SEC considers removing two-year restriction connected to advisers’ political contributions

The SEC’s Rule 206(4)-5, known as the “pay-to-play” rule, prohibits an investment adviser from getting paid by any governmental client for two years if the adviser or anyone covered by the rule has made a political contribution to any such official or candidate having the ability to influence the selection of the adviser. On September 3, the SEC suggested repealing the mentioned rule and related recordkeeping requirements.

If the proposal is successful, investment advisers and their staff members would benefit the most. Their firms could carry on with the management of government money for compensation without having to follow the rule of abstaining from engaging in any covered political donation for two years.

Who stands to gain if the rule disappears

According to the SEC, there are 16,434 investment advisers registered with the agency and approximately 1.11 million of their employees across those firms. As per the provisions of the existing regulation, the company with covered contribution may not be able to take the fees from a government agency for two years.

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