Vice President Kamala Harris’s selection of Minnesota Gov. Tim Walz as her running mate imposes restrictions on campaign contributions to the Harris-Walz campaign by federally registered investment advisers (RIAs), exempt reporting advisers (ERAs) and their Covered Associates (as defined below) and other financial industry professionals under various federal pay-to-play laws. As Gov. Walz is the sitting governor of Minnesota, these limitations could bar firms from being compensated for advisory services provided to certain Minnesota state governmental entities and pension plans. Similar issues arose in 2016 for the Trump campaign when former President Donald Trump selected Indiana Gov. Mike Pence as his running mate. Contributions to other 2024 election campaigns involving candidates for, or incumbents, holding state or local office also could trigger the same issues.

Investment Advisers

With respect to investment advisers, Rule 206(4)-5 under the Investment Advisers Act of 1940, as amended, prohibits RIAs and ERAs from providing advisory services for compensation to a state or local public pension plan or other “government entity” pension plan if, within the past two years, they or their Covered Associates made a political contribution above a de minimis exception amount to an elected official of a state who is in a position to influence the selection of the investment adviser to manage such public assets. Covered Associates include an investment adviser’s (i) general partner, managing member and executive officers; (ii) any employees who solicit government clients (and their supervisors up the chain of command); and (iii) any political action committees they control.

The Minnesota State Board of Investment is responsible for investing Minnesota public assets (Minnesota Public Assets), including the assets of three statewide retirement systems,other public retirement savings plans, tax-advantaged savings plans, state agency cash balance accounts and non-retirement assets. As Chair of the Minnesota State Board of Investment, Gov. Walz is in a position to influence the selection of investment advisers to manage Minnesota Public Assets. Therefore, contributions to the Harris-Walz campaign by RIAs, ERAs and their Covered Persons above the de minimis exception amount will trigger a two-year time out (the “Time Out”) from managing Minnesota Public Assets by such investment advisers. Notably, Rule 206(4)-5 imposes strict liability on investment advisers, meaning that a non-de minimis contribution automatically triggers the Time Out, even in the absence of any quid pro quo arrangement. Indeed, the Securities and Exchange Commission (SEC) has brought numerous enforcement actions against investment advisers for violating Rule 206(4)-5, even in the absence of any quid pro quo arrangements.

The de minimis exception applies when a Covered Associate, who is a natural person, makes political contributions. This includes contributions to officials for whom the Covered Associate is entitled to vote for and if the total contributions do not exceed $350 to anyone official per election. For non-US citizens and other persons not permitted to vote in the presidential election, the de minimis exception is lowered to $150. Consequently, contributions to the Harris-Walz campaign below $350 in the aggregate by a natural person Covered Associate entitled to vote in the presidential election, and/or by contributions below $150 in the aggregate from a natural person Covered Associate not entitled to vote in the presidential election, will not trigger the Time Out. Moreover, contributions made to Vice President Harris before she selected Gov. Walz on August 6 will not trigger the Time Out.

In addition to the contribution limitations discussed above, Rule 206(4)-1 also prohibits RIAs, ERAs and their Covered Associates from soliciting contributions to the Harris-Walz campaign. Violations of this prohibition would not trigger the Time Out; however, they could subject the investment adviser to an enforcement action.