SEC Proposes Rescinding the Pay-to-Play Rule for Investment Advisers

In a proposal issued September 3, 2026, the SEC would rescind Advisers Act Rule 206(4)-5, adopted in 2010, which currently bars investment advisers from providing compensated advisory services to government clients for two years following certain political contributions to officials who could influence adviser selection. SEC Chairman Paul Atkins said that after more than 15 years, the rule "is overly prescriptive and has produced a host of unintended consequences," pointing to its strict liability structure and its effect on advisers' political contributions. The proposal is open for public comment and has not been adopted.

What this means for advisers:

• The rule remains in effect today. Firms serving government clients, such as public pension funds, should maintain existing pay-to-play policies and monitoring until any final rule is adopted.
• The SEC's stated concern is the rule's strict liability design, where inadvertent or minor contributions can trigger significant consequences regardless of intent.
• All other Advisers Act obligations (fiduciary duty, fraud provisions, compliance program requirements, and codes of ethics) are unaffected by this proposal.
• Commissioners Hester Peirce and Mark Uyeda issued separate statements supporting the proposal, with Peirce framing the current rule's restrictions in First Amendment terms.
• A 60-day comment period follows publication in the Federal Register.

ICS continues to track how proposed changes to political contribution rules could affect compliance policies for advisers serving government clients.

Read the proposal.

ICS advises financial institutions navigating regulatory changes of this type. If your firm needs to assess the impact of this development on your compliance program, contact us to discuss.