ComplySci, a provider of regulatory technology and compliance for the financial services sector, has published a guide to regulations governing election contributions, the firm announced today.
The guide, 2022 Ultimate Guide to Pay-to-Play Compliance, is designed to help financial firms navigate the nuances of federal regulations on political contributions and identify risk-mitigating solutions, ComplySci said. It outlines recent changes in the regulations; the implications of federal, state and local pay-to-play rules in an election year; and the best practices to address these risks.
The federal government and at least 20 states have pay-to-play regulations, with more states and municipalities expected to approve similar measures in the coming months and years, ComplySci said.
"Political engagement and contributions have increased significantly since the adoption of the SEC's pay-to-play rule in 2010, increasing compliance risk for financial firms that do business with government entities," John Gebauer, National Regulatory Service president, said in a statement. "We want to ensure compliance professionals have an integrated, comprehensive program to track, detect and review any political contributions made by a firm and its covered associates to avoid triggering the rule and being unable to do business with the government entity which was, intentionally or not, inappropriately influenced."
According to campaign finance reports filed with the Federal Election Commission, presidential candidates raised and spent $4.1 billion in the 2019 to 2020 election cycle. Meanwhile, Congressional candidates raised another $4 billion and political action committees raised roughly $13 billion. “Direct contributions provide the most apparent risks, but indirect contributions, which can be in-kind donations, look-back provisions or accidental, such as registering for a fundraiser or dinner, also can trigger violations,” ComplySci said.
"The current SEC has an ambitious and aggressive agenda to address systemic fraud and conflicts of interest, which can harm investors and corrupt our public markets," and compliance with pay-to-play election regulations are part of that campaign, Gebauer said.
The guide is being published in conjunction with illumes, a ComplySci company that builds tools for transparency.