Facing freedom-of-speech issues, the SEC is taking a closer look at a pay-to-play proposal from the Financial Industry Regulatory Authority that would regulate political contributions.

On Tuesday, the commission said it would begin formal rulemaking proceedings for the proposal, including a comment and rebuttal process.

The Finra plan would prohibit the solicitation of, or sales to, a government entity by covered individuals (such as registered reps and placement agents) who have made political contributions to government officials within the past two years. De minimus contributions of $350 are allowed if covered persons are able to vote for the official, or $150 if not.

The proposal generally follows an existing SEC rule covering investment advisors who do, or seek to do, business with government entities.

Pay-to-play rules are designed to prevent fraud in the awarding of state pension contracts. They can cover a broad array of advisors, including retail reps who may work with defined benefit or defined contribution plans such as 403(b) and 457 plans.

But the political-giving restrictions are being challenged by opponents who say recent Supreme Court rulings raise doubts about the constitutionality of such limits.

Republican state parties in New York and Tennessee and the Center for Competitive Politics, a group that advocates for removing political spending limits, have objected to Finra’s proposal on constitutional grounds.

The Financial Services Institute also raised First Amendment concerns in a comment letter last January.

“Institution of proceedings appears appropriate at this time in view of the legal and policy issues raised by the [Finra] proposal,” the SEC said in its order Tuesday.

Erin Stattel, an SEC spokesperson, declined further comment.