The Securities and Exchange Commission's Political Contribution Rule (Rule 206(4_-5 under the Investment Advisers Act of 1940) imposes unnecessary compliance burdens on financial professionals while restricting their participation in the political process and constitutionally protected free speech. NAIFA has submitted a comment letter urging the SEC to rescind the rule and clarify in the Final Release that FINRA Rule 2030, which was adopted solely to implement and support the SEC's Rule, should likewise be rescinded.
The Political Contribution Rule generally prohibits investment advisers from providing advisory services to a government entity for two years after the adviser has made a political contribution to an official of that entity. FINRA Rule 2030 expands the SEC's rule to include broker-dealers that solicit or distribute services with government entities on behalf of investment advisers. In its comment letter, NAIFA notes that the SEC has said the Political Contribution Rule is overly broad, imposes significant and unjustified burdens, and results in outright political contribution bans. NAIFA also argues that should the SEC rescind the Political Contribution Rule for investment advisers, there is no logical rationale for keeping the FINRA rule for broker-dealers.
"Rescinding the Rule, and therefore the regulatory basis for the follow-on FINRA Rule, is appropriate and long overdue," NAIFA President Christopher Gandy wrote in the comment letter. "The SEC would protect the constitutional rights to engage in the political process while reducing unnecessary compliance costs and regulatory complexity. At the same time, preexisting anti-fraud measures would preserve strong protections against corruption."