The ruleapproved in 2010 by the Securities and Exchange Commissionbans financial firms that do business with state and local governments from receiving state contracts for two years if employees donate more than a few hundred dollars to governors and other public officials.
The measure could create two tiers of potential presidential candidates: Those who aren’t current governors, such as Jeb Bush and Sens. Marco Rubio and Ted Cruz, won’t have to worry about the regulation, while it could be a major issue for those running from the governors mansion.
Big money is at stake. Wall Street poured nearly $80 million into the 2012 race — some of which could be off limits for governors vying for the White House now.
“It’s a significant amount of money that could potentially be out of reach for these 2016 candidates that are governors simply because of this SEC rule,” said David Mitrani, an attorney and campaign finance law expert. “It’s absolutely not a level playing field.”
There are also big consequences for financial companies themselves. The rule imposes a significant fine and a two-year “timeout period” on companies that are found to be in violation. In many cases, these contracts can be worth millions of dollars over time and serve as the lifeblood for smaller Wall Street firms.
Given the murkiness of the rule’s enforcement, some firms are cautious.
The Blackstone Group, a private equity firm that helps manage the New Jersey state pension fund, has a blanket prohibition against donating to state politicians there.
“We require that all contributions be cleared and prohibit any to PACs that fund, are controlled by, or primarily benefit state and local candidates or office holders,” Blackstone spokeswoman Christine Anderson told CNN.
Mitrani, the attorney and campaign finance expert, said such restraint is wise.
“A lot of companies live and breathe based on these government management services. There’s so much money involved,” he said. “The consequence of losing this business for even a three-figure contribution is not worth the risk for a lot of companies.”