11th Circuit Punts State Republicans’ Challenge of FINRA Rule to D.C.

ATLANTA (CN) – The 11th Circuit punted two state Republican party organizations’ challenge to a Financial Industry Regulatory Authority rule governing political contributions to the D.C. Circuit, and dismissed a third for lack of jurisdiction.

The New York Republican State Committee, the Tennessee Republican Party, and the Georgia Republican Party challenged the Securities and Exchange Commission’s approval of FINRA’s adoption of rule 2030, “a regulation governing the political contributions of FINRA members who solicit government officials for  investment advisory services contracts.” The rule also contains a provision to prevent loopholes by making indirect contributions to government officials.

“The Commission’s rules also prohibit investment advisors from using placement agents—persons who solicit government officials for investment advisory services contracts on behalf of investment advisers—unless such agents are ‘regulated persons’ within FINRA,” the ruling states.

The panel found they lacked jurisdiction for the Georgia Republican Party’s appeal, and the New York and Tennessee parties were found not to be in the appropriate venue for the petition because neither party has its principal place of business within the 11th Circuit.

The parties claim that the SEC does not have the authority to impose the regulation and that the new rule violates the First Amendment and will harm fundraising efforts because some placement agents will be barred from placing contributions.

Judge Julie Carnes, writing for the panel, found that the Georgia Republican Party was unable to substantiate the claim, submitting a single affidavit of from the party’s Executive Director, J. Adam Pipkin, as evidence.

In the affidavit, Pipkin claimed those regulated by the rule “will be limited in their ability to contribute to the Georgia Republican Party” and that the rule “will significantly hinder the state party.”

Pipkin also claimed that “the parties will have to divert resources to continue from its core mission to advise state and local officeholders about the impact of Rule 2030 on their ability to fundraise.” Pipkin offered no evidence in his affidavit to support that theory, according to the ruling.

The affidavit “offers no facts to show that the Georgia Party’s fundraising will actually be harmed,” Carnes states, adding the affidavit’s generalizations were not sufficient evidence.

The Georgia Republican Party argued the rule also imposes consequences for making contributions to certain candidates, but failed to name a specific member that would be injured by the rule.

The remaining challenges from New York and Tennessee were transferred to the agreed upon venue in the D.C. Circuit.

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