Trump's SEC moves to scrap the rule guarding nearly $6 trillion in US public pension money — allowing Wall Street to make donations

“Advisers’ implementation of the rule has effectively resulted in the suppression of political speech,” SEC Chairman Paul Atkins said in a statement.

“Many firms simply impose blanket prohibitions on employee political contributions rather than navigate the rule’s complexities. Such practice discourages full participation in the electoral process through contributions to candidates. People should not have to choose between their political speech rights and a job in a particular industry.”

No replacement suggested for the rule

The SEC, in announcing the proposal, did not offer an alternate suggestion, with Atkins saying “Ultimately, matters involving political contributions are more properly governed by local ordinances, state laws, and federal election regulations.”

The pay-to-play rule went into effect in 2010, prohibiting “covered associates” from providing any sort of advisory services to government clients for two years after making certain candidate contributions. The term “covered associates” was intentionally broad to ensure wide protections. The bill was passed unanimously by the SEC with bipartisan support.

Now, however, the SEC says the rule has resulted in “significant unintended consequences,” including preventing advisers from making political contributions in state and local elections. In addition, the agency said the rule prevented public pensions from hiring “the most qualified or cost-effective advisers” or could cause them to lose them because of its two-year lockdown period following political contributions.

Pension plans, as of 2025, have over $6 trillion invested in them in the U.S., according to the U.S. Census Bureau.

The proposal will enter a 60-day public comment period. The SEC currently has a 3-0 Republican majority, with two vacant seats that are statutorily reserved for Democrats, virtually ensuring the proposal will pass, regardless of the level and nature of those comments.

A thin enforcement record

While Atkins’ calls the rule a violation of free speech for private equity firms, the SEC has only brought enforcement actions citing it a handful of times. In 2017, 10 investment advisory firms paid tens of thousands of dollars in penalties for violating the pay-to-play rule. Four more were charged in 2022, and another two in 2024.

Still, the chairman called the rule “overly prescriptive” and said it had produced numerous unintended consequences.

“Beyond operational implementation challenges, it has imposed serious penalties for small, often impulsive donations to candidates in both parties, and routinely punishes and handicaps advisory firms for an employee making a donation even before joining the business,” he said. “Our proposal would rescind the political contribution rule in its entirety and amend the Advisers Act recordkeeping rule to eliminate the provisions requiring a registered investment adviser to make and keep certain records in connection with the political contribution rule.”