Federal court upholds SEC pay-to-play rule

Federal court upholds SEC pay-to-play rule
© Anne Wernikoff

The nation’s second-most powerful court handed a victory to the Securities and Exchange Commission (SEC) Tuesday, dismissing a challenge to a five-year-old agency rule that puts restrictions on investment advisers' contributions to political campaigns.

The three-judge panel on the U.S. Court of Appeals Circuit affirmed the lower court’s decision to dismiss the case brought by two state Republican parties against the agency in 2014.


The New York Republican State Committee and the Tennessee Republican Party argued that the so-called pay-to-play rule exceeds the commission’s statutory authority and violates the Administrative Procedure Act as well as the First Amendment.

A lower court previously said it lacked jurisdiction to hear the case, leading the plaintiffs to appeal.

In the appeals court decision Tuesday, Judge Cornelia “Nina” Pillard said the two state Republican parties who sued the SEC missed their window for challenging the agency rule.

The parties should have referred to court precedent, which gives “precise instructions about what to do” if they were uncertain about where and when to file their suit, she said.

“The proper course for the plaintiffs to protect their rights was to file a petition with this court within sixty days of the rule’s issuance, not to wait four years to test their claim," she said. "There is no basis for excusing the plaintiffs’ failure timely to petition this court for review.”

In a statement, Letitia James, public advocate for the city of New York, applauded the court decision upholding the SEC rule.

“The GOP sued the SEC over this rule to help their 2016 Presidential candidates raise more money from Wall Street,” she said. “In truth, they are jeopardizing the retirement security of millions of Americans to further their political ambitions."