SEC Proposes to Eliminate Pay-to-Play Rule for Investment Advisers
On September 3, 2026, the U.S. Securities and Exchange Commission (SEC) issued a proposal to rescind its current pay-to-play rule for investment advisers and make related changes to recordkeeping requirements. The rule prohibits investment advisers from providing compensated investment advisory services to a government client for two years after the investment adviser or one of its covered associates makes a prohibited political contribution to certain elected officials or candidates (Advisers Act Rule 206(4)-5 or “the Rule”).
In its proposal, the SEC identified significant unintended consequences resulting from the Rule’s 2010 adoption, namely that compliance practices among some investment advisers have effectively restricted all political contributions by the investment advisers and their employees. According to the proposal, market participants also stated that the Rule is burdensome, complex, and creates a de facto strict liability standard. The SEC considers existing protections, including prohibitions on fraud, fiduciary duty requirements, the compliance rule, and the code of ethics rule, to likely be sufficient in addressing pay-to-play practices while allowing advisers the flexibility to implement an approach more appropriately tailored to their particular risks.
Rather than amend the Rule, the SEC proposes to rescind it in its entirety. The proposal would also amend recordkeeping requirements consistent with the proposed rescission.
Comments are due 60 days following publication of the proposal in the Federal Register. As of September 4, 2026, a Federal Register publication date has not yet been assigned. The proposed rule can be found here.
Wiley is analyzing the proposal and its potential implications and would be pleased to assist clients in preparing comments or in assessing the ramifications of a repeal.
Note that the Rule remains in place until any rescission passes, and the limits and prohibitions continue to apply to contributions for the 2026 midterm election.
