On March 29, 2016, the SEC issued an order instituting proceedings to determine whether to approve or disapprove the Financial Industry Regulatory Authority's (FINRA) proposal to adopt FINRA Rules 2030 (Engaging in Distribution and Solicitation Activities with Government Entities) and 4580 (Books and Records Requirements for Government Distribution and Solicitation Activities). These "pay to play" and related rules, first proposed in December 2015, would regulate the activities of FINRA member firms that engage in distribution or solicitation activities for compensation with government entities on behalf of investment advisers. The proposal is modeled on the SEC's pay to play rule for investment advisers (Rule 206(4)-5 under the Investment Advisers Act of 1940).

The SEC issued the order so that it can seek additional input on the proposal and the issues presented by the proposal. Interested persons may submit comments on whether the proposal should be approved or disapproved until 21 days after publication in the Federal Register. The SEC will accept rebuttal comments until 45 days after publication in the Federal Register.

For a full summary of the proposal, see Legal Update, FINRA Proposes Pay to Play Rules.

For more on the SEC's pay to play rule, see Practice Note, Investment Adviser Pay to Play Rule.