A U.S. appeals court handed the Securities and Exchange Commission a victory on Tuesday by dismissing a challenge from two state Republican parties to the regulator’s pay-to-play rule for investment advisers.
Republicans in New York and Tennessee said the rule, which places some restrictions on asset managers who donate to political campaigns, was a violation of free speech rights.
The U.S. Court of Appeals for the District of Columbia Circuit, however, said the Republicans missed a key 60-day deadline to challenge the rule after it went into effect and had lost their chance to try and have it overturned.
Reuters could not immediately reach attorneys for the plaintiffs. An SEC spokesperson did not immediately respond to a request for comment on the ruling.
The SEC’s pay-to-play rule aims to combat a potential quid pro quo between investment advisers and elected officials in a position to help them win business.
It prohibits advisers from receiving compensation for helping to manage public assets, such as pension plans, for two years after making a campaign contribution to public officials or candidates in a position to award contracts.
In 2014, the Republicans tried unsuccessfully to argue the case in a lower federal court, but the judge there ruled that only the appeals court had the authority to hear the case.
On Tuesday, the appeals court affirmed that decision, saying that it was the proper venue.
However, its three-judge panel sided with the SEC, which had repeatedly argued that the Republicans missed the 60-day deadline to challenge the rule. The rule was adopted in 2010, but the challenge was not filed until August 2014.
“The proper course for the plaintiffs to protect their
rights was to file a petition with this court within sixty days of the rule’s issuance, not to wait four years to test their claim,” Circuit Judge Cornelia Pillard said in the court’s opinion.
“There is no basis for excusing the plaintiffs’ failure timely to petition this court for review,” she wrote.