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Covington has advised clients regarding pay-to-play laws for many years, and we have one of the country’s most extensive practices in this area of the law. We have particular expertise with respect to the financial services, pharmaceutical, and manufacturing sectors. We assist clients in conducting internal investigations of pay-to-play compliance, devising pay-to-play compliance programs, reviewing the impact of pay-to-play laws on RFP responses and existing contracts, and pre-clearing proposed political contributions that could implicate these rules.

In recent years, federal regulators and numerous states and localities have adopted so-called “pay-to-play” laws restricting political contributions by state and local government contractors. Typically, these laws provide that campaign contributions made by, and political fundraising activities conducted by, a company, its senior executives, certain employees, or family members of senior executives and employees would bar the company from being awarded a government contract. Some of these laws also require contractors to file reports with government agencies identified covered political contributions. Violations during the pendency of a state or local contract may also result in fines, forfeiture of the contract and disgorgement of compensation received under the contract, and other penalties.

The Securities and Exchange Commission’s pay-to-play rule is particularly sweeping, covering state and local political contributions made by investment advisers, certain executives and employees, and their PACs. In addition, municipal securities dealers are subject to Rule G-37, a pay-to-play rule imposed by the Municipal Securities Rulemaking Board. And commodities swap dealers may be covered by the Commodity Futures Trading Commission’s pay-to-play rules. Moreover, many individual state and local pension funds and state and local agencies have their own pay-to-play rules.

We are well-versed in all of these laws and routinely update an internal database tracking new laws, changes, and developments.