State Republican Parties Challenge Pay-to-Play

The state republican parties of New York and Tennessee filed suit last week against the SEC, challenging the Political Contribution Rule (better known as the “Pay-to-Play” rule). Published in the Federal Register in July 2010 and effective in March and September 2011, the rule prevents investment advisors from providing advisory services to a state or local government for two years after the adviser or certain of its employees contribute to the campaign of certain covered government officials. The SEC recently brought its first action under the rule in an order released June 20, 2014.

The suit challenges the law on First Amendment grounds, and also contends that the SEC exceeded its authority by implementing the rule because federal campaign finance is the exclusive purview of the Federal Election Commission.