This week FINRA proposed for SEC adoption a “pay-to-play” rule for broker-dealers engaged in distribution or solicitation activities with government entities. The Proposed Rule is modeled after investment-adviser pay-to-play Rule 206(4)-5 under the ’40 Act, adopted by the SEC in 2010.
Proposed FINRA Rule 2030(a) would prohibit a covered member from engaging in distribution or solicitation activities for compensation with a government entity on behalf of an investment adviser that provides or is seeking to provide investment advisory services to such government entity within two years after a contribution to an official of the government entity is made by the covered member or a covered associate (including a person who becomes a covered associate within two years after the contribution is made).
FINRA initially proposed the Rule in November 2014. See Reg. Notice 14-50. The proposal sent to the SEC makes some changes, including dropping earlier disgorgement and disclosure requirements.
New Rule 2030 will complete the pay-to-play suite of rules, together with the MSRB’s proposal extending its long-standing pay-to-play Rule G-37 to municipal advisors. That proposal also is pending before the SEC. I discussed it here.
The Rule filing, SR-FINRA-2015-056 (Dec. 16, 2015), is here.