The US District Court for the District of Columbia dismissed a case brought against the US Securities and Exchange Commission (SEC) by the New York Republican State Committee and the Tennessee Republican Party, stating that the District Court is not “the proper forum for their challenge,” according to the memorandum opinion.
In its memo, the District Court states that the complaint should have been brought directly to the US Court of Appeals under a provision of the Investment Advisers Act which calls for all challenges of an SEC “order” to be brought before that court.
The plaintiffs plan to continue pursuing the case, pfm has learned. They filed a notice of appeal of the district court decision on October 1 as well a petition for review in the DC Circuit on October 6.
The complaint, originally filed in August, challenged SEC’s political contributions rule, claiming that registered investment advisors should be free to make federal political donations as part of their first amendment rights. Currently, the rule prevents any GP and key personnel from backing a political candidate that could in some way influence the decision of a limited partner, such as a public pension plan, to hire that GP or back one of its funds.
The lawsuit argued that the SEC lacks the statutory authority to regulate campaign contributions, noting that the Federal Election Commission has jurisdiction over federal campaign contributions and that political donations do not necessarily violate securities laws, which the SEC does have jurisdiction on.
The complaint noted that New York State Senator Lee Zeldin, who is running for the House of Representatives, has been negatively impacted by the rule. Zeldin confirms members of the New York Board of Regents, which sets guidelines and standards for managing certain state endowments. Similarly, the suit alleged that the Tennessee Republican Party has state officials currently seeking federal office who are covered by this rule, which “restricts Plaintiff Tennessee Republican Party’s ability to fundraise.”
The District Court raised an issue of standing with this point, noting that, as political organizations, the plaintiffs are not directly affected by the rule in the way that candidates and regulated advisers are. It is unclear if this standing issue will hurt the suit again in the Court of Appeals.