TN Republican Party Challenges MA Pay-to-Play Rules

On April 12, the Tennessee Republican Party filed a petition in the US Sixth Circuit Court of Appeals, seeking to invalidate the SEC's approval of new rules extending the MSRB's long-standing "pay-to-play" prohibitions to new municipal advisors.

The MSRB has prohibited "pay-to-play" practices in the municipal securities space since its Rule G-37 was promulgated in 1994. The Rule does not prohibit political contributions by bond dealers outright, but instead prohibits them from doing business with issuers to who's elected officials a dealer has made political contributions during the preceding two years. Despite its infringement upon political speech, Rule G-37 has been upheld by the Courts. See Blount v. SEC, 61 F. 3d 938 (DC Cir. 1995), cert. denied, 517 U.S. 1119 (1996). In 2014, the MSRB proposed amendments that would extend Rule G-37 to municipal advisors under the new MA regime introduced by Dodd-Frank. As since amended, those changes were "deemed approved" by the SEC's inaction on MSRB's latest proposal, effective Feb. 13, 2016. See MSRB Reg. Not. 2016-06; Release No. 34-76763; File No. SR-MSRB-2015-14.The new Rule is scheduled to become effective August 17, 2016. The Tennessee Republican Party (along with NY) lost a similar challenge to parallel investment-adviser pay-to-play regulations, when the District of Columbia Circuit held it was filed too late and in the wrong court. New York Republican State Committee v. SEC, No. 14-1194 (D.C. Cir. Aug. 25, 2015). I wrote about it here. The case is Tennessee Republican Party v. SEC, No. 16-3360 (6th Cir. Filed Apr. 12, 2016).

Thomas K. Potter, III ( is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Tom is licensed in Tennessee, Texas and Louisiana. He has over 30 years' experience representing financial institutions in litigation, regulatory and compliance matters. See attorney profile. © 2016 by Thomas K. Potter, III (all rights reserved).

Posted in: MSRB, SEC, Tennessee
Jump to Page
Arrow icon Top

Contact Us

We use cookies to improve your website experience, provide additional security, and remember you when you return to the website. This website does not respond to "Do Not Track" signals. By clicking "Accept," you agree to our use of cookies. To learn more about how we use cookies, please see our Privacy Policy.

Necessary Cookies

Necessary cookies enable core functionality such as security, network management, and accessibility. These cookies may only be disabled by changing your browser settings, but this may affect how the website functions.

Analytical Cookies

Analytical cookies help us improve our website by collecting and reporting information on its usage. We access and process information from these cookies at an aggregate level.