N.Y. Republican State Comm. v. SEC. & Exch. Comm'n

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 15, 2018 Decided June 18, 2019

No. 18-1111

NEW YORK REPUBLICAN STATE COMMITTEE AND TENNESSEE

REPUBLICAN PARTY,

PETITIONERS

v.

SECURITIES AND EXCHANGE COMMISSION,

RESPONDENT

On Petition for Review of a Final Order

of the Securities & Exchange Commission

Edmund G. LaCour Jr. argued the cause for petitioners.

With him on the briefs were H. Christopher Bartolomucci and

Jason B. Torchinsky.

Jeffrey A. Berger, Senior Litigation Counsel, Securities

and Exchange Commission, argued the cause for respondent.

With him on the brief was Michael A. Conley, Solicitor.

Carter G. Phillips, Joseph Guerra, Tobias S. Loss-Eaton,

and Michael L. Post were on the brief for amicus curiae

Municipal Securities Rulemaking Board in support of

respondent.

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Before: PILLARD, Circuit Judge, and GINSBURG and

SENTELLE, Senior Circuit Judges.

Opinion for the Court filed by Senior Circuit Judge

GINSBURG.

Dissenting opinion filed by Senior Circuit Judge

SENTELLE.

GINSBURG, Senior Circuit Judge: In 2016 the Securities

and Exchange Commission adopted Rule 2030, which

regulates the political contributions of those members of the

Financial Industry Regulatory Authority (FINRA), a self-

regulatory association of broker-dealers, who act as

“placement agents” – i.e., individuals and firms that

investment advisers hire to help them secure contracts

advising a government entity. The Rule prohibits a placement

agent from accepting compensation for soliciting government

business from certain candidates and elected officials within

two years of having contributed to such an official’s electoral

campaign or to the transition or inaugural expenses of a

successful candidate. The New York Republican State

Committee (NYGOP) and the Tennessee Republican Party

petition for review of the SEC’s order approving Rule 2030,

on the grounds that: (1) the SEC did not have authority to

enact the Rule; (2) the order adopting the Rule is arbitrary and

capricious because there was insufficient evidence it was

needed; and (3) the Rule violates the First Amendment to the

Constitution of the United States. The SEC challenges the

petitioners’ standing to bring the case and defends the Rule

against these arguments.

We hold the NYGOP has standing and deny its petition

on the merits. The SEC acted within its authority in adopting

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Rule 2030; doing so was not arbitrary and capricious because

the SEC had sufficient evidence it was needed; and the Rule

does not violate the First Amendment in view of our holding

in Blount v. SEC, 61 F.3d 938 (1995), in which we upheld a

functionally identical rule against the same challenge.

I. Background

The SEC adopted the challenged rule in response to

longstanding concerns about so-called “pay-to-play” activity

in the public pension market. We therefore begin by laying

out what prompted the SEC’s decision to regulate the

contributions of placement agents to candidates and

incumbents for elected office.

A. Pay-to-Play and Public Funds

In many instances, local and state government officials

responsible for holding and managing public funds, such as

pension funds and tuition plans, are also responsible for

choosing investment advisers to manage plan assets. Political

Contributions by Certain Investment Advisers, Investment

Advisers Act Release No. IA–3043, 75 Fed. Reg. 41018,

41019/1 (July 14, 2010). 1 By 2010 an increasing number of

enforcement actions had revealed that some of these elected

officials chose investment advisers based upon whether the

would-be adviser had given them money or donated to their

campaign. 75 Fed. Reg. at 41019/3-20/3; id. at 41039 n.290.

For example, the SEC brought cases against the former

Treasurer of the State of Connecticut and other defendants,

1

Henceforth, for the sake of simplicity, we follow the lead of the

SEC in using the term “public pension plan” to refer to any

investment program “sponsored or established” by a government

entity, “regardless of whether they are retirement funds.” 75 Fed.

Reg. 41018 n.3.

