SEC quietly targets anti-corruption rule

The Securities and Exchange Commission published a proposal to rescind the pay-to-play rule, a nearly two-decade-old regulation that prevents investment firms from buying access to public pension funds through political donations.

How the rule came to be

In the early 2000s, Wall Street firms made huge donations and secret payments to state and local officials in exchange for lucrative contracts managing multibillion-dollar public pension funds. Some investments later tanked, hurting thousands of retirement accounts.

What the rule actually does

The regulation prevents asset managers from getting paid to manage money for government entities for two years after they donate to elected officials who oversee those funds. It allows employees limited donations of $150 to $350 per election.

“combat pay-to-play arrangements in which advisers are chosen based on their campaign contributions to political officials rather than on merit.”

SEC chairman's argument for scrapping it

Paul Atkins says the rule has needlessly burdened investment firms and led to serious penalties for small donations. He claims it has suppressed political speech by causing firms to prohibit all employee campaign contributions.

Critics say it prevents corruption

Benjamin Schiffrin of Better Markets countered that the rule suppresses corruption, not speech. The SEC itself stated in 2010 that the rule was designed to combat pay-to-play arrangements where advisers are chosen based on campaign contributions rather than merit.

“Not so. It has resulted in the suppression of corruption.”

The massive pension fund opportunity

Public pensions alone contain roughly nine trillion dollars. Public and private pension funds already make up more than forty percent of assets invested with private equity firms, which pay large fees in exchange for promises of greater returns.

Apollo's forty million dollar scheme

In 2009, CalPERS discovered that a former board member had accepted over forty million dollars from Apollo Management in exchange for helping the firm secure about three billion dollars in pension investments. The board member also funneled gifts and paid for meals and travel.

Carlyle, Quadrangle, and Markstone cases

Carlyle settled for twenty million dollars for making thirteen million in payments to secure seven hundred thirty million in New York pension investments. Quadrangle settled over one million in payments for one hundred million in investments. Elliott Broidy pleaded guilty to paying nearly one million for a two hundred fifty million investment.

The cost of Apollo's management

CalPERS lost at least four hundred seventy-five million dollars while Apollo managed their pension funds during the heyday of pay-to-play schemes. Without restrictions, investment firms could once again buy access to Americans' retirement savings.

Soft guidelines won't replace strict rules

The SEC suggests investment firms may enact their own ethical guidelines instead of following a strict rule. But voluntary policies are harder to enforce than clear regulations that have protected retirees' finances for nearly two decades.

Enforcement already declining sharply

The SEC brought ninety-seven cases involving abuse of public finance in 2016 but only seven in 2025. Recent scandals in Ohio and Iowa show pension fund corruption persists even with the current rule in place.