AO 2017-02: Vendor may offer web-based investment services to political committees
A vendor may offer a political committees a web-based bank deposit program that would invest political committee funds into money market accounts. Participating committees may not use these investment accounts as “campaign depositories.”
Background
War Chest, LLC, plans to offer political committees a program that would invest committee funds into FDIC-insured money market accounts. Political committees taking part in this program would place their funds into a War Chest account, held at a Colorado-chartered trust. Each committee’s War Chest account would have a separate account number, and each committee’s funds would be segregated. The funds in this War Chest account would be administered by an investment advisor registered with the Securities and Exchange Commission. The program advisor would direct trust funds through an intermediary, which would distribute political committee funds among various “sub-custodian” banks. Interest earned would be automatically reinvested into the program.
To withdraw funds, a participating political committee would submit an application via telephone or a secure web portal. A participant political committee would receive a monthly statement from the program advisor showing the amount of accrued interest and a statement from the intermediary showing the amount of the political committee’s funds in the money market accounts at each sub-custodian bank.
Analysis
The Federal Election Campaign Act (the Act) requires political committees to designate one or more state banks, federally chartered or insured depository institutions as its campaign depository. No disbursements, other than petty cash, may be made by political committees except by check or other draft drawn on those accounts. The Commission has determined that interest earned from committee investments do not need to be returned to a campaign depository before automatically being reinvested. Advisory Opinions 1999-08, 1997-06. The Commission found War Chest’s proposal to automatically reinvest interest to be similar to other investment vehicles approved in the past.
War Chest asked the Commission if participating political committees could deposit contributions directly into, and make expenditures direct from, the trust holding the War Chest accounts. The Commission concluded that because the War Chest accounts are not entities eligible to be considered campaign depositories under the Act and Commission regulations, political committees can neither deposit contributions into, nor make expenditures from, a War Chest account.
Lastly, War Chest asked if the sub-custodian banks need to be listed on a participating political committee’s Statement of Organization as a campaign depository. War Chest would hold the sub-custodian bank accounts in its own name, and the political committee would have no control over how the funds in those accounts are managed. As a result sub-custodian banks would not need to be listed as campaign depositories. However, a participating political committee would be required to amend their Statement of Organization to list the intermediary depository at which the committee maintains its own account.
Date issued 5/25/2017; 7 pages
Relevant citations:
11 CFR 102.10
Disbursement by check
11 CFR 103.2
Depositories
11 CFR 103.3(a)
Deposit of receipts and disbursements
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