Sep. 11, 2026
RE: Release No. IA-6994 / File No. S7-2026-31, RIN 3235-AN65, Political Contributions by Certain Investment Advisers The release proposes to rescind rule 206(4)-5's two-year compensation ban on advisers that make covered political contributions to officials able to influence government advisory contracts. It supports rescission partly by noting that "[s]ince the rule's compliance date, no similar enforcement actions have been brought by the Commission" against advisers for pay-to-play practices, while separately acknowledging "it is possible that the political contributions rule has had some deterrent effect." Those two statements point in opposite directions, and the release does not resolve which one better explains the enforcement gap before relying on the absence of enforcement to justify rescission. A rule that successfully deters the conduct it targets will also show no enforcement actions against that conduct; the release's own list of thirteen pre-2010 enforcement actions brought under the antifraud provisions alone shows what the detection rate looked like before the rule existed. If rescission returns advisers to that same antifraud-only enforcement environment, the pattern of few detected cases could resume for reasons having nothing to do with the underlying rate of pay-to-play conduct. The cost-benefit analysis compounds this by quantifying only one side of the ledger. The release calculates aggregate annual compliance-cost savings of $415,611,750, built from 2010 Adopting Release wage and burden-hour assumptions applied to counts of smaller, medium, and larger advisers, plus $67,770.50 in avoided exemption-filing costs. On the other side, the release states it does "not have data on measures indicating the extent of adviser competition that would allow us to quantify the magnitude of any such distortions," and describes the reintroduced pay-to-play risk only in qualitative terms - that the risk "can be mitigated" without a corresponding dollar estimate of what remains after mitigation. A cost-benefit comparison with one side carried to the dollar and the other side left as "we cannot quantify this" is not a comparison a reader can independently test; at minimum, a ranged estimate built from the same academic sources the release already cites - including the finding that each dollar in campaign contributions was associated with a $400 increase in government contract revenue, which the release discounts as not adviser-specific without supplying an adviser-specific alternative - would let commenters evaluate the tradeoff on comparable terms. The Initial Regulatory Flexibility Act Analysis has a related gap. It counts 460 small SEC-registered advisers, 34 of which report State or local government clients, but states the Commission does "not have data and are not aware of any databases that compile information regarding how many advisers are foreign private advisers and that have State or local government clients," and that "[i]t is unclear how many" of the 6,463 exempt reporting advisers - 1,268 of which manage under $25 million in assets - would count as small for this analysis. The IRFA proceeds on the population it can count without characterizing how large the uncounted population might be, which leaves the RFA's small-entity impact requirement addressed only for a known subset of the advisers the rescinded rule currently covers. None of this is an argument that the current rule is beyond criticism; the release's account of compliance costs falling on smaller advisers, and of advisers over-restricting employees' lawful political speech beyond what the rule requires, describes real problems with the existing prescriptive approach. The narrower point is that rescinding a prophylactic rule in favor of case-by-case antifraud enforcement is a substantive policy choice that deserves a cost-benefit record where both sides are developed to a comparable degree, and a small-entity analysis that accounts for the advisers it cannot currently count rather than setting them aside. Submitted by: Steven Quinn Singleton