SEC Proposes Rescinding Adviser Pay-to-Play Rule
The SEC has proposed rescinding the federal pay-to-play rule for investment advisers, signaling a major potential shift in compliance obligations related to political contributions.
The Securities and Exchange Commission on September 3, 2026, issued a proposal to rescind Rule 206(4)-5 of the Investment Advisers Act, the federal “pay-to-play” rule. The rule currently prohibits investment advisers from receiving compensation for advisory services from a government entity for two years after the adviser or certain executives or employees make a political contribution to an official of that entity. The proposed rescission signals a significant potential change in the regulatory landscape for asset managers who interact with public pension plans and other government clients. While the move could reduce certain specific compliance burdens, advisers should note that other state and local pay-to-play restrictions may still apply. Furthermore, conduct previously covered by the rule could still raise concerns under general anti-fraud provisions. Firms should monitor the rulemaking process and consider submitting public comments.