June 20, 2019 •

SEC FINRA Pay-to-Play Rule Upheld by Federal Court

On June 18, a federal appellate court affirmed the legality of a Securities and Exchange Commission (SEC) pay-to-play rule. In New York Republican State Committee v. SEC, the U.S. Court of Appeals for the District of Columbia Circuit found the […]

On June 18, a federal appellate court affirmed the legality of a Securities and Exchange Commission (SEC) pay-to-play rule.

In New York Republican State Committee v. SEC, the U.S. Court of Appeals for the District of Columbia Circuit found the SEC’s Financial Industry Regulatory Authority (FINRA) Rule 2030 constitutional.

The rule prohibits a placement agent from accepting compensation for soliciting government business from certain candidates and elected officials within two years of having contributed to such an official’s electoral campaign or to the transition or inaugural expenses of a successful candidate.

The New York Republican State Committee and the Tennessee Republican Party had argued the SEC did not have authority to enact the rule, the order adopting the rule was arbitrary and capricious because there was insufficient evidence it was needed, and the rule violated the First Amendment of the Constitution of the United States.

While the court found the plaintiffs had standing, it ruled against all their arguments and upheld the rule.

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August 28, 2017 •

FINRA Proposes Pay-to-Play Rules for Capital Acquisition Brokers

The Financial Industry Regulatory Authority (FINRA) has filed a proposed rule change with the Securities and Exchange Commission (SEC) to expand its brand-new pay-to-play rules to cover capital acquisition brokers (CAB). FINRA Rule 2030, which took effect August 20, restricts […]

The Financial Industry Regulatory Authority (FINRA) has filed a proposed rule change with the Securities and Exchange Commission (SEC) to expand its brand-new pay-to-play rules to cover capital acquisition brokers (CAB).

FINRA Rule 2030, which took effect August 20, restricts contributions made to an official of a government entity being provided investment advisory services or being engaged to provide investment advisory services by certain parties. The rule applies to broker-dealers, placement agents, and covered associates acting on behalf of certain regulated investment advisors or soliciting a government entity to invest in certain pooled investment vehicles. FINRA Rule 4580, which took effect the same day, mandates certain record-keeping requirements concerning related contributions.

A firm meeting the statutory definition of a CAB and electing to be governed by the FINRA rule set would be subject to FINRA’s new pay-to-play rules under the proposal. Specifically, FINRA proposes the addition of rules providing all CABs be subject to FINRA Rules 2030 and 4580. If approved, the effective date will be no later than 30 days after FINRA’s announcement of the SEC’s approval.

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May 8, 2017 •

US Spending Bill Has Campaign Finance Provisions

Among the amendments in the 2017 Consolidated Appropriations Act that passed into law on May 5 are two provisions affecting campaign financing. House Resolution 244 explicitly prohibits the Internal Revenue Service from making new rules concerning the political speech or […]

Among the amendments in the 2017 Consolidated Appropriations Act that passed into law on May 5 are two provisions affecting campaign financing.

House Resolution 244 explicitly prohibits the Internal Revenue Service from making new rules concerning the political speech or activity of 501(c)(4) organizations. The legislation also prohibits the Securities and Exchange Commission from finalizing, issuing, or implementing any rule, regulation, or order regarding the disclosure of political contributions, contributions to tax exempt organizations, or dues paid to trade associations.

The 708 page omnibus spending bill, passed by Congress on May 4 and signed by the president on May 5, funds the U.S. government through September 30.

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April 13, 2017 •

New White Paper on The Foreign Corrupt Practices Act (FCPA), First Enacted 40 Years Ago

State and Federal Communications, Inc. has released a new white paper on The Foreign Corrupt Practices Act (FCPA) authored by Research Associate George Ticoras. Legal compliance with all the rules and regulations is always important to the broad network of government […]

FCPA cover 2State and Federal Communications, Inc. has released a new white paper on The Foreign Corrupt Practices Act (FCPA) authored by Research Associate George Ticoras.

Legal compliance with all the rules and regulations is always important to the broad network of government relations professionals, companies, and organizations we serve. We prepared this white paper to explain the purpose of the FCPA as an anti-bribery statute, and to provide background on preventing the bribery of governmental officials of foreign nations by individuals and entities under the jurisdiction of the United States.

The purpose of the FCPA is to prohibit giving a payment of any money or other thing of value to a foreign official for purposes of influencing the official to act in a corrupt manner in order to obtain or retain business. The corrupt action could be an unlawful act or behavior made to secure an unfair advantage for the donor. The FCPA was enacted in 1977 and is enforced by the Securities and Exchange Commission (SEC).

FCPA enforcement continues to be a high priority area for the SEC. Violations can lead to substantial punitive actions including civil and criminal enforcement actions against issuers and their officers, directors, employees, stockholders, and agents. The growing frequency of settlements, non-prosecution agreements, oversight, and self-reporting make understanding the depth of the FCPA’s impact on corporate business increasingly apparent and important.

The State and Federal Communications white paper of the FCPA is useful for all practitioners and government relations professionals involved in international business and compliance.

To obtain a free copy of the white paper, visit State and Federal Communications to access a PDF.

