SEC Moves to Scrap Pay-to-Play Restrictions for Advisers

The Securities and Exchange Commission has put forward a proposal to eliminate a long-standing regulation that restricts investment advisers from working with government clients following political donations. The rule in question bars compensated advisory services for two years after the adviser contributes to certain political campaigns or officials.

The proposal, announced on Wednesday, seeks to rescind what is commonly known as the pay-to-play rule. If approved, the measure would remove the automatic disqualification that currently applies when advisers or their executives make qualifying contributions to state or local officials who oversee public pension funds.

SEC officials argue that the existing framework may be overly broad and does not align with more recent approaches to supervising conflicts of interest. The agency is inviting public feedback on the proposed change, a step that typically precedes a final vote by the commission.

Industry groups have criticized the rule as burdensome and difficult to navigate, while transparency advocates warn that repeal could invite impropriety. The SEC has set a comment period for interested parties to weigh in before any final decision is made.