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alleging the Treasurer had allocated pension fund investments

to fund managers in exchange for political contributions and

other payments made through the Treasurer’s “friends and

political associates.” Id. at 41020/1.

Concerned that these practices distort the market for

investment advisory services, the SEC adopted a rule in 2010

regulating the political contributions of firms and individuals

registered under the Investment Advisers Act of 1940, which

prohibits any adviser from engaging “in any act, practice, or

course of business which is fraudulent, deceptive, or

manipulative.” 15 U.S.C. § 80b-6(4); see 17 C.F.R. §

275.206(4)-5. This “Advisers Act rule” makes it unlawful for

an investment adviser to provide services “for compensation

to a government entity within two years after a contribution to

an official of the government entity is made by the investment

adviser or any covered associate of the investment adviser.”

17 C.F.R. § 275.206(4)-5(a)(1). The rule was “modeled on”

Rule G-37 of the Municipal Securities Rulemaking Board

(MSRB), 75 Fed. Reg. at 41020/3, which the SEC had

approved in 1994 and which imposes a similar two-year

“time-out” upon a dealer in the municipal securities market

who has donated to a covered official. Self-Regulatory

Organization - Municipal Securities Rulemaking Board,

Exchange Act Release No. 34-33868, 59 Fed. Reg. 17621,

17622/3-25/3 (Apr. 13, 1994). The SEC modeled its rule

upon MSRB Rule G-37 in part because we had upheld that

rule against a first amendment challenge in Blount, and in part

because the SEC believes G-37 was successful in

“significantly curb[ing] pay to play practices in the municipal

securities market.” 75 Fed. Reg. at 41020/3, 41023/3; see

also Order Approving a Proposed Rule Change To Adopt

FINRA Rule 2030 and FINRA Rule 4580 To Establish “Pay-

To-Play” and Related Rules, Exchange Act Release No. 34-

78683, 81 Fed. Reg. 60051, 60065/1 (Aug. 31, 2016).

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The SEC understood the Advisers Act rule would not

address all instances of pay-to-play corruption. In particular,

it was aware of several cases in which an investment adviser

did not contribute directly to a candidate or incumbent but

instead acted through a placement agent. See 75 Fed. Reg. at

41037/3-38/1; Notice of Filing of a Proposed Rule Change To

Adopt FINRA Rule 2030 and FINRA Rule 4580 To Establish

“Pay-to-Play” and Related Rules, Exchange Act Release No.

34-76767, 80 Fed. Reg. 81650, 81651/1 (Dec. 30, 2015). For

example, a placement agent who funneled contributions to the

New York State Comptroller secured contracts for its client to

advise $250 million worth of pension fund investments. 81

Fed. Reg. at 60065/3; 75 Fed. Reg. at 41019/3-20/3. The SEC

was therefore “concerned that a rule that failed to address the

use of [placement agents] would be ineffective were advisers

simply to begin using ... placement agents” to get government

clients. 75 Fed. Reg. at 41037/3.

Instead of barring investment advisers from hiring

placement agents, however, the SEC allowed an adviser to

retain a placement agent who is a member of the FINRA, 17

C.F.R. § 275.206(4)-5(a)(2)(i)(A); 15 U.S.C. § 78c(a)(26), if

the FINRA would impose restrictions upon its members that

were “substantially equivalent [to] or more stringent” than the

SEC’s parallel rule for investment advisers. 17 C.F.R. §

275.206(4)-5(f)(9)(ii); see Ga. Republican Party v. SEC, 888

F.3d 1198, 1200 (11th Cir. 2018); 81 Fed. Reg. at 60063/3

(noting the FINRA had agreed to “prepare rules for [the

SEC’s] consideration that would prohibit its [placement

agent] members” from engaging in pay-to-play activity).

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B. FINRA Rule 2030

In 2015 the FINRA proposed Rule 2030, which is

modeled after the Advisers Act rule and MSRB Rule G-37.

