SEC Proposes to Scrap “Pay-to-Play” Rule for Investment Advisers

Washington, D.C. — September 3, 2026. The Securities and Exchange Commission has proposed rescinding its so-called “pay-to-play” rule, which currently bars investment advisers from being paid for advisory work with a government client for two years after the adviser (or certain associated people) makes a political contribution to specific elected officials or candidates. The related recordkeeping requirements tied to the rule would also go away.

Importantly, the rest of the Investment Advisers Act would remain fully in force. Fraud prohibitions, fiduciary duty obligations, the compliance rule, and the code of ethics rule are not affected by this proposal.

Why the SEC Wants to Rescind the Rule

According to the Commission, the political contribution rule — in place since 2010 — has produced a number of unintended consequences since it was adopted. Some advisers, for example, have responded by barring their employees from making any political contributions at the state and local level, well beyond what the rule technically requires.

The SEC also points to operational problems with the rule itself. Because it effectively functions as a strict liability standard, even a small or seemingly minor donation — sometimes called a “foot fault” — can trigger serious consequences, including a two-year ban on compensation from a government client and potential fines.

What Chairman Atkins Said

SEC Chairman Paul S. Atkins argued that after more than 15 years of the rule being in effect, it has become clear the rule is “overly prescriptive” and has generated a range of unintended problems. He noted that the rule has penalized small, often impulsive donations to candidates across the political spectrum, and has even affected firms over contributions made by an employee before that person joined the firm. He also suggested the rule’s practical effect has been to suppress political speech, and argued that questions around political contributions are better handled by local ordinances, state law, and federal election regulations rather than SEC rulemaking. (Read his full statement on the SEC’s site — linked below.)

What’s in the Proposal

Specifically, the proposal would:

Rescind Advisers Act Rule 206(4)-5 (the pay-to-play rule itself)
Amend the Advisers Act’s recordkeeping rule to remove the provisions tied to political contributions
What Happens Next

The public comment period will stay open for 60 days after the proposing release is published in the Federal Register. Investment advisers, industry groups, and other interested parties will have the opportunity to weigh in before any final rule is adopted.