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 US District Court for the District of Columbia dismissed the case. But not all is lost in Mudville. The decision hinged on whether the District Court or the Court of Appeals should have jurisdiction over the case.
The District Court found that the political contributions rule is an “order” for purposes of the Investment Advisers Act. That means the proper venue is the Court of Appeals. That means that the New York Republican State Committee and the Tennessee Republican Party merely have to refile the case in the Court of Appeals.
However, the District Court raised the issue of standing that may come to haunt the New York Republican State Committee and the Tennessee Republican Party. As political organizations, they are not directly affected by the rule. It’s really the candidates and the regulated advisers who are hurt by the rule. The party organizations failed to allege any specific facts that show a decline in contributions because of the political contributions rule.
The party organizations did point to State Senator Lee Zeldin, a candidate for the U.S. House of Representatives as an individual who was harmed by the rule.
I thought this would be a tough case to win on the merits. It may never get to the merits because of the jurisdiction and standing issues.
Sources: