New Jersey State Pay-to-Play Rules and Federal Elections
July 8, 2015
With Governor Chris Christie’s announcement of his candidacy for President of United States, a number of commentators have pointed out that the pay-to-play rules of the Securities and Exchange Commission for investment advisors and their covered associates, and the pay-to-play rules of the Municipal Securities Rulemaking Board for broker-dealers and their municipal finance professionals, apply to contributions to his candidate committee. Lost in the frenzy is that New Jersey’s own extensive and onerous pay-to-play rules do not apply to federal candidates regardless of the state office that the candidate holds.
There are two sets of New Jersey pay-to-play rules of concern: the statutory pay-to-play rules for state contracts under N.J.S.A. 19:44A-20.13-20.25, and the regulations of the New Jersey State Investment Council under N.J.A.C. 17:16-4.1 to 4.11.
As to the statutory pay-to-play rules, the New Jersey Election Law Enforcement Commission and the New Jersey State Treasurer have stated that contributions to a federal account that will be used only in federal elections do not trigger the rules. ELEC Advisory Opinion No. 03-2006; Letter of Bradley I. Abelow, New Jersey State Treasurer, June 23, 2006.
As to the New Jersey State Investment Council regulations, the regulations apply to political contributions and payments to political parties. N.J.A.C. 17:16-4.2, “political contribution” means a contribution for the purpose of influencing any election for New Jersey state office, and under certain circumstances, any election for New Jersey local office. Since a candidate committee for President is a candidate committee for a federal office, contributions to the committee are not political contributions.
Under N.J.A.C. 17:16-4.2, a “political party” does not include a federal or national campaign committee, or nonstate political committee, even if such federal, national, or non-state committee makes payments or contributions to which the regulations would otherwise apply. In addition, under N.J.A.C. 17:16-4.5(b), an indirect violation includes a person or entity making payments to a federal party or committee, or other political committee or organization for the purpose of influencing New Jersey state or local elections.
Since a campaign committee for President will not make contributions to influence New Jersey state or local elections, this section of the regulations should not apply as well. Since the New Jersey State Investment Council regulations do not apply, persons who work for investment advisors should determine whether they are covered associates under the SEC rules. If they are not covered associates, then neither the SEC rules nor the State Investment Council rules will prohibit their contributions to a Presidential campaign committee.
Finally, corporate executives and officers should consult counsel when considering contributions to candidates or political committees, whether at the municipal, county, state, or federal level.
Gibbons P.C. is counsel to Chris Christie For President, Inc.