A federal court rejected a legal challenge to a U.S. rule that makes it difficult for some political candidates to raise money from Wall Street.
The Washington-based U.S. Court of Appeals dismissed an attempt to overturn the 2010 Securities and Exchange Commission regulation, ruling Tuesday that two state Republican Party committees waited too long to file their lawsuit. The SEC rule effectively bars banks, hedge funds and private equity firms from giving campaign contributions to governors and other state officials.
The decision comes as several Republican governors, whose fundraising is restricted by the regulation, seek their party’s presidential nomination. They include Chris Christie of New Jersey, Scott Walker of Wisconsin, John Kasich of Ohio and Louisiana’s Bobby Jindal.
Known as the pay-to-play rule, the SEC regulation prohibits investment advisers from overseeing state assets for two years after giving more than a nominal contribution to an official who could help the fund manager get hired.
It was put in place after a series of scandals involving investment advisers donating to politicians who later helped them win business from state pension funds.
The rule covers current office-holders and candidates in state races as well as state officials running for a federal office.
Many investment firms, which profit from their work for state-pension plans and college-savings plans, decided to forgo giving to any state officials to avoid the possible draconian consequences.
The New York Republican State Committee and the Tennessee Republican Party filed their suit last year amid a general loosening of U.S. campaign finance rules by the Supreme Court. The parties argued the restriction violated their constitutional right to free speech. They also contended that the SEC didn’t have the authority to regulate campaign contributions.
In Tuesday’s decision, the court left the door open for a new challenge, saying the parties could first ask the SEC to repeal the rule and then file suit if the request is denied.
An SEC spokeswoman declined to comment on the ruling. Lawyers for the state parties didn’t immediately respond to a call and e-mail seeking comment.
The case is New York Republican State Committee v. SEC, 14-1194, U.S. Court of Appeals, District of Columbia (Washington).