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SEC Hit with Lawsuit on Political Contributions to Public Pension Funds Rule

Joining forces against the U.S. Securities and Exchange Commission (“SEC”), the New York Republican State Committee and Tennessee Republican Party have filed a lawsuit against the agency regarding a rule they claim violates the First Amendment and Administrative Procedures Act (“the Act”). According to the August 7th complaint, both parties contend that a rule restricting an adviser’s political contributions to public employee pension funds imposes on the Federal Elections Commission’s authority to regulate campaign spending as established in the Act. The complaint also asks the U.S. District Court to declare that the SEC lacked proper authority to write the rule.

The plaintiffs contend that the rule, which is part of in SEC’s Release No. IA-3043, Political Contributions by Certain Investment Advisers, is based on the assumption that pay-to-play actions could transpire within public pensions. In addition, the complaint stated that fund advisers are less willing to make political contributions because of the rule’s restrictions. As a result, the plaintiffs request the rule be overturned. At a time when candidates are lobbying campaign contributions for the 2016 presidential primaries, early reports indicate the SEC rule is affecting politicians seeking donations from their Wall Street connections. An SEC spokeswoman refused to comment on the lawsuit.

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