REMINDER: Political Contributions – FN2020-13
FINRA Rule 2030 and SEC Rule 206(4)-5 (collectively, the “Pay-to-Play Rules”) place restrictions on broker dealers and investment advisers in connection with political contributions. Under the Pay-to-Play Rules, ESI is prohibited from engaging in solicitation or distribution activities with certain government entities for two years after a contribution is made to an official of that government entity. Therefore, ESI policy requires preclearance of certain contributions to candidates for political office by Registered Representatives (“RRs”), as well as Investment Adviser Representatives (“IARs”).
Applicability
ESI policy requires that a Contribution to any Official running for political office (includes federal, state, or municipal), Government Entity, or political action committee (“PAC”) must be pre-approved by the Firm.
Contributions to candidates for state and/or municipal offices may not exceed $350 during an election cycle if you can vote for the official; or $150 during an election cycle if you cannot vote for the official. Contributions to entities that support campaigns (i.e. PACs), at the state or municipal levels are subject to the same de minimis contribution limits.
Please note that these limits apply to candidates for federal office, if they are incumbent to an elected position at the state or municipal level while running for federal office. For example: the limits would apply to a contribution to a current state governor running for a federal senate seat.
Definitions:
- A Government Entity is any state or political subdivision of a state, including municipalities.
- A Contribution is any gift, loan, advance, deposit of money or anything of value.
- An Official means any person who was, at the time of the Contribution, an incumbent, candidate or successful candidate for elective office of a Government Entity, if the office:
- Is directly or indirectly responsible for, or can influence the outcome of, the hiring of an investment adviser by a Government Entity; or
- Has authority to appoint any person who is directly or indirectly responsible for, or can influence the outcome of, the hiring of an investment adviser by a Government Entity.
Important to Note:
- You are prohibited from directing another person to contribute on your behalf.
- You may not direct payments through third parties (e.g. consultants, attorneys, family, friends or affiliated companies).
Certification
IARs are required to declare and certify political contributions, including those made to PACs, on their Quarterly Political Activity Certification. RRs certify annually, on their Registered Representative Annual Certification, that they have reported their political contribution activity. Do not wait until the certification to report a contribution.
How to Pre-Clear or Declare a Contribution
To submit a pre-clearance or declaration request for a political contribution:
- Go to StarCompliance (https://nationallife.starcompliance.com)
- Click on the “Political Activity” tile near the top of the page
- Once the tile is clicked the “DECLARE POLITICAL ACTIVITY” form will appear
- Complete the form and click “Submit”.
You may check the status of your request by clicking “View List” on the “Political Activity” tile, which displays submitted request(s) and their status (i.e. pending, approved, denied).
Failure to Pre-Clear Contributions
Pre-clearing political contributions permits ESI the opportunity to ensure your proposed contribution will not place the Firm and/or any of its RRs in jeopardy of violating the Rule. Failure to pre-clear Contributions to candidates for, or incumbents of, state or municipal office could create regulatory exposure and may result in disciplinary action.
If you have any questions about this requirement, please contact your supervisor or ESI Compliance at 800-344-7437.