The Investment Counsel Association of America of Washington D.C., has proposed a code of ethics for investment advisers regarding their contributions to politicians.

The proposal urges investment advisers to adopt a code of ethics that prohibits advisers from making political contributions for the purpose of obtaining government business managing, for example, pension funds. The counsel recommends that firms use some combination of a contribution ban, pre-clearance of contributions by an adviser's compliance executives and disclosure of contributions to clients as the best means to check problems.

Pay-to-play refers to the practice of advisers making political contributions to obtain government contracts to manage public funds. The SEC has proposed a rule that largely would ban key executives at investment advisory firms from making contributions to politicians who might award their firms business. The counsel suggested that its approach was preferable to the SEC rule proposal.

The counsel made public its proposal last week. Arthur Levitt, chairman of the SEC, issued a statement welcoming the counsel's proposal. The SEC will consider the counsel's proposal as the agency works on a final version of its own rule on pay-to-play, Levitt said.

The Investment Counsel Association is a trade association that represents investment advisory firms. It includes more than 250 firms, including many large mutual fund advisers.

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