SEC Proposes to Rescind Investment Adviser Pay-to-Play Rule
The proposal would shift compliance from a strict-liability standard to a principles-based approach rooted in existing antifraud and fiduciary duty rules.
The US Securities and Exchange Commission has proposed rescinding the investment adviser 'pay-to-play' rule, Rule 206(4)-5 under the Advisers Act. The SEC stated that the rule, in place since 2011, has functioned as a strict-liability trap, leading to enforcement actions for minor technical violations—such as small campaign contributions by employees with no client-facing role—rather than preventing genuine quid pro quo corruption. For advisers, the change would remove a significant compliance burden that had led some firms to ban all employee political contributions.
However, the SEC emphasized that rescission would not eliminate oversight. Pay-to-play conduct would still be policed under existing anti-fraud provisions, general fiduciary duties, and the requirements of the Compliance Rule (206(4)-7) and Code of Ethics Rule (204A-1). The agency expects advisers to maintain tailored, risk-based policies and procedures to prevent improper influence. Advisers must also continue to comply with separate state and local pay-to-play laws and any contractual restrictions. The comment period for the proposal is open until November 9, 2026.