The SEC's pay-to-play rule has a wide reach to prevent investment advisers from giving contributions, directly or indirectly, to elected officials who are in a position to award the adviser with business. One important provision, effective in July 2015, is the prohibition on investment advisers using third parties that solicit business from a government entity. But investment advisers are allowed to use third parties that are "regulated persons." This includes registered brokers or dealers that are subject to their own pay-to-play rules adopted by a registered national securities association. This encouraged FINRA and MSRB – both self-regulatory nonprofit organizations – to adopt pay-to-play rules so that brokers and dealers would qualify as "regulated persons." The SEC's Division of Investment Management held off on enforcing the prohibition against investment advisers until the MSRB and FINRA rules became effective in August 2017.

Now that the FINRA rules are in place, investment advisers are allowed to use broker-dealers subject to FINRA's pay-to-play rules. But there was still the question of how a particular type of broker-dealer—the "Capital Acquisition Broker"—would be regulated. "CABs" may engage in a limited range of activities by generally advising funds on capital raising and corporate restructuring or act as placement agents. CABs do not carry or maintain customer accounts, handle customer funds or trading orders, or engage in proprietary trading or market-making. A firm may elect to be governed by CAB rules because CABs are subject to fewer FINRA regulations and are not expressly covered by FINRA's pay-to-play rules. As a result, however, CABs do not qualify as "regulated persons" and investment advisers cannot engage them.

To resolve the issue, FINRA proposed a rule in August 2017 that clarifies that CABs are subject to the FINRA pay-to-play rules. Similar to the SEC rules, the proposal bars a CAB from seeking paid work from a government entity for two years after it or a covered associate makes a contribution to a public official of the entity. The rule was approved by the SEC on September 29, and FINRA will announce the effective date of the rule by November 28. In the meantime, however, the Division of Investment Management has advised that it will not seek enforcement action against an investment adviser that engages a CAB until after the effective date of the rule.

In addition to the third-party restrictions, funds that manage government assets have to be very careful about the political activities of their covered associates. The SEC has brought a number of enforcement actions against investment advisers where employees made personal contributions that had nothing to do with government business to state officials. Some of these contributions were made by employees who may or may not have even been covered associates. Even small or returned contributions by these employees resulted in enforcement action. To avoid being barred from business, a number of investment advisers agreed to pay penalties up to $100,000 to settle the charges. Investment advisers, broker-dealers, and CABs are all encouraged to review and enforce their pay-to-play compliance procedures.