The U.S. Securities and Exchange Commission announced on September 3, 2026 that it is proposing to repeal Rule 206(4)-5, the controversial “pay-to-play” rule that has restricted investment advisers from earning compensation from government clients for two years after covered political contributions. The proposal would also remove related recordkeeping requirements.
Under the existing rule, an adviser or any covered associate who contributes to an official or candidate with influence over adviser selection can trigger a two-year timeout on payments from that government entity. SEC Chairman Paul Atkins called the rule a “trap for the unwary,” arguing that “people should not have to choose between their political speech rights and a job in a particular industry.” The Commission described the 15-year-old rule as complex, unclear and burdensome, functioning as a de facto strict liability standard.
The SEC says there are 16,434 registered investment advisers and about 1.11 million employees across those firms. The proposal would remove political-contribution-specific recordkeeping provisions, while anti-fraud provisions, fiduciary obligations, compliance requirements, ethical codes and other anti-corruption and procurement laws would remain in force.
The Investment Adviser Association has pushed for reform, favoring a more tailored approach rather than complete repeal. Research covering about 22,000 SEC-registered advisory firms from 2001 to 2016 found donations to state authorities and political action committees corresponded with increased public pension business, and political donations from managers with large government business declined after the rule took effect.
The proposal arrives amid record corporate political spending. Public Citizen reported on August 27 that corporations spent $646 million in the 2026 midterms, 40% more than the entire 2024 cycle, with crypto companies contributing $206 million. The comment period will last 60 days after Federal Register publication, and final adoption remains uncertain.
