A federal appeals court recently rejected a challenge to the SEC’s pay to play rule.  Adopted by the SEC to prevent “pay to play” arrangements between public officials and investment advisory firms, the rule restricts certain registered investment advisers from making political contributions to officials with some level of control over the investment decision-making of public pension plans and other government entities.  Last week, the U.S. Court of Appeals for the D.C. Circuit threw out a lawsuit seeking to set aside the rule.  This latest development has put a spotlight on the pay to play rule, which is extremely broad and can be confusing in its application.  With the 2016 elections quickly approaching, it is important that affected firms re-examine their efforts to comply with the rule – especially given the heightened level of SEC scrutiny in this area, as indicated by recent enforcement activity.  In a guest article, Justin V. Shur and Gerald P. Meyer, a partner and an associate, respectively, at Molo Lamken, discuss the facts and findings of the case; analyze liability under the pay to play rule; clarify penalties for non-compliance; and offer tips to prevent and mitigate violations.  For additional insight from Shur, see “FCPA Considerations for the Private Fund Industry: An Interview with Former Federal Prosecutor Justin Shur,” Hedge Fund Law Report, Vol. 7, No. 20 (May 23, 2014); “How Private Fund Managers Can Manage FCPA Risks When Investing in Emerging Markets,” Hedge Fund Law Report, Vol. 6, No. 2 (Jan. 10, 2013); and “Political Intelligence Firms and the STOCK Act: How Hedge Fund Managers Can Avoid Potential Pitfalls,” Hedge Fund Law Report, Vol. 5, No. 14 (Apr. 5, 2012).