The US Securities and Exchange Commission sent a proposal to the White House on Aug. 14 that would loosen restrictions on investment advisers who donate to state and local political campaigns.
The current rule, adopted in 2010, bans investment advisers from collecting fees for managing public pension assets for two years if the firm, key personnel, or an affiliated political action committee donates to a state or local campaign.
Donations as small as $150 to $350 per election can trigger the two-year ban, according to the rule's current thresholds.
The SEC said the changes are meant to address identified compliance burdens, and that the current rule "overly restricts investment advisors."
"The Commission is heeding years of complaints from across the political spectrum and will consider a proposal to address these issues and reform the rule."
SEC Spokesperson
SEC Chairman Paul Atkins has previously criticized the rule for punishing employees who may not have known they were violating it, including those who donated before joining a firm.
It's not yet clear whether the proposal would modify the rule's current limits or eliminate it altogether.
The rule has a real enforcement history behind it. In 2016, State Street Bank and Trust Co. agreed to pay $12M to resolve SEC allegations that it used donations to win Ohio pension fund business.
Goldman Sachs Group Inc. paid $12M in a case tied to alleged donations to a Massachusetts gubernatorial candidate. As recently as 2022, Highland Capital Partners paid $95K over a $1K donation to an unsuccessful gubernatorial candidate.
The rule also prohibits advisers from fundraising for candidates or local political parties in jurisdictions where they're seeking or conducting government advisory business.
The timeline is long
The SEC currently has three Republican commissioners and is set to fall to two when Hester Peirce departs for academia.
The agency would then take public comment before voting on a final rule. The full process typically runs 18 to 24 months.
Separately, the SEC recently made permanent its decision to stop issuing guidance on whether companies may skip shareholder votes on activist proposals, a move that has frustrated investor groups and raised litigation risk for companies that exclude resolutions.
Both moves fit within the Trump administration's broader deregulation push, though Democrats are expected to challenge the pay-to-play changes as a risk to billions in public pension assets.
The proposal lands ahead of the Nov. 3 midterm elections, where Republicans are defending narrow House and Senate majorities.
