SEC Proposes Rescission of Political Contribution Rule for Investment Advisers

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On September 3, 2026, the U.S. Securities and Exchange Commission announced a proposal to rescind its "pay-to-play" rule (Advisers Act Rule 206(4)-5), which 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, along with related recordkeeping requirements. The Commission states that since the rule's adoption in 2010, it has led to unintended consequences, including prohibitions by some advisers on political contributions at the state and local level, and has created a de facto strict liability standard where small donations or "foot faults" can trigger substantial prohibitions and fines. SEC Chairman Paul S. Atkins stated that the rule is overly prescriptive, has resulted in the suppression of political speech, and that matters involving political contributions are more properly governed by local ordinances, state laws, and federal election regulations rather than the SEC. The proposal would amend the Advisers Act recordkeeping rule to eliminate corresponding provisions, while all other Advisers Act requirements, including fraud prohibitions, fiduciary duty, the compliance rule, and the code of ethics rule, would continue to apply; the public comment period

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