The U.S. Securities and Exchange Commission proposed rescinding Rule 206(4)-5, the investment adviser pay-to-play rule adopted in 2010. The SEC cited disproportionate compliance burdens and unintended constraints on protected political activity, including the rule’s automatic two-year compensation ban for advisers following certain political contributions. The SEC argued that the rule’s strict-liability framework can penalize minor contributions or inadvertent errors without evidence of a quid pro quo, prompting some advisers to prohibit employee political contributions or avoid hiring candidates who previously donated. Pay-to-play misconduct would remain subject to the Investment Advisers Act’s antifraud provisions, fiduciary obligations, and compliance and ethics requirements, which the SEC views as a principles-based means of targeting genuine corruption without blanket restrictions on political speech.
2026-09-03U.S. Securities & Exchange Commission
U.S. Securities and Exchange Commission proposes repealing investment adviser pay-to-play rule
The U.S. Securities and Exchange Commission proposed repealing its investment adviser pay-to-play rule, citing compliance burdens and restrictions on protected political activity. Existing antifraud, fiduciary, compliance and ethics obligations would continue to address quid pro quo misconduct.