81 Fed. Reg. at 60053/1, 60057/2. Rule 2030(a), subject to

some exceptions, prohibits a FINRA member from

Engag[ing] in distribution or solicitation activities for

compensation with a government entity on behalf of

an investment adviser that provides or is seeking to

provide investment advisory services to such

government entity within two years after a

contribution to an official of the government entity is

made by the covered member or a covered associate.

In other words, if a placement agent makes a contribution

to a government official who can influence a government

entity’s choice of an investment adviser, see Rule 2030(g)(8)

(defining “official”), then the placement agent must wait two

years before he or his firm can accept payment for soliciting

that government entity on behalf of a client. The “two-year

time-out” is intended to serve as a “cooling-off period during

which the effects of a political contribution on the selection

process can be expected to dissipate.” 81 Fed. Reg. at

60053/1.

Rule 2030(b) prevents circumvention of this primary

prohibition by forbidding a covered member or a “covered

associate” of a member from “solicit[ing] or coordinat[ing]

any person or political action committee” to make any

contributions to a covered official. See also Rule 2030(g)(2)

(defining “covered associate”). The covered member or

associate is also forbidden from “soliciting or coordinating

any person or political action committee to make any payment

to a political party of a state or locality of a government entity

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with which the covered member is engaging in, or seeking to

engage in, distribution or solicitation activities on behalf of an

investment adviser.” Rule 2030(b)(2) (cleaned up). Put

another way, a placement agent may not solicit contributions

for a political party and later be paid to serve as a placement

agent for the state or locality of that party.

Rule 2030(c)(1) sets forth an exception to the Rule for de

minimis contributions, allowing an associate of a FINRA

member firm to contribute up to $350 to a candidate or

incumbent if he or she is eligible to vote for that person;

otherwise the limit is $150.

When the SEC approved FINRA Rule 2030 in 2016, the

NYGOP, along with the Tennessee and Georgia Republican

Parties, filed a joint petition in the Eleventh Circuit for review

of the SEC order. 81 Fed. Reg. at 60051; Ga. Republican

Party, 888 F.3d at 1201. The Eleventh Circuit held the

Georgia party did not have standing to challenge the order and

transferred the case to this court based upon the applicable

venue statute. Id. at 1205 (citing 15 U.S.C. § 78y(a)(1)).

II. Analysis

A. Standing

In order to bring their challenge, the petitioners must

establish they have satisfied the “constitutional minimum” for

standing to sue, which requires that (1) they have suffered an

injury-in-fact, (2) caused by the challenged conduct; and (3) a

favorable decision is likely to redress that injury. Lujan v.

Defs. of Wildlife, 504 U.S. 555, 560-61 (1992). If any one of

the petitioners has standing to raise a claim, then this court

has jurisdiction over that claim without regard to whether any

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other petitioner also has standing. Carpenters Indus. Council

v. Zinke, 854 F.3d 1, 9 (D.C. Cir. 2017).

Although we are typically skeptical about a petitioner’s

standing where, as here, neither petitioner is regulated by the

challenged rule, Lujan, 504 U.S. at 561-62, we hold the

NYGOP has met its burden by advancing “specific facts” to

support its claim to have suffered an injury-in-fact. Id. at 561;

Sierra Club v. EPA, 292 F.3d 895, 899 (D.C. Cir. 2002). The

NYGOP has submitted the affidavit of Francis Calcagno, a

placement agent covered by Rule 2030, stating that “if Rule

2030 were no longer in effect,” then he “would solicit

contributions for the NYGOP from [his] friends, family, and

other contacts.” Add. to Pet’rs’ Br. 18-19.

An organization is obviously “harmed if its contributors

cease giving it money.” Taxation with Representation of

Wash. v. Regan, 676 F.2d 715, 723 (D.C. Cir. 1982) (holding

a nonprofit has standing to bring a first amendment challenge

against restrictions denying tax deductions to its contributors),

rev’d on other grounds, 461 U.S. 540 (1983). Hence, we hold

the NYGOP’s reduced ability to raise funds due to Rule 2030

constitutes a concrete and particularized injury for purposes of

Article III standing.

