Vice President Kamala Harris’ choice of Minnesota Gov. Tim Walz as her running mate has created an unexpected challenge for Wall Street’s political donors.
Major financial institutions are currently facing strict regulations that could limit their employees’ ability to contribute to the Harris-Walz campaign.
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At the heart of the problem, which was initially reported by Business Insider, is the Securities and Exchange Commission’s “pay-to-play” rule, passed in 2010. The regulations are intended to prevent financial firms from influencing politicians through campaign contributions in the hopes of securing lucrative government contracts, such as managing state pension funds.
Citigroup issued a memo on August 6 requiring most U.S. employees to seek pre-approval for donations to the Harris-Walz campaign. According to Business Insider, the policy affects employees in investment banking, wealth management and other departments, with only the consumer banking unit exempt.
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The stakes are high for financial institutions. Even small donations can lead to significant fines. In 2017, Pershing Square was fined $75,000 after an analyst made a $500 contribution to a Massachusetts gubernatorial candidate. Similarly, JPMorgan Chase agreed to advise a Tallahassee, Florida pension fund pro bono for two years because of an employee’s previous political donation.
The situation stands in stark contrast to the 2020 election, when Wall Street donors contributed more than $74 million to Joe Biden’s campaign, according to data from Insider’s Center for Responsive Politics.
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The regulation extends beyond the SEC. Similar rules exist at other financial regulatory agencies, including the Commodity Futures Trading Commission and the Municipal Securities Rulemaking Board. The rules generally prohibit companies from providing certain services to state and local governments for two years after covered employees make political contributions to relevant officials.
However, according to Skadden, a New York City-based law firm, the rules have some nuances. There is a de minimis exemption for individual contributions — $350 under SEC, CFTC and FINRA rules and $250 under MSRB Rule G-37. The exemption applies regardless of whether the donor lives in Minnesota.
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Critics argue that the regulation could stifle political participation. Insider noted that SEC Commissioner Hester Peirce criticized the pay-to-play rule in 2022, calling it an “extremely blunt instrument” that “imposes unique, unquantifiable costs on individuals by impeding their ability to participate in the political process.”
As the campaign progresses, financial institutions and their employees must deal with the regulations.
While some may find solutions in the form of donations to specific PACs or Super PACs not directly tied to the candidates, the overall effect will likely dampen Wall Street’s financial support for the Harris-Walz ticket.
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This article $350 Could Cost You Thousands: Wall Street Banks Put the Brakes on Harris-Walz Donations originally appeared on Benzinga.com
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