The SEC proposed rescinding Rule 206(4)-5 under the Investment Advisers Act of 1940, known as the pay-to-play rule, which can bar investment advisers from receiving compensation from government clients for two years after covered political contributions. Announced Sept. 3, the proposal would also eliminate contribution-specific recordkeeping requirements. The agency described the rule as complex, unclear and burdensome, while saying some firms have responded by prohibiting employee political contributions altogether. SEC Chairman Paul Atkins said people should not have to choose between political speech rights and a job in a particular industry. The SEC said 16,434 investment advisers are registered with the agency, employing approximately 1.11 million people. Managers competing for mandates from public pension funds, state retirement systems and public university endowments would be among the main beneficiaries if the rule is rescinded. Antifraud, fiduciary, compliance, ethics, anti-corruption and procurement requirements would remain. The Investment Adviser Association has supported a more tailored reform rather than complete repeal. Research covering about 22,000 SEC-registered advisory firms from 2001 to 2016 found that political donations corresponded with increased public-pension business, while giving by managers with substantial government business declined after the rule took effect. The proposal comes as corporations have spent $646 million in the 2026 midterms, including $206 million from crypto companies, according to a Public Citizen report. Public comments will close 60 days after Federal Register publication, and no final decision has been made.