Republican state committees in New York and Tennessee asked a federal appeals court in Washington on Monday to overturn the Securities and Exchange Commission’s pay-to-play rule.
During oral arguments in the District of Columbia Circuit, the plaintiffs disputed the SEC’s position that its rule is not subject to judicial review.
The SEC rule prohibits investment advisers from taking compensation for services provided to a government client or through a pooled investment vehicle if anyone from the firm makes political contributions to someone who could influence the awarding of the advisory contract. Contributions above $350 from eligible voters or $150 from others trigger a two-year ban on getting paid for services. “Congress did not empower the commission to regulate federal political contributions when it granted generic authority to prevent fraudulent, deceptive or manipulative practices in the market for investment adviser services,” the parties argued in their brief.
New York City Public Advocate Letitia James, a trustee of the $53 billion New York City Employees’ Retirement System, filed an amicus brief supporting the SEC. “We’ve taken legal action to support preserving these anti pay-to-play provisions because we must protect pensions from politics. We believe that the federal court to which we submitted our brief will respond favorably and strike down GOP attempts to create a gaping pay-to-play loophole,” Ms. James said in a statement.