pay-to-play

Important changes to California’s pay-to-play law took effect January 1, 2025, and now the state’s regulations have caught up to the law.

The state’s Fair Political Practices Commission adopted the new regulations late last month, following statutory revisions to California’s complex pay-to-play law found at California Government Code § 84308…

Continue Reading California Updates Pay-to-Play Law Regulations to Reflect Recent Law Changes

With Election Day fast approaching, corporations face increasing pressure from both internal and external forces to make legal decisions about political activities. This can be a fraught area of law, with little understood, highly technical regulatory issues that vary significantly across jurisdictions. Corporate counsel should be mindful of common—and sometimes…

Continue Reading Avoiding Pitfalls on the Path to Election Day: Common Political Law Risks for Corporations in Election Season

California recently passed a series of new regulations affecting its “pay-to-play” laws that limit political contributions by state and local government contractors and others involved in proceedings on contracts, licenses, permits, and other “entitlements for use” in the state.  These regulations implement changes to the law that took effect this…

Continue Reading California Passes New Pay-to-Play Regulations for Contributions by Government Contractors and Others

The District of Columbia’s new pay-to-play law will take effect on November 9, 2022.  As we blogged about here, the Campaign Finance Reform Amendment Act of 2018 prohibits certain campaign contributions by contractors doing or seeking to do business with the D.C. government.  This prohibition applies to entities holding…

Continue Reading New Pay-to-Play Contribution Law for D.C. Contractors Takes Effect Next Month

The U.S. Securities and Exchange Commission (“SEC”) last week announced settlements with four investment advisory firms regarding alleged violations of the SEC’s pay-to-play rule, illustrating that federal regulators continue to aggressively pursue such cases.   The rule at issue, Rule 206(4)-5 (“the Rule”), prohibits investment advisors from, among other things, receiving compensation from certain government entities for two years after a person affiliated with the investment advisor makes a covered campaign contribution to an official of the government entity.  While the involved firms did not admit or deny the allegations in the settlement orders, an examination of the cases is instructive in assessing the current landscape of SEC pay-to-play rule enforcement.  Together, the four settlements are noteworthy in two major respects: (1) the circumstances of the underlying contributions that highlight the wide-reaching application of Rule 206(4)-5; and (2) the fact that one of the SEC Commissioners issued a sharp dissent that expressed deep concern about the breadth of the Rule.

The settlements involved covered associates at four different firms making contributions to four different recipients: an unsuccessful candidate for Mayor of New York City; the incumbent Governor of Hawaii ; an unsuccessful candidate for Governor of Massachusetts; and to a then-candidate for Governor of California.  In two cases, the firms managed public pension money and, in the other two, the firms managed state university endowments, an often overlooked category of government entity investors. 

While the SEC Rule is intended to prevent fraud, it seems highly unlikely that any of the contributions at issue in these four cases could have influenced state investment decisions: 

  • All four investment advisory firms had preexisting business relationships with the relevant government entities before the prohibited contributions were made and no new business was solicited after the contributions. 
  • One of the donors was not even a covered associate at the time of the contribution.
  • Only one of the four prohibited recipients was an incumbent officeholder at the time of the contribution. 
  • Two of the four recipients failed to win election to the offices they sought. 
  • Two of the cases involved situations where the donor either received a refund or requested a refund. 
  • The contribution amounts were a drop in the bucket in proportion to the tens of millions of dollars raised in these elections – three cases involved a single $1,000 contribution and the fourth involved a contribution of $1,000 and another $400. 

Continue Reading SEC Commissioner Says It’s “Past Time” To Reform Overly “Blunt” Pay-to-Play Rule