On September 3, 2026, the U.S. Securities and Exchange SEC (the “SEC”) proposed to rescind the Political Contribution Rule, commonly known as the “Pay-to-Play Rule.” The SEC also proposed amendments to the Recordkeeping Rule to eliminate the related political contribution recordkeeping requirements. Advisers should not interpret the proposal as signaling the end of pay-to-play compliance requirements. Other requirements under the Advisers Act and applicable federal and state laws may continue to impose restrictions even if the rule is rescinded.

Background

The Political Contribution Rule (“Rule”) generally bars an investment adviser from receiving compensation from a government entity for two years following certain political contributions by the adviser or its covered associates. In its proposal, the SEC indicated that the Rule’s objectives of deterring fraud could be better achieved through a principles-based approach and that other existing regulations provide a sufficient framework to support those objectives.

Key Considerations for Adviser

Investment advisers would remain required to maintain policies and procedures reasonably designed to prevent fraudulent practices, including pay-to-play practices. However, advisers would retain flexibility to tailor those policies to their business rather than follow the Rule’s prescriptive requirements. In its proposal, the SEC identifies several factors that an adviser could consider when revising its policies and procedures:

• Compliance with applicable law: An adviser’s policies and procedures should address pay-to-play practices that violate the Advisers Act and other federal securities laws.
• Risk identification: An adviser’s policies and procedures should identify and assess the risk of the adviser or its personnel engaging in pay-to-play practices, including by making contributions to government officials, political parties and political action committees.
• Pre-clearance: Advisers should consider incorporating into its policies and procedures a process of pre-clearance of contributions by the adviser and its personnel to officials of government entities, depending on the adviser’s risk assessment, nature of business, and its particular facts and circumstances.
• Third-party solicitors: If an adviser uses third-party solicitors, the adviser would need to address in its policies and procedures the unique pay-to-play risks associated with such practices.
• Periodic monitoring: The adviser’s policies and procedures should incorporate a process for more frequent periodic monitoring of compliance with any pay-to-play-related elements, as part of the adviser’s overall review of its policies and procedures under the compliance rule.
• Remedial steps: Advisers would need to include in their policies and procedures steps or a framework to address contributions that are inconsistent with the policies and procedures.
• Code of Ethics: Advisers should consider where amendments to its Code of Ethics are necessary to reflect any changes governing the conduct of the adviser and its personnel in addressing pay-to-play risks

Conclusion

The Political Contribution Rule and its associated recordkeeping requirements remain in effect. Accordingly, investment advisers must continue to comply with the existing political contribution and recordkeeping requirements. The proposal will be open for public comment until November 9, 2026. Therefore, the Political Contribution Rule is expected to remain in effect though at least the 2026 election cycle.