[co-authors: , Lauren Wagner and Caroline Allen]

North Dakota Governor Doug Burgum announced his candidacy for the 2024 GOP Presidential nomination on June 7, 2023. His announcement, on the heels of Florida Governor DeSantis’ May 24 announcement, highlights the urgent need for investment advisers, broker-dealers, and other financial industry participants to update their political contribution approval procedures and internal education efforts.

Contributing to any political campaign (including a presidential primary campaign) implicates various federal pay-to-play rules, including:

• Securities and Exchange Commission Rule 206(4)-5 (the “SEC Pay-to-Play Rule”),
• Municipal Securities Rulemaking Board Rule G-37, and
• Commodity Futures Trading Commission Rule 23.451.

State-level pay-to-play laws may also apply to campaigns of any state officials. Unlike many other states, North Dakota does not have its own state-level pay-to-play rules; however, federal rules may impose lower contribution limits on contributors to Burgum’s campaign, thus presenting fundraising obstacles similar to those facing Florida Governor Ron DeSantis.

The SEC Pay-to-Play Rule prohibits an investment adviser from receiving compensation for investment advisory services provided to a government entity within the two years following a contribution to an associated “official.” An “official” is a holder of, or a candidate for, an elective office that has the requisite amount of control or influence over the hiring of an investment adviser by a government entity. The CFTC and MSRB rules contain similar prohibitions.

In assessing requests to make campaign contributions, advisers and other covered financial industry participants should consider the extent to which Governor Burgum is an “official” of a covered governmental entity under the Pay-to-Play Rule (or holds equivalent status under the MSRB and CFTC rules).

As with all pay-to-play assessments, a careful review of each governmental entity’s charter, powers, and operations should be considered.

All three federal pay-to-play regimes permit any covered individual in the country to contribute up to the applicable de minimis amount ($350 per election for the SEC and CFTC; $250 under the MSRB rule) to presidential candidates. For non-presidential campaigns, the applicable de minimis limits vary depending whether the contributor is entitled to vote for the candidate. For more information on federal pay-to-play rules, please refer to Akin’s June 6, 2023 alert regarding contributions to Governor DeSantis’ campaign.