The SEC claims Taxation is inapplicable because the tax

statute challenged in that case affected the entire donor base

of a nonprofit organization, whereas the NYGOP has not

shown placement agents affected by Rule 2030 constitute

more than a minority of its potential contributors. As the

petitioners point out, however, this argument addresses only

the degree of their injury. As we have long held, even a slight

injury is sufficient to confer standing; the size of the harm

therefore poses no jurisdictional barrier to the NYGOP’s

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claim. See Tax Analysts & Advocates v. Blumenthal, 566 F.2d

130, 138 (D.C. Cir. 1977).

The SEC next invokes Clapper v. Amnesty International

USA, 568 U.S. 398 (2013), to argue the petitioners’ risk of

harm is too speculative because it relies upon the decisions of

third parties not before us. In Clapper, the Supreme Court

held that certain attorneys and organizations did not have

standing to challenge a provision of the Foreign Intelligence

Surveillance Act of 1978 because they failed to show their

claimed injury – namely, that their communications with

overseas clients and contacts would be intercepted by the

Government – was “certainly impending.” Id. at 410-14. As

the Supreme Court later clarified, however, a plaintiff is not

limited to establishing injury-in-fact by showing that a harm

is “certainly impending”; it may instead show a “substantial

risk” that the anticipated harm will occur. See Susan B.

Anthony List v. Driehaus, 573 U.S. 149, 158 (2014). We

have, therefore, determined that “the proper way to analyze an

increased-risk-of-harm claim is to consider the ultimate

alleged harm ... as the concrete and particularized injury and

then to determine whether the increased risk of such harm

makes injury to an individual citizen sufficiently ‘imminent’

for standing purposes.” Attias v. Carefirst, Inc., 865 F.3d

620, 627 (D.C. Cir. 2017).

We have already determined that the NYGOP’s reduced

ability to raise funds is a concrete and particularized harm to

the organization. The question now is whether the NYGOP

has shown it faces a “substantial risk” of this harm

materializing.

We hold the NYGOP has met its burden. To be sure,

Calcagno has not shown with literal certainty that his contacts

would have donated to the NYGOP upon his request. But

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Clapper does not require certainty; instead, it understandably

holds a plaintiff’s risk of harm cannot be based upon a

“highly attenuated chain of possibilities.” 568 U.S. at 410.

Unlike in Clapper, where the chain comprised several links,

“requir[ing] the assumption that independent decisionmakers”

– the Attorney General, the Director of National Intelligence,

and judges of the Foreign Intelligence Surveillance Court –

“would exercise their discretion in a specific way,” Attias,

865 F.3d at 626, here the plaintiff’s standing requires only the

single inference that at least one of Calcagno’s family,

friends, or contacts would have donated a few dollars to the

NYGOP had Calcagno asked him or her to do so. In our

view, that inference is eminently reasonable – indeed,

irresistible; the increased risk of at least some harm as a result

of the SEC’s decision to adopt Rule 2030 is therefore

substantial and not speculative. Cf. id. at 628-29 (contrasting

the substantial risk of identity theft posed by a data hack with

the “long sequence of uncertain contingencies” in Clapper).

We do not believe that a practical application of Article III

requires more than the affidavit before us.

In short, we hold the NYGOP has Article III standing to

pursue this case. The NYGOP’s reduced ability to raise funds

due to Rule 2030 constitutes a non-speculative injury-in-fact,

which would be redressed were we to grant its petition.

B. Authority of the SEC

We turn now to the petitioners’ challenge to Rule 2030 as

an ultra vires regulation of campaign finance. Pursuant to

Section 15A of the Securities Exchange Act of 1934, the SEC

“shall approve” a rule proposed by the FINRA – the only

registered national securities association, see Self-Regulatory

Organization Rulemaking, SEC. EXCH. COMM’N (Mar. 5,

2019), https://www.sec.gov/rules/sro.shtml – if it is

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“consistent with the requirements of [the Act].” 15 U.S.C.

