Column: How Trump’s V.P. choice could throttle his fundraising chances

The Trump campaign’s fundraising record thus far is nothing to brag about. But legal authorities have begun noticing that by choosing a sitting governor, Indiana’s Mike Pence, as his running mate, Donald Trump has probably shut down any hope of big contributions from Wall Street.

That has nothing to do with the investment community’s political sentiment for or against Pence. It’s all about the Security and Exchange Commission’s 2010 “pay-to-play” regulations governing political donations by investment advisors.

We are concerned that contributions may be used ... as the cover for what is much like a bribe.

— Securities and Exchange Commission


As Viveca Novak of observes, they’re forbidden to make more than minimal contributions to any public official in a position to influence the selection of an investment advisor to a government entity. As Indiana governor, Pence is deemed to have influence over the selection of investment advisors to Indiana public pension funds such as the Indiana Public Retirement System, which had about $29.9 billion in assets at the end of 2015.

The penalties for violating the rule are draconian: the loss of any existing contracts with the subject funds, and a ban on new contracts for a two-year “time-out,” starting with the date of the donation. The stricture applies to investment firms’ executives and political action committees, as well as employees involved in soliciting business from government agencies and those employees’ supervisors. It means that “most hedge funds and private equity firms — their PACs, their executives, their fund managers and probably their investor relations staff — can’t give to the ticket,” Novak writes.

The rules would have applied to donors to at least one other official vetted for the ticket by the Trump campaign: New Jersey Gov. Chris Christie.

The pay-to-play rules were imposed after a spate of scandals in which political donations were traded for investment management deals with pension funds. The SEC’s commentary on the rules states candidly that “we are concerned that contributions may be used … as the cover for what is much like a bribe … a payment that accrues to the private advantage of the official and is intended to induce him to exercise his discretion in the donor’s favor.”

The SEC defines a contribution as almost anything of value, even a loan or advance, though not volunteer time. The de minimus exemption is $350 for a contribution by a donor eligible to vote for the candidate, and $250 for anyone else.

That’s a big difference from the standard limits for donations to political campaigns. Under federal law, individuals this year can contribute up to $2,700 to each candidate or candidate committee, $5,000 to each PAC, $10,000 total to state, district and local party committees and $33,400 to national party committees.

While donors can argue in some of these cases that they’re not contributing directly to a public official, Wall Street firms have been extremely gun-shy about the rules. Major firms require that political donations by covered employees be vetted in advance by compliance teams, and have tended to shy away from any donations that might even smell like a violation.

The rules have been a headache for campaigns almost since they were imposed. In 2012 they put a crimp in Texas Gov. Rick Perry’s presidential fundraising, and were said to have played a role in the Mitt Romney campaign’s rejection of Christie as running mate. Even though neither the Romney nor Obama campaigns that year featured a sitting governor on the ticket, both struggled to clarify the rules for potential investment industry donors so they wouldn’t be inordinately discouraged.

Keep up to date with Michael Hiltzik. Follow @hiltzikm on Twitter, see his Facebook page, or email

Return to Michael Hiltzik’s blog.


FTC moves against Herbalife, but leaves a question: Why is this company still allowed in business?

Feds say Prime Healthcare has figured out how to make money from hospitals — through fraud

The Zika crisis: How Congress abandoned its duty to govern