WASHINGTON, D.C. — The existing rule prohibits investment advisers from providing compensated investment advisory services to a government client for two years after making a political contribution to certain elected officials or candidates. All other requirements of the Advisers Act and its associated rules, including prohibitions on fraud, fiduciary duty requirements, the compliance rule, and the code of ethics rule, would continue to apply under the new framework.

SEC Chairman Paul S. Atkins stated that the agency had reviewed the regulation's impact over more than a decade. "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," Atkins said.

Advisers have indicated that the rule is operationally challenging to implement and creates a de facto strict liability standard. Some advisers have prohibited political contributions at the state and local level due to the rule. He noted that the regulation has affected donations across the political spectrum and penalized firms for actions taken by employees prior to their employment.

"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," he said. He added that the implementation of the rule has effectively resulted in the suppression of political speech. The public comment period will remain open for 60 days after the proposing release is published in the Federal Register.

Why It Matters

The events described span 17 years, from 2010 to 2027, marking a shift in how the SEC regulates the intersection of finance and politics. The proposal addresses concerns that the rule has suppressed political speech and created operational burdens for investment advisers, while shifting oversight of political contributions to local, state, and federal election regulations.

Timeline

On February 8, 2024, the Commodity Futures Trading Commission and the Securities and Exchange Commission further extended the compliance date for amendments to Form PF regarding reporting requirements for all filers and large hedge fund advisers. On September 3, 2026, the Securities and Exchange Commission issued a proposal to rescind its "pay-to-play" rule for investment advisers.

Also on September 3, 2026, the Commission determined that the political contribution rule has led to unintended consequences since its adoption in 2010. SEC Chairman Paul S. Atkins stated that after more than 15 years of experience, the rule is overly prescriptive. He noted that beyond operational challenges, it imposes serious penalties for small donations and suppresses political speech.

Atkins concluded that such matters are more properly governed by local ordinances, state laws, and federal election regulations. The proposal also seeks to amend the Advisers Act recordkeeping rule to eliminate provisions related to the political contribution rule.