SEC proposes rolling back political contribution rule for investment advisers

The Securities and Exchange Commission (SEC) has proposed to rescind its "pay-to-play" rule, which currently restricts investment advisers from providing compensated services to clients affiliated with government entities for a period of two years following a political contribution to certain elected officials or candidates. The proposed changes would also eliminate related recordkeeping requirements.

The SEC claims that this rule has led to unintended consequences, such as making political contributions, especially at the state and local levels, prohibitively difficult for advisers. They argue that the rule imposes strict liability, leading to overly punitive fines for minor donations. SEC Chairman Paul S. Atkins stated that the rule has "effectively resulted in the suppression of political speech."

The proposal aims to restore power to local ordinances, state laws, and federal election regulations for matters concerning political contributions. The public will have a 60-day comment period following the proposal's publication in the Federal Register.