The U.S. Court of Appeals for the D.C. Circuit yesterday issued a long-awaited opinion upholding, on the merits, a recent update to the SEC’s pay-to-play rule. While the case involved only a narrow piece of the rule, the decision’s logic is worded more broadly and could apply to the SEC rule as a whole, making … Continue Reading
During the diligence process that precedes a merger or acquisition, investment firms and corporations should pay careful attention to political law risks. Political laws are notoriously complex, are often not intuitive, and even seemingly minor or technical violations of these rules can result in significant penalties and reputational harm. These risks are especially acute when … Continue Reading
In December, the Securities and Exchange Commission (“SEC”) fined an investment adviser $100,000 for violating the SEC’s pay-to-play rule. The SEC’s rule effectively prohibits investment adviser executives and other “covered associates” of an investment adviser from making political contributions in excess of de minimis amounts ($350 per election if the contributor is eligible to vote … Continue Reading
On December 4, the D.C. Council unanimously approved the first significant pay-to-play law for Washington, D.C. The restriction would apply to contractors with—or seeking—one or more contracts with an aggregate value of $250,000 or more. The legislation will be considered by the Mayor and would be subject to a 30-day period of congressional review. The … Continue Reading
With less than one month to go before the 2018 elections, the ground is shifting for major political donors. Developments over the last several years, and especially in the last few months, show that the rules of the road are changing with respect to many of the common election law issues faced by high net … Continue Reading
Companies doing business with state and local governments or operating in regulated industries are subject to a dizzying array of “pay-to-play” rules. These rules effectively prohibit company executives and employees (and in some cases, their family members) from making certain personal political contributions. Even inadvertent violations can be dangerous: a single political contribution can, for example, … Continue Reading
Perhaps no industry faces more scrutiny and regulation of its political activities than the financial services industry. Even though these rules are often not intuitive, failure to comply with them can result in big penalties, loss of business, and debilitating reputational consequences. In this advisory, we describe three sometimes overlooked political law related risks for hedge funds, … Continue Reading
The universe of those covered by the SEC’s pay-to-play restrictions is expanding. If a newly proposed SEC rule is adopted as expected, pay-to-play restrictions will now extend to cover the recently created class of broker-dealers called Capital Acquisition Brokers (“CABs”). In this advisory, we discuss the background on the proposed rule and its implications for … Continue Reading
Over the past few years, a few state political party committees have relentlessly sought to block or overturn pay-to-play laws overseen by the Securities and Exchange Commission (SEC). Yesterday, the Sixth Circuit delivered another defeat to an ongoing effort to challenge federal pay-to-play laws. Last year, we noted that the Municipal Securities Rulemaking Board (MSRB) … Continue Reading
The Securities and Exchange Commission announced Tuesday that it will allow further comment on a pay-to-play rule proposed by the Financial Industry Regulatory Authority (FINRA). As we discussed previously, if the SEC approves FINRA’s pay-to-play rule, it would clarify that investment advisers are allowed to hire third party solicitors if they are subject to FINRA … Continue Reading
New Jersey is well-known for having strict, comprehensive, and complex pay-to-play laws. Two new changes to an annual pay-to-play filing required of some government contractors will only enhance that reputation. State law requires a company that receives $50,000 annually through government contracts in New Jersey to file a report by March 30 of the following … Continue Reading
On Wednesday, the Municipal Securities Rulemaking Board (MSRB) announced that its expanded pay-to-play rules will cover municipal advisors, including third-party solicitors, as of August 17, 2016. As we noted previously and discussed during Covington’s Corporate Political Activity & Government Affairs Compliance Conference earlier this month, the MSRB has been drafting an expansion to its pay-to-play … Continue Reading
A $12 million settlement announced last week by the Securities & Exchange Commission suggests that the SEC will aggressively pursue alleged schemes connecting political contributions to government contracts even if the political contributions do not violate its 2010 pay-to-play rule. According to the settlement order, in 2010, the head of Public Funds at State Street … Continue Reading
Yesterday’s D.C. Circuit opinion upholding the SEC’s burdensome “pay-to-play” rule on procedural grounds is bad news for those questioning the rule’s constitutionality. Nevertheless, the rule is still far from invincible. The SEC pay-to-play rule, among other things, effectively prohibits investment firm executives from making certain political contributions to state and local officeholders and candidates. Last … Continue Reading
The Wagner case, decided today by the D.C. Circuit, is important because of its analysis of the constitutionality of federal campaign contribution restrictions and, by extension, of pay-to-play laws generally. Covington has been monitoring this case since the district court decision in 2012, to the argument before the D.C. Circuit in 2013, and the decision … Continue Reading
Despite potential vulnerabilities, Hawaii’s pay-to-play law survived a significant challenge in the Ninth Circuit last week. The matter involved an electrical-construction company, its CEO and a second individual who challenged several sections of Hawaii’s campaign finance law, including a requirement that the company register and report its activities once it crossed a $1,000 threshold, and … Continue Reading
Earlier this week, New Jersey Governor Chris Christie vetoed key aspects of a bill that would have imposed new restrictions on the ability of national and federal political party committees to raise money from Wall Street and financial executives. The bill, as we have previously discussed, sought to apply the state’s notoriously stringent pay-to-play rules … Continue Reading
A little-noticed sentence in a bill sitting on New Jersey Governor Chris Christie’s desk could, if it becomes law, threaten to curtail the ability of national party committees to raise money from Wall Street and financial industry executives. The Republican and Democratic Governors Associations, the Republican National Committee, the Democratic National Committee, and the federal … Continue Reading
A constitutional challenge to the SEC’s “pay to play” rule moved one step closer to resolution today, even as significant hurdles remain in an effort to strike down the rule. The U.S. Court of Appeals for the District of Columbia Circuit heard arguments this morning on an appeal brought by two state political parties challenging … Continue Reading
In our discussion of the Securities & Exchange Commission’s (SEC) actions over the past year, we described how the SEC is ramping up enforcement of its pay-to-play restrictions. We also pointed out an acknowledgment by an agency enforcement official that the agency is “actively looking” for violations and that the agency does its own “surveillance.” What kind … Continue Reading
When the history of the Securities & Exchange Commission’s pay-to-play rule is written, 2014 could be the inflection point. Developments this year suggest two dramatically different paths for the rule in the years to come: either the rule will unravel from court challenges or it will become an increasingly prominent enforcement weapon in the SEC’s … Continue Reading
On November 14, the Financial Industry Regulatory Authority (FINRA) issued a notice asking for comment (by December 15) on its proposal to establish three rules designed to restrict pay-to-play practices. The three rules include a pay-to-play prohibition (Rule 2390), a disclosure requirement (Rule 2271), and a recordkeeping requirement (Rule 4580). The rules largely track the … Continue Reading
New Jersey, already home to some of the most complex and restrictive pay-to-play laws in the nation, is considering an aggressive new expansion of those laws. A bill under consideration that recently passed through a senate committee would prohibit certain individuals and entities involved in managing state employee retirement funds from making contributions to national, … Continue Reading
In an important decision, the US District Court for the District of Columbia yesterday dismissed a constitutional challenge to the SEC’s “pay to play” rule, which restricts contributions and fundraising by some individuals who are associated with hedge funds, private equity funds, and other registered investment advisers. The Court ruled that the case had been … Continue Reading
