Challenge to SEC Pay-To-Play Rule Rejected by DC Circuit

Yesterday, the D.C. Circuit Court of Appeals turned back a challenge brought by the state Republican parties of New York and Tennessee to an important rule adopted by the Securities and Exchange Commission (SEC) to prevent pay-to-play practices in state investing in New York Republican State Committee v. SEC.  The Campaign Legal Center, joined by Democracy 21, filed an amici brief in the case in January of this year, urging the D.C. Circuit Court of Appeals to reject the challenge to the SEC rule. 

The SEC rule bars investment firms from managing state assets, like pension funds, for two years after a firm or its associates make more than de minimis contributions to officeholders or candidates who have or would have power to award investment contracts. The Court of Appeals found that the state parties' challenge to this rule was time-barred, noting that the Investment Advisers Act required the challenge to be brought within 60 days of the rule’s promulgation in 2010.

“We are glad to see that the Court of Appeals left this key measure to combat pay-to-play corruption standing,” said Tara Malloy, Campaign Legal Center Senior Counsel. “The SEC adopted this rule only after federal and state investigations uncovered extensive evidence of fraud in the award of state investment contracts—from Connecticut to Florida to New Mexico.  One such scheme involved former New York State Comptroller Alan Hevesi, who was ultimately convicted of steering $250 million in pension funds to an investment firm in exchange for gifts and more than $500,000 in contributions.  The SEC rule directly combats these types of abuses.”

To read the amici brief filed by the Legal Center with the D.C. Circuit Court of Appeals, click here.

To read the D.C. Circuit Court of Appeal’s opinion dismissing the petition, click here.