§ 78s(b)(2)(C)(i). Section 15A also authorizes the FINRA to

make rules to “prevent fraudulent and manipulative”

practices, “to promote just and equitable principles of trade,”

and to “remove impediments to and perfect the mechanism of

a free and open market and a national market system, and, in

general, to protect investors and the public interest.” 15

U.S.C. § 78o-3(b)(6); see also 81 Fed. Reg. at 60062/3-63/1.

The SEC says Rule 2030 comes within this authority

because pay-to-play transforms the process by which

government officials select investment advisers into one in

which political contributions, rather than the competence and

cost of investment advisers, drive the award of contracts. See

81 Fed. Reg. at 60063/1-65/3. As a result, public pension

funds are more likely to be managed by less qualified

investment advisers and to pay higher fees, to the detriment

both of the funds’ beneficiaries and of taxpayers. Id. at

60065/2; 75 Fed. Reg. at 41022/2-3. Indeed, pay-to-play

presents a familiar agency problem in which the agent, who

selects advisers for the fund, has an interest that diverges from

that of his principals – the beneficiaries. This is not a self-

correcting problem: Investment advisers and placement agents

who decline to pay are put at a competitive disadvantage. See

Blount, 61 F.3d at 945-46.

We agree with the SEC’s view of its authority. As we

said in Blount, 61 F.3d at 945, regulating pay-to-play

practices in the municipal bond market is within the authority

of the SEC to reduce distortion in financial markets:

“Pay to play” practices raise artificial barriers

to competition for those firms that either

cannot afford or decide not to make political

contributions. Moreover, if “pay to play” is the

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determining factor in the selection of an

underwriting syndicate, an official may not

necessarily hire the most qualified underwriter

for the issue.... “Pay to play” practices

undermine [just and equitable] principles [of

trade] since underwriters working on a

particular issuance may be assigned similar

roles, and take on equivalent risks, but be

given different allocations of bonds to sell –

resulting in differing profits – based on their

political contributions or contacts.

Id. This reasoning, of course, is not limited to the market for

municipal securities at issue in Blount; it applies with equal

force to the pension funds at risk of corruption in this case.

See 81 Fed. Reg. at 60063/2-3 (“[P]ublic pension plans are

particularly vulnerable to pay-to-play practices”).

The petitioners first complain this view of the SEC’s

authority is too expansive. In support, they cite California

Independent System Operator Corp. v. FERC, 372 F.3d 395

(2004) (CAISO), in which we held the Federal Energy

Regulatory Commission (FERC) exceeded its statutory

authority when it ordered a state-created utility corporation to

adopt a method for selecting members of its board, in

derogation of the method prescribed by a state statute. The

FERC claimed it was acting pursuant to its authority to

regulate a “practice” affecting a rate collected by a public

utility, id. at 399, but after analyzing the meaning of that word

in the Federal Power Act, id. at 398-401, we concluded the

“breathtaking scope” of the FERC’s interpretation was

unreasonable. Id. at 401.

The petitioners here do not explain how CAISO bears

upon the present case. To be sure, both cases involve a

13

federal agency accused of acting outside the bounds of its

authority, but there the similarity ends. The reasoning in

CAISO is addressed to the specific provisions of the Federal

Power Act, and the petitioners do not explain how it might in

any meaningful way affect our analysis of the Exchange Act.

Nor do the petitioners marshal any evidence to draw into

question our observation in Blount that there is a “self-

evident” connection “between eliminating pay-to-play

practices and the Commission’s [twin] goals of ‘perfecting the

mechanism of a free and open market’ and promoting ‘just

and equitable principles of trade.’” 61 F.3d at 945.

