SEC's Atkins Moves to Scrap $350 Political Gift Cap

SEC Chairman Paul Atkins proposed last week to rescind the agency's 2010 pay-for-play rule, a move that would free finance-industry employees to give more than $350 to state and local candidates and hand political-speech oversight back to state and federal election regulators.

"The rule has effectively resulted in the suppression of political speech," Atkins said in announcing the proposal, arguing that "many firms simply impose blanket prohibitions on employee political contributions rather than navigate the rule's complexities." People "should not have to choose between their political speech rights and a job in a particular industry," he added.

The 2010 rule, adopted under the Obama-era SEC, bars employees with authority over the hiring of investment advisers by government entities from donating more than $350 to candidates for governor, mayor, comptroller and other offices that play even a tangential role in appointing public pension fund board members. The stated aim was to stop financial firms from winning pension business by donating to the politicians who oversee those funds. Atkins counters that "matters involving political contributions are more properly governed by local ordinances, state laws, and federal election regulations—not by the SEC."

The proposal lands after JP Morgan Chase & Co. Chief Executive Jamie Dimon last year called the rule an infringement on his First Amendment rights. "I can't speak up, and I can't fight for what I believe," Dimon said. "Doesn't that violate my First Amendment rights?" Daniel Shuchman and Bradley Smith made a similar case in the Wall Street Journal last year, arguing the cap chills protected speech.

Progressives warn that scrapping the rule invites corruption in public pension investing, which oversees trillions of dollars in state and local retirement assets. Atkins counters that the SEC retains authority to police quid-pro-quo corruption, noting that investment advisers "are subject to the Investment Advisers Act antifraud requirements, fiduciary duty obligations, and rules requiring them to maintain compliance policies and procedures and codes of ethics."

The rulemaking now enters a public comment period before the commission can vote on a final rescission. A repeal would mark the latest step in a broader deregulatory push under Atkins, who has said the agency should focus its resources on policing fraud in public markets rather than political activity. Removing the SEC from policing political speech could free the agency to concentrate on investor-protection cases, the WSJ editorial board argued in support of the proposal.

The outcome hinges on the commission's makeup and the comment record. If the rule is rescinded, finance employees could resume donating to state and local campaigns, shifting political contribution flows from a sector that has largely sat out such races since 2010. If the proposal stalls, the $350 cap stays in force and firms keep their blanket bans in place. A final SEC vote is not yet scheduled.

This article is for informational purposes only and does not constitute investment advice.