Alexandria, VA – The Center for Competitive Politics (CCP) today announced that it filed comments critical of a new Municipal Services Rulemaking Board proposal to expand so-called “pay-to-play” rules. The draft amendments to what is formally known as Rule G-37 would in many cases ban certain investment managers from making campaign contributions to candidates for a range of vaguely defined offices.
“The proposed rule is too vague, too broad and tramples on the vital First Amendment right to contribute to candidates,” said CCP President David Keating. “The MSRB needs to go back to the drawing board and come up with an alternative that addresses pay-to-play concerns while protecting First Amendment rights.”
CCP says the proposed rule is unclear about what persons and candidates are covered by its provisions. For example, the proposed rule would reach candidates for any elective office that “has authority to appoint any person who is directly or indirectly responsible for, or can influence the outcome of” hiring a dealer for municipal securities business or an advisor for municipal advisory business. Yet the rule fails to say what qualifies as “indirect responsibility” or “indirect influence.”
Allen Dickerson, CCP’s Legal Director, explains in the comments that “This lack of clarity will inevitably mean that some contributions that would otherwise be made, and which pose little to no danger of pay-to-play corruption, will not be made. That is itself a substantial First Amendment harm.”
CCP identifies a number of vague or unclear terms in MSRB’s proposal that would chill speech and add confusion to the current rule. CCP warns that, “In short, the Draft Amendments attempt to obtain universal coverage by employing terms that are both vague and overbroad. This is an approach to regulation the United States Supreme Court has long decried, and a practice that leaves the present Draft Amendments open to eventual constitutional challenge.”
The proposed rule also institutes very low contribution limits for municipal advisors giving to candidates. Contributions to candidates that one cannot vote for are banned entirely, and contributions to candidates that one can vote for are capped at just $250.
CCP explains that this contrasts with SEC rules: “the SEC, in 2010, found that a $150 contribution limit for investment advisers who could not vote for the candidate was sufficient to achieve its pay-to-play objectives. The MSRB has provided no explanation as to why the higher SEC limits are insufficient, and CCP remains skeptical that even those limits are constitutional absent a strong evidentiary record on that point.”
Moreover, CCP notes that, “the Supreme Court has never ‘allowed the exclusion of a class of speakers from the general public dialogue,; which is exactly what the Draft Rule would do.”
CCP also advises the MSRB to explicitly exempt independent expenditures from the rule, in keeping with the Supreme Court’s ruling in Citizens United v. FEC.
MSRB must ensure that any rules it generates conform to Supreme Court precedent and the Constitution. CCP’s comments offers several alternative courses of action for MSRB to address pay to play concerns without burdening First Amendment rights, such as tougher penalties, stronger investigative tools for audits, and whistleblower protections.
The Center for Competitive Politics promotes and defends the First Amendment’s protection of the political rights of speech, assembly, and petition. It is the nation’s largest organization dedicated solely to protecting First Amendment political rights.