The petitioners argue in the alternative that the Congress

surely “could not have intended to delegate a decision of such

... significance to an agency.” Pet’rs’ Reply Br. 14 (quoting

FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120,

160 (2000)). Rather, the argument goes, the Congress has

reserved to itself the authority to determine when a political

contribution poses a risk of corruption, because it has chosen

to set limits directly through the Federal Election Campaign

Act of 1971 (FECA). As evidence that the Congress intends

to dictate when limits may be adjusted or imposed, the

petitioners cite a provision of the FECA that specifies

contribution limits shall increase based upon changes in the

price index, 52 U.S.C. § 30116(c), as well as FECA

provisions that bar contributions from certain groups, such as

national banks and foreign nationals, §§ 30118, 30121, but

not from placement agents.

Because none of these provisions bears upon the SEC’s

authority to uproot pay-to-play corruption in financial

markets, we take the petitioners’ argument to be that

provisions of the later-enacted FECA work an implied repeal

– a term the petitioners understandably reject – of the SEC’s

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pre-existing authority to regulate pay-to-play activity under

Section 15A of the Exchange Act.

As the SEC points out, however, the Supreme Court has

instructed that when “statutes are capable of coexistence, it is

the duty of the courts, absent a clearly expressed

congressional intention to the contrary, to regard each as

effective.” J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Int’l,

Inc., 534 U.S. 124, 143-44 (2001); see also Radzanower v.

Touche Ross & Co., 426 U.S. 148, 154 (1976) (describing

“two well-settled categories of repeals by implication: (1)

where provisions in the two acts are in irreconcilable conflict

... ; and (2) if the later act covers the whole subject of the

earlier one .... But, in either case, the intention of the

legislature to repeal must be clear and manifest”) (cleaned

up). We do not take this duty lightly. See FTC v. Ken

Roberts Co., 276 F.3d 583, 593 (D.C. Cir. 2001) (“Because

we live in an age of overlapping and concurring regulatory

jurisdiction, a court must proceed with the utmost caution

before concluding that one agency may not regulate merely

because another may”) (internal quotation omitted). In our

view, that the Congress has increased the contribution limits

to keep pace with inflation and that it has prohibited certain

groups from making contributions is not evidence of a “clear

congressional intention” to preclude the SEC from limiting

campaign contributions that distort financial markets.

Finally, the petitioners make a related but distinct claim,

based upon Galliano v. U.S. Postal Service, 836 F.2d 1362

(D.C. Cir. 1988), that the “first-amendment-sensitive”

provisions of the FECA limiting individual contributions

“displace” any authority the Exchange Act may have

conferred upon the SEC to set further restrictions. Pet’rs’ Br.

33-34 (citing Galliano, 836 F.2d at 1370). In Galliano, we

held the United States Postal Service could not enforce its

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statutory authority to prevent “false representations” in the

mail by imposing certain disclosure requirements for political

mail on top of those specifically required by the detailed

disclosure provisions of the FECA, which reflect a delicate

“balance of interests ... deliberately struck by Congress” in

light of the first amendment considerations involved in

regulating campaign finance. 836 F.2d at 1370. Similarly, as

the SEC emphasizes, we were concerned that the procedures

used by the Postal Service to adjudicate whether a defendant

had made a “false representation” through the mail would

have bypassed the “precisely drawn” dispute resolution

process prescribed by the FECA. Id. at 1371.

At the outset, we note that in Galliano, which was

decided prior to Blount, we were at pains to analyze the

authority of the Postal Service in a manner that “reduce[d]

constitutional doubt,” id. at 1369, with respect to two

questions: (1) whether the Postal Service’s effort to “regulate

solicitations for political contributions” was consistent with

the First Amendment and (2) “if so, then as a matter of first

amendment due process, [whether] such solicitations may be

regulated without a prior judicial determination of the

existence vel non of first amendment protections.” Id. at 1370

n.7 (cleaned up); see also Ken Roberts Co., 276 F.3d at 593

(describing Galliano as “relying on the First Amendment and

the canon of constitutional doubt in holding that the [FECA]

partially preempted the postal fraud prescriptions”). Although

the First Amendment is surely implicated in the present case

as well, Blount, as described below, has since clarified that

the SEC’s pay-to-play rules are not constitutionally infirm

under the law of this Circuit. Moreover, our concern in

Galliano with “first amendment due process” is simply not

relevant here. Whereas we were concerned in Galliano about

whether there would be sufficient judicial review of the Postal

Service’s case-by-case determinations of what is a

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misrepresentation and what is protected speech, id. at 1369,

1370 n.7, here we review only a facial challenge to whether

the bright line of Rule 2030 violates the First Amendment.

