The Securities and Exchange Commission on Sept. 3 proposed rescinding its “pay-to-play” rule for investment advisers, a 2010 regulation that prohibits an adviser from providing compensated investment advisory services to a government client for two years after making a political contribution to certain elected officials or candidates.
The proposal would rescind Advisers Act Rule 206(4)-5 outright and amend the Advisers Act recordkeeping rule to eliminate the corresponding provisions tied to the political contribution rule, according to the Commission’s announcement.
What would remain
The SEC said all other requirements of the Advisers Act and its associated rules would continue to apply, including prohibitions on fraud, fiduciary duty requirements, the compliance rule and the code of ethics rule.
The Commission’s stated rationale
The Commission said it has determined that the political contribution rule, since its adoption in 2010, “has led to significant unintended consequences, such as prohibitions by some advisers on political contributions at the state and local level.”
Advisers have indicated the rule is operationally challenging to implement and creates a de facto strict liability standard, the SEC said, which can lead to situations where small donations or “foot faults” potentially trigger substantial prohibitions and fines.
In a statement accompanying the proposal, SEC Chairman Paul S. Atkins said: “After more than 15 years of experience administering the ‘pay-to-play’ rule, it is clear that it is overly prescriptive and has produced a host of unintended consequences. Beyond operational implementation challenges, it has imposed serious penalties for small, often impulsive donations to candidates in both parties, and routinely punishes and handicaps advisory firms for an employee making a donation even before joining the business. Furthermore, advisers’ implementation of the rule has effectively resulted in the suppression of political speech.”
Atkins added: “Ultimately, matters involving political contributions are more properly governed by local ordinances, state laws, and federal election regulations—not by the SEC.”
Next steps
The public comment period will remain open for 60 days after the proposing release is published in the Federal Register. A proposal is not a final rule; the Commission would have to act again to adopt the rescission.
The release did not disclose a vote tally.
Source: U.S. Securities and Exchange Commission, “SEC Proposes Rescission of Political Contribution Rule for Investment Advisers” (Press Release 2026-85), released Sept. 3, 2026. The document describes a proposal open for public comment, not an adopted rule.