Placement vet feels ‘relief’ at SEC rule

Charles Eaton says banning unregistered placement agents from doing business with public US institutions is ‘the right decision’.

Charles Eaton, a veteran placement agent and one of several industry professionals who lobbied the US Securities and Exchange Commission to reconsider a total ban on public-pension solicitation, says news Wednesday that the commission has backed away from this proposal is “a relief”.

“The outcome seems to be very appropriate,” said Eaton, founder of Rowayton, Connecticut-based Eaton Partners. “We can praise the SEC and FINRA for coming to the right decision. We are totally in favour of the tightening of the rules regarding placement agents.”

FINRA is the US Financial Industry Regulatory Authority, which regulates broker-dealers. SEC commissioners on Wednesday voted on a final rule meant to stop “pay to play” abuses at public pension funds that took into account FINRA’s ability to enforce rules governing the interaction of public institutions and placement agents. An earlier proposal had reasoned that FINRA would be unable to effectively regulate the interaction between placement agents and public officials.


Eaton and others in the placement industry, including placement firm MVision, have worked for more than a year attempting publicly and privately to convince the SEC that a ban on registered placement agents interacting with public pensions would punish the wrong market participants and be unnecessary in the fight against pay to play. Last year Eaton warned that such a ban may lead to the demise of the placement industry, because US public pensions remain a significant source of capital for private funds.

Some state pensions are still considering rules that would ban the use of all placement agents, however. “We are hopeful that some of the states that have had issues with certain types of placement agents will take some guidance from this and change their own minds about totally banning placement agents and/or contingency fees,” said Eaton.

A professional at a separate placement firm, who wished to speak off the record, said the final SEC rule “was what we were hoping for. Hopefully, this will take the steam out of individual state regulations that were developing in the vacuum. Being subject to multiple, overlapping regulations is not easy or efficient”.

Eaton said that prior to the emergence of this issue, he had not interacted with the SEC. He said he discovered that such an advocacy effort “just takes a long, long time for a government agency as busy and encompassing as the SEC”.