SEC proposes ending pay-to-play rule for investment advisers

September 4, 2026 at 02:12 AM2 min

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The SEC proposed eliminating a 2010 rule that bars investment advisers from working for public pension funds after political donations to state and local officials. The proposal, released Thursday, would end the two-year prohibition triggered by contributions of $150 to $350. SEC Chairman Paul Atkins said the rule suppresses political speech and that such matters belong to election regulators.

Key Facts

The SEC proposal would eliminate the 2010 pay-to-play rule that imposes a two-year ban on investment advisers who make political contributions of $150 to $350 to state and local officials.
SEC Chairman Paul Atkins said the rule has effectively suppressed political speech and that political contributions should be governed by local ordinances, state laws, and federal election regulations.
The rule does not apply to federal elections, and other SEC requirements such as fraud prohibitions and fiduciary duties would remain in force.
The SEC will take public feedback on the proposal and incorporate it into a final rule, which must be voted on before taking effect; the process typically takes 18 to 24 months.

Proposal Details

The SEC released the proposal on Thursday, aiming to remove the prohibition on investment advisers offering services to public pension funds after recent political donations to state and local elected officials. The 2010 rule was enacted after scandals involving fund managers making political campaign contributions to win pension management contracts. Under the current rule, firms are prohibited from offering investment services to state and local funds for two years if certain employees give between $150 and $350 to public officials per election. The rule does not apply to federal elections, and the SEC noted that other requirements, including prohibitions on fraud and fiduciary duty requirements, would continue to apply.

SEC Leadership Views

SEC Chairman Paul Atkins said in a statement that implementation of the rule has been challenging and often imposes serious penalties for small donations. Atkins stated that advisers' implementation of the rule has effectively resulted in the suppression of political speech. He added that matters involving political contributions are more properly governed by local ordinances, state laws, and federal election regulations, not by the SEC. SEC Commissioner Hester Peirce in 2022 called the rule an exceedingly blunt instrument.

Next Steps

The agency will take public feedback on the proposal and incorporate that input into a final rule. The final rule will have to be voted on before it can take effect. The process typically takes between 18 to 24 months.