The New York Republican State Committee and the Tennessee Republican Party brought suit against the Securities and Exchange Commission challenging its political contributions rule for investment advisers, Rule 206(4)-5. The complaint seeks an injunction against the enforcement of the rule’s political contribution restrictions on contributions to federal candidates.
The first attack on the rule is that Federal Election Campaign Act gave the Federal Election Commission exclusive jurisdiction over federal campaigns. I don’t know enough about that law to opine on that argument.
The second attack is that the rule exceeds the SEC’s statutory authority. They look to the release for Rule 206(4)-5 and the SEC’s own statement that the rule may prohibit acts that are not themselves fraudulent. The problem is that the SEC is confusing payments to state officials as a quid pro quo for business with legal campaign contributions.
As for expertise, the parties point out that the SEC has no specialized knowledge of campaign finance or elections.
The third attack is that the rule violates the First Amendment to the US Constitution. One focal point of the argument is that the rule distorts the ability to give to candidates running for the same office. I pointed this out in the 2012 Republican presidential primaries. Contributions were limited to Rick Perry, but none of the other candidates.
Although some of the arguments could be used to take down the entire rule, the parties are only seeking to exclude it from application to federal candidates. In my view that would be an improvement. It would make it a much clearer rule. The only published relief under the rule was when the Ohio State Treasurer was running for US Senate. The employee thought the rule did not apply to federal candidates.
I don’t like the political contributions rule. It takes innocent, legal behavior, with no fraudulent intent, and turns it into a regulatory violation. Campaign finance is a problem, but the SEC rule does little to help the problem.
Sources:
- Complaint filed against the SEC
- Presidential Campaign Season and the SEC’s Pay-to-Play Rule
- Pay to Play and the Supreme Court
- Some Relief for a Fund Manager Under the Political Contributions Rule
Meade and Prettyman Courthouse by AgnosticPreachersKid
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