steps and policies firms can adopt to avoid these common compliance traps.