• Governor Perry’s Presidential Candidacy Issues Under SEC Rule 206(4)-5 and MSRB Rule G-37
  • August 19, 2011
  • Law Firm: Skadden Arps Slate Meagher Flom LLP - New York Office
  • Gov. Rick Perry of Texas announced on August 13, 2011, that he is running for president. Contributions made or solicited on behalf of Gov. Perry’s presidential campaign are subject to federal pay-to-play rules — Securities and Exchange Commission (SEC) Rule 206(4)-5 for investment advisers and Municipal Securities Rulemaking Board (MSRB) Rule G-37 for municipal securities dealers. He also will be covered under proposed pay-to-play rules MSRB Rule G-42 (for municipal advisors) and CFTC Rule 23.451 (for swap-dealers and major swap participants), once they are finalized and take effect.

    Both Rules 206(4)-5 and G-37 prohibit a covered firm, its covered employees1 or any Political Activity Committees (PAC) they control from making, soliciting or coordinating contributions on behalf of a covered official. Such officials include a covered state official running for federal office. Gov. Perry is covered in that he appoints members to various Texas state pension funds and entities that may select an investment adviser (under Rule 206(4)-5) or issue municipal bonds (under Rule G-37).

    Consequently, covered firms, employees and their PACs should avoid making contributions to Gov. Perry’s presidential campaign, unless they qualify under an applicable de minimis exemption below. Moreover, they should avoid soliciting or coordinating contributions on his behalf, such as serving on his finance committee.

    De Minimis Exemptions

    Rule 206(4)-5

    A covered associate may contribute up to $150 per election to a covered candidate, and up to $350 per election to a candidate for whom he or she is entitled to vote. There is an MSRB interpretive notice stating that any individual “in the country” would be viewed as being entitled to vote for a presidential candidate given that the presidential race is national.2 As a practical matter, you also should make sure that the individual is a U.S. citizen, given that greencard holders residing in the U.S. are permitted to make contributions under federal election law, but are not permitted to vote.

    Rule G-37

    A municipal finance professional may contribute up to $250 per election to a candidate for whom he or she is entitled to vote. See above discussion regarding the MSRB interpretation.


     1 Investment adviser and covered associates under Rule 206(4)-5, and the broker-dealer and municipal finance professionals under Rule G-37.

    2 The SEC has recognized that MSRB interpretations under Rule G-37 may act as guidance under Rule 206(4)-5.