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August 4, 2016 •

MSRB Clarifies Look-Back Rule for Municipal Advisors under Rule G-37

Today, the Municipal Securities Rulemaking Board (MSRB) filed an amendment with the Securities and Exchange Commission (SEC) clarifying the two-year look-back ban on contributions from municipal advisors in the upcoming amendments to MSRB Rule G-37. The amendments, effective August 17, […]

MSRBToday, the Municipal Securities Rulemaking Board (MSRB) filed an amendment with the Securities and Exchange Commission (SEC) clarifying the two-year look-back ban on contributions from municipal advisors in the upcoming amendments to MSRB Rule G-37.

The amendments, effective August 17, 2016, apply regulatory policies to municipal advisors matching the regulatory policies applicable to dealers under the existing rules. Included in the rules is a two-year look-back provision prohibiting contributions in the two years prior to conducting regulated business.

The MSRB states contributions by persons who become associated with a dealer and become municipal finance professionals of the dealer who are affected by new amendments to Rule G-37 taking effect on August 17, 2016, are subject to the two-year look-back in Rule G-37. Contributions made in the two years prior to the August 17 effective date may subject a dealer to a prohibition on municipal securities business.

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August 1, 2016 •

SEC Fights MSRB Rule Challenge by Asserting It Cannot Fight

A Municipal Securities Rulemaking Board (MSRB) pay-to-play rule amendment set to take effect on August 17 is being challenged in federal court. However, the Securities and Exchange Commission (SEC) argues it cannot defend the lawsuit because the Consolidated Appropriations Act […]

MSRBA Municipal Securities Rulemaking Board (MSRB) pay-to-play rule amendment set to take effect on August 17 is being challenged in federal court.

However, the Securities and Exchange Commission (SEC) argues it cannot defend the lawsuit because the Consolidated Appropriations Act of 2016 prohibits the SEC from using federal funding to finalize, issue, or implement any regulation regarding the disclosure of political contributions, contributions to tax-exempt organizations, or dues paid to trade associations.

The SEC argues the same federal restrictions preclude the commission from using funds to defend the MSRB rule on its merits.

The challenge to the amendment is being made in the Sixth Circuit Court of Appeals in Cincinnati. It was brought by the Georgia and Tennessee Republican parties and the New York State Republican Committee.

Currently, MSRB Rule G-37 prohibits certain political contributions for two years prior to engaging in a municipal securities business where a related official received contributions. The amendment extends the pay-to-play rule to municipal advisors.

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August 3, 2015 •

SEC Pay-To-Play Enforcement for Third Party Solicitations Delayed

On July 31, the Securities and Exchange Commission (SEC) was to begin enforcing pay-to-play rules under 17 C.F.R. §275.206(4)-5 for third party solicitations. However, on June 25, the SEC stated until there is an effective date of a Financial Industry […]

Securities and Exchange Commission-SealOn July 31, the Securities and Exchange Commission (SEC) was to begin enforcing pay-to-play rules under 17 C.F.R. §275.206(4)-5 for third party solicitations. However, on June 25, the SEC stated until there is an effective date of a Financial Industry Regulatory Authority (FINRA) pay-to-play rule or an effective date of a Municipal Securities Rulemaking Board (MSRB) pay-to-play rule, whichever is later, the Division of Investment Management would not recommend enforcement action to the SEC against an investment adviser or its covered associates under rule 206(4)-5(a)(2)(i) for the payment to any person to solicit a government entity for investment advisory services. Neither FINRA nor the MSRB have yet adopted pay-to-play rules.

Pay-to-play rules imposed by 17 C.F.R. §275.206(4)-5 apply to investment advisers and their covered associates who make contributions to officials of state and local government entities.

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November 4, 2014 •

MSRB Asks SEC to Approve Proposed Pay-To-Play Rule

At its quarterly meeting, the Board of Directors of the Municipal Securities Rulemaking Board (MSRB) agreed to ask the Securities and Exchange Commission for approval of its proposed pay-to-play rule for municipal advisors. The proposed rule would require limiting gifts […]

At its quarterly meeting, the Board of Directors of the Municipal Securities Rulemaking Board (MSRB) agreed to ask the Securities and Exchange Commission for approval of its proposed pay-to-play rule for municipal advisors. The proposed rule would require limiting gifts to $100 for municipal advisors giving gifts to employees of entities engaged in municipal securities activities. The new rules for municipal advisors also would prohibit receiving reimbursement of entertainment expenses from the proceeds of an offering of municipal securities.

In an MSRB press release, Board Chair Kym Arnone said, “Two decades ago, the MSRB adopted its landmark pay-to-play rule to address any actual link, and the appearance of a link, between political contributions and municipal securities underwriting, a bold move that dramatically improved the integrity of the market. Extending the well-established principles of this rule to municipal advisors will similarly work to promote the integrity of the market and the municipal advisory industry.” The quarterly meeting was held October 29 – 31, 2014.

