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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.
Conducted a detailed analysis of pay-to-play issues for a major pharmaceutical company and have obtained favorable advisory opinions from state regulators for a variety of our corporate clients.
We advise several major hedge funds on compliance with federal and state rules governing political contributions by government contractors, as well as lobbying registration laws that apply to hedge funds that seek investments from state and local public pension plans.
Pay-to-play laws do not just apply to investment advisers. Any company with government contracts is potentially subject to these rules. To that end, we regularly help our corporate clients develop and implement pay-to-play compliance policies and procedures.
We successfully represented a political candidate in one of the first and highest-profile pay-to-play law investigations in the country.
We offer a subscription service that provides clients with updates on pay-to-play laws in all 50 states.
March 31, 2016, Inside Political Law
The Securities and Exchange Commission announced Tuesday that it will allow further comment on a pay-to-play rule proposed by the Financial Industry Regulatory Authority (FINRA). As we discussed previously, if the SEC approves FINRA’s pay-to-play rule, it would clarify that investment advisers are allowed to hire third party solicitors if they are subject to ...
March 7, 2016, Inside Political Law
New Jersey is well-known for having strict, comprehensive, and complex pay-to-play laws. Two new changes to an annual pay-to-play filing required of some government contractors will only enhance that reputation. State law requires a company that receives $50,000 annually through government contracts in New Jersey to file a report by March 30 of the following … ...
February 18, 2016, Inside Political Law
On Wednesday, the Municipal Securities Rulemaking Board (MSRB) announced that its expanded pay-to-play rules will cover municipal advisors, including third-party solicitors, as of August 17, 2016. As we noted previously and discussed during Covington’s Corporate Political Activity & Government Affairs Compliance Conference earlier this month, the MSRB has been ...
January 19, 2016, Inside Political Law
A $12 million settlement announced last week by the Securities & Exchange Commission suggests that the SEC will aggressively pursue alleged schemes connecting political contributions to government contracts even if the political contributions do not violate its 2010 pay-to-play rule. According to the settlement order, in 2010, the head of Public Funds at State ...
August 27, 2015, Inside Political Law
Yesterday’s D.C. Circuit opinion upholding the SEC’s burdensome “pay-to-play” rule on procedural grounds is bad news for those questioning the rule’s constitutionality. Nevertheless, the rule is still far from invincible. The SEC pay-to-play rule, among other things, effectively prohibits investment firm executives from making certain political contributions to ...
July 8, 2015, Inside Political Law
The Wagner case, decided today by the D.C. Circuit, is important because of its analysis of the constitutionality of federal campaign contribution restrictions and, by extension, of pay-to-play laws generally. Covington has been monitoring this case since the district court decision in 2012, to the argument before the D.C. Circuit in 2013, and the decision … ...
May 26, 2015, Inside Political Law
Despite potential vulnerabilities, Hawaii’s pay-to-play law survived a significant challenge in the Ninth Circuit last week. The matter involved an electrical-construction company, its CEO and a second individual who challenged several sections of Hawaii’s campaign finance law, including a requirement that the company register and report its activities once it ...
May 7, 2015, Inside Political Law
Earlier this week, New Jersey Governor Chris Christie vetoed key aspects of a bill that would have imposed new restrictions on the ability of national and federal political party committees to raise money from Wall Street and financial executives. The bill, as we have previously discussed, sought to apply the state’s notoriously stringent pay-to-play rules … ...
March 27, 2015, Inside Political Law
A little-noticed sentence in a bill sitting on New Jersey Governor Chris Christie’s desk could, if it becomes law, threaten to curtail the ability of national party committees to raise money from Wall Street and financial industry executives. The Republican and Democratic Governors Associations, the Republican National Committee, the Democratic National ...
March 23, 2015, Inside Political Law
A constitutional challenge to the SEC’s “pay to play” rule moved one step closer to resolution today, even as significant hurdles remain in an effort to strike down the rule. The U.S. Court of Appeals for the District of Columbia Circuit heard arguments this morning on an appeal brought by two state political parties challenging … Continue Reading
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