The Securities and Exchange Commission could rule within two months on pay-to-play abuses among investment advisers to public pension funds.

SEC Chairman Arthur Levitt Jr. said the commission's investment management division may recommend the adoption of a rule to curb the use of political campaign contributions to secure pension fund management business.

Mr. Levitt was addressing the annual meeting of the Council of Institutional Investors in Washington on Tuesday.

The SEC has found allegations of abuses in at least 17 states, Mr. Levitt said, including last month's indictment of the Chicago city treasurer, Miriam Santos, on charges she demanded political payments from firms managing city pension assets. According to published reports, the indictment included allegations that Ms. Santos had tried to get Citibank to host a fund-raising event. A Citibank spokesman said he was unfamiliar with the case.

"It's time we put an end to the culture of pay-to-play in the area of municipal money management," Mr. Levitt said.

The roughly $2 trillion of public pension assets do not belong to elected officials, Mr. Levitt said. "They belong to the tens of thousands of firefighters, ambulance drivers, city clerks, bus drivers, and other public employees who make our communities work," he said.

If the SEC crafts a rule, Mr. Levitt said, it would be similar to one approved in 1994 prohibiting municipal bond underwriters from doing business with government clients for two years after making a contribution to an elected official.

The municipal bond underwriting rule, or Rule G-37, is administered by the Municipal Securities Rulemaking Board. A rule affecting investment advisers would be administered by the SEC, Mr. Levitt said.

Such a rule probably would affect only those banks and other companies jockeying to manage the majority of pension assets, said Edward D. Higgins, the president of Mercantile Bancorp. in St. Louis.

Public pension fund management is not a big business for Mercantile, Mr. Higgins said.

Of the bank's $41 billion of trust assets, about $1 billion is in public funds, he said.

The SEC has been looking closely at the investment management area in recent months.

Mr. Levitt's comments come just a week after he revealed several proposals for the governance of mutual funds. Those proposals include a requirement that the majority of directors sitting on the boards of investment companies be drawn from outside the company.

Investment boards currently are required to have outside directors as 40% of their members.

The Investment Company Institute, the Washington mutual fund trade group, is examining the role of mutual fund directors. More than $5 trillion is invested in U.S. mutual funds, more than twice the amount held in public pension funds.

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