Wall Street Hits Harris-Walz Donations That Amount to $350 or More. Here’s Why –

By Mitti Hicks

August 14, 2024

Federal regulations restrict the ability of some employees to contribute to political campaigns.

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If you work at a bank, you may want to reconsider donating to a political campaign. Some laws restrict this for finance workers.

It all comes down to the Securities and Exchange Commission’s “Pay-to-Play Rule” under the Investment Advisers Act of 1940. Passed in 2010, the regulation prevents financial firms from influencing politicians by contributing to political campaigns in hopes of getting a government contract, such as a state pension fund. In the case of Vice President Kamala Harris and her vice presidential candidate, Minnesota Gov. Tim Walz, Walz is a public official.

Large financial institutions make every effort to ensure that their employees follow the rules.

On Aug. 6, Citigroup sent a memo to employees reminding them to seek approval for donations to the Harris-Walz campaign. The policy applies to employees working in investment banking, wealth management and other departments. According to Business Insider, there is an exception for exempt employees in consumer banking.

Breaking the rules with even the smallest donation can cost financial institutions tens of thousands.

In 2017, for example, Pershing Square was fined $75,000 after an analyst contributed $500 to a Massachusetts gubernatorial candidate. In another case, the nation’s largest bank, JPMorgan Chase & Co., provided free advice to a Tallahassee, Florida, pension fund because the bank’s executive contributed $1,000 to the city’s mayor’s re-election campaign.

The current rules aren’t enforced solely by the SEC. Other financial regulators have similar rules, including the Commodity Futures Trading Commission and the Municipal Securities Rulemaking Board. According to Yahoo Finance, the rules generally prohibit financial firms from providing services to state and local governments for two years after employees make political contributions to relevant officials.

There are some exceptions. The de minimis exemption allows for individual contributions of less than $350 under SEC, CFTC and FINRA rules and $250 under MSRB Rule G-37. Other workarounds include donations to PACs or Super PACs that are not directly affiliated with candidates.

SEC Commissioner Hester Peirce criticized the pay-to-play rule after the SEC ruled to fine four investment advisers for one-time, small donations. She dissented from the ruling, writing, “I urge the Commission to reconsider the pay-to-play rule to ensure that it does not impede political involvement unrelated to an adviser’s pursuit of government clients.”