We are not therefore compelled by Galliano to resolve the

allegedly overlapping authority of the SEC and the FEC by

holding only one of them may regulate in a way that touches

upon political contributions.

Galliano might nevertheless have given the petitioners

some traction had the Supreme Court not later decided POM

Wonderful LLC v. Coca-Cola Co., 573 U.S. 102 (2014),

which supersedes some of this court’s reasoning in Galliano.

(Indeed, it is unclear to what extent Galliano has survived that

decision.) The Court in POM held that labeling regulations

implementing the Food, Drug, and Cosmetic Act (FDCA) do

not preclude a business from bringing a claim against a

competitor for unfair competition arising from false or

misleading advertising in violation of the Lanham Act. As

the SEC rightly claims, the reasoning in POM weighs heavily

in its favor. The Court began its analysis with the text of the

two statutes, noting neither contains an express limitation on

Lanham Act claims, which is “of special significance because

the Lanham Act and the FDCA have coexisted” for 70 years.

Id. at 113. Similarly, neither of the relevant statutes in this

case contains a provision limiting the reach of the other, and

the first pay-to-play rule adopted by the SEC (MSRB Rule G-

37) has coexisted with the FECA for 25 years. Furthermore,

in determining that the Congress did not “intend the FDCA to

preclude Lanham Act suits,” id. at 121, the Court reasoned

that the two statutes “complement each other in major

respects .... Although both statutes touch on food and

beverage labeling, the Lanham Act protects commercial

interests against unfair competition, while the FDCA” and

hence, we might add, the labeling regulation implementing it,

“protects public health and safety.” Id. at 115. Similarly, the

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FECA and the Exchange Act, as instantiated by the SEC’s

pay-to-play rules, can peacefully coexist: Although both

regimes touch upon political contributions, the FECA is

meant to protect elections from the perceived untoward

effects of over-limit campaign contributions by whomever

made, whilst the Exchange Act, as implemented by Rule

2030, is meant to protect the financial markets from the

perceived untoward effects of over-limit contributions made

by placement agents. See Blount, 61 F.3d at 944 (“[I]n

Buckley and Austin the legislature was interested in clean

elections, whereas here the SEC is interested in clean bond

markets”).

In so holding, we reject the petitioners’ argument that the

FECA is incompatible with the Exchange Act because the

general $2,700 contribution limit set by the FECA serves as a

“safe haven.” Pet’rs’ Reply Br. 18; see Galliano, 836 F.2d at

1370. This argument is not tenable after POM: The Court

there considered and rejected a similar contention, reasoning

that the implementing regulations of the FDCA should not be

viewed as a “ceiling on the regulation of food and beverage

labeling” because the “Congress intended the Lanham Act

and the FDCA to complement each other.” Id. at 119. Just as

the Court observed in POM that “[i]t is unlikely that Congress

intended the FDCA’s protection of health and safety to result

in less policing of misleading food and beverage labels than in

competitive markets for other products,” id. at 116, so too we

think it unlikely the Congress intended the FECA’s protection

of the electoral process to result in less policing of corruption

and inefficiency in the financial markets.

We are similarly unpersuaded by the petitioners’

argument that the FECA leaves no room for the SEC to

impose its own restrictions simply because the FECA is more

detailed. As the Court said in POM, the “greater specificity

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[of one law] would matter only if [the two laws] cannot be

implemented in full at the same time.” 573 U.S. at 118.

Because, as shown above, the Exchange Act and the FECA

can both be fully implemented without conflict, it matters not

that the FECA is more detailed.

