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Judge Dismisses Challenge to Pay-to-Play Rule

A district court judge dismissed a challenge to the SEC’s Political Contribution Rule (better known as the “Pay-to-Play” rule) on jurisdictional grounds. The rule, adopted in 2010 by a unanimous Commission vote, restricts for two years the ability of investment advisors to provide advisory services to a state or local government after the adviser or certain of its employees contribute to the campaign of certain covered government officials.

The court accepted the Commission’s argument that jurisdiction to review the rule lay exclusively with the court of appeals based on the Investment Advisers Act of 1940. While the plaintiffs may refile the case in appellate court, the SEC has argued that the plaintiffs lack standing to challenge the rule, and further that they failed to challenge the rule within 60 days of adoption, and thus need to petition the SEC for reconsideration before filing any lawsuit.

The court’s opinion can be found here.