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October 1, 2014 •

Court Challenge to SEC Pay-to-Play Rules Dismissed by Court

A suit filed by the Republican parties of New York and Tennessee challenging the Securities and Exchange Commission’s (SEC) Pay-to-Play rule has been dismissed by the U.S. District Court for the District of Columbia. The court held it did not […]

Securities and Exchange Commission-SealA suit filed by the Republican parties of New York and Tennessee challenging the Securities and Exchange Commission’s (SEC) Pay-to-Play rule has been dismissed by the U.S. District Court for the District of Columbia. The court held it did not have jurisdiction and the proper court to hear the case is the D.C. Circuit Court of Appeals.

The plaintiffs alleged SEC Rule 206(4)-5, which imposes restrictions upon investment advisors and their covered associates making contributions to officials of state and local government entities, violates the freedom of speech protections of the First Amendment. The suit also took the position the SEC does not have the authority to regulate campaign contributions.

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August 13, 2014 •

State Republican Parties Challenge SEC Pay-to-Play Rule

The Republican parties of New York and Tennessee have filed suit in U.S. District Court for the District of Columbia challenging Securities and Exchange Commission (SEC) Rule 206(4)-5. The plaintiffs allege the rule, which imposes restrictions upon investment advisors and […]

Securities and Exchange Commission-SealThe Republican parties of New York and Tennessee have filed suit in U.S. District Court for the District of Columbia challenging Securities and Exchange Commission (SEC) Rule 206(4)-5. The plaintiffs allege the rule, which imposes restrictions upon investment advisors and their covered associates making contributions to officials of state and local government entities, violates the freedom of speech protections of the First Amendment.

The suit also takes the position that the SEC does not have the authority to regulate campaign contributions.

If struck down, the elimination of the rule would make it easier for any state governor making a run for president to raise money from the financial sector.

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June 25, 2014 •

SEC Charges Firm with Pay-to-Play Violation

For the first time, the U.S. Securities and Exchange Commission (SEC) has charged a firm with violations of its pay-to-play rules. On June 20, the SEC charged TL Ventures Inc., a private equity firm, with receiving advisory fees from the […]

Securities and Exchange CommissionFor the first time, the U.S. Securities and Exchange Commission (SEC) has charged a firm with violations of its pay-to-play rules. On June 20, the SEC charged TL Ventures Inc., a private equity firm, with receiving advisory fees from the pension funds of both Philadelphia and Pennsylvania after an associate of the firm had made campaign contributions in 2011 to the governor and a candidate for mayor.

Federal regulations prohibit investment advisers and their covered associates who make contributions to officials of state and local government entities from providing compensatory advisory services for two years following a campaign contribution. TL Ventures Inc. has agreed to settle the charges by paying nearly $300,000.

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June 18, 2012 •

SEC Delays Compliance Date for Pay-to-Play Rule

April 2013

SECThe Securities and Exchange Commission has extended the date advisers and third-party solicitors must comply with new pay-to-play rules until April 2013.

The Commission is extending the compliance date for the ban on third-party solicitation under rule 206(4)-5 of the Investment Advisers Act of 1940 in order to ensure an orderly transition for third-party solicitors and advisers and as well as to provide additional time to adjust compliance policies and procedures after the transition.

Rule 206(4)-5, the “Pay to Play Rule,” prohibits an investment adviser from providing advisory services for compensation to a government client for two years after the adviser or certain of its executives or covered associates make a contribution to elected officials or candidates.

The rule also prohibits an adviser and its covered associates from providing or agreeing to provide, directly or indirectly, payment to any third-party for a solicitation of advisory business from any government entity on behalf of such adviser, unless such third-party was an SEC-registered investment adviser or a registered broker or dealer subject to pay to play restrictions adopted by a registered national securities association.

More information can be found here.

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March 27, 2012 •

Tuesday Campaign Finance News Roundup

Disclosure and campaign finance reform issues made the news today. Take a look at today’s articles:

Securities and Exchange Commission SealFederal: “Two SEC Commissioners Could Dramatically Change Campaign Finance” by George Zornick in The Nation. via Eric Brown’s Political Activity Law blog.

California: “State political watchdog ramps up enforcement” by Brian Joseph in the Orange County Register.

Connecticut: “Connecticut legislators set focus on campaign finance reform; look to increase transparency” by Jordan Fenster in The Register Citizen.

District of Columbia: “Campaign money orders to cease?” by Jim McElhatton and Luke Rosiak in the Washington Times.

District of Columbia: “D.C. ethics law overhaul hampered by hiring difficulties, enforcement duties” by Mike DeBonis in The Washington Post.

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August 5, 2010 •

House Financial Services Committee Approves Shareholder Protection Act

The House Financial Services Committee has approved the Shareholder Protection Act of 2010 by a vote of 35-28.

House Financial Services Committee in sessionH.R. 4790 requires any corporation making political expenditures must first amend its bylaws to require majority shareholder approval of any political expenditure in excess of $50,000. Corporations would also have to annually report all political spending over $10,000 to their shareholders.

The legislation authorizes the Securities and Exchange Commission (SEC) to require disclosure of all political expenditures made by a corporation as well as the individual votes of company board members who authorized the expenditures. Further, the measure requires the SEC to publish the disclosures on its public website. The measure now moves to the full House for consideration though the vote may not occur until after Congress returns from its August recess.

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