Finally, the petitioners’ assertions to the contrary

notwithstanding, the “exclusive jurisdiction” of the FEC to

enforce the FECA, see 52 U.S.C. § 30106(b)(1), is no bar to

our conclusion that the SEC may enforce the Exchange Act to

reduce distortion in financial markets. Rule 2030 does not

purport to give the SEC the ability to enforce provisions of

the FECA. Cf. POM, 573 U.S. at 116-17 (explaining that

although the FDA has exclusive authority to enforce the

FDCA, “POM seeks to enforce the Lanham Act, not the

FDCA or its regulations”).

C. Arbitrary and Capricious

In their next line of attack, the petitioners claim the order

adopting Rule 2030 is arbitrary and capricious, in violation of

the Administrative Procedure Act, 5 U.S.C. § 706(2)(A),

because the SEC has not shown the Rule targets corruption

beyond that already prevented by federal and state laws

against bribery or by the FECA.

We do not believe the federal and state laws prohibiting

bribery are adequate to address pay-to-play activity, as the

petitioners suggest. Laws against bribery “deal with only the

most blatant and specific attempts of those with money to

influence governmental action,” Wagner v. FEC, 793 F.3d 1,

15 (D.C. Cir. 2015) (quoting Buckley v. Valeo, 424 U.S. 1,

27-28 (1976)); “corruption and its appearance are no doubt

more widespread in the contracting process than our criminal

dockets reflect.” Id.; see also id. at 25.

19

Nor is the FECA a solution to the problem: The SEC

adopted Rule 2030 precisely because it was aware of several

instances in which a placement agent’s contribution to a

government official – lawful under the FECA – influenced

that official’s decision to award an advisory services contract.

See 75 Fed. Reg. 41019/2-20/3, 41037/3. In adopting the

Rule, the agency explained that placement agents played a

“central role” in several pay-to-play scandals involving

FECA-compliant contributions to officials in New York,

Connecticut, and California. 81 Fed. Reg. at 60065/3; see

also 75 Fed. Reg. 41019/2-20/2; id. at 41019/3 n.17; id. at

41039/3 n.290.

The petitioners minimize the significance of this

evidence, arguing the SEC’s examples do not show that

“most, many, or even more than a few publicly disclosed

$2,700 federal contributions or similar contributions made to

state and local officials by placement agents will involve the

kind of quid pro quo arrangement” the Rule aims to prevent.

Pet’rs’ Br. 44. That is true, but it would make no sense to

require the SEC to show that quid pro quo arrangements are,

as the petitioners put it, “rampant,” id.: A contribution is

corrupting even if it cannot be traced to the subsequent award

of a contract for advisory services because in this market “a

contribution brings the donor merely a chance to be seriously

considered, not the assurance of a contract.” Blount, 61 F.3d

at 945. (Indeed, it could hardly be otherwise whenever a

candidate or incumbent receives several contributions from as

many would-be advisers.) Not surprisingly, in Blount the

record contained “no evidence of specific instances of quid

pro quos,” yet we rejected the same argument in the form that

the harms being targeted by MSRB Rule G-37 were “merely

conjectural.” 61 F.3d at 944. As we explained then in

analyzing whether MSRB Rule G-37 violated the First

20

Amendment, the contributions at issue “self-evidently

create[d] a conflict of interest” and, although actual

corruption is difficult to detect, the “risk of corruption is

obvious and substantial.” Id. at 944-45. Accordingly, “no

smoking gun is needed where ... the conflict of interest is

apparent, the likelihood of stealth great, and the legislative

purpose prophylactic.” Id. at 945; see also Buckley, 424 U.S.

at 29-30 (rejecting a challenge to the contribution limit in the

FECA that “most large contributors do not seek improper

influence,” because it is too “difficult to isolate suspect

contributions”).

D. The First Amendment

We turn, finally, to the petitioners’ contention that Rule

2030 violates the First Amendment. As a threshold matter,

however, we must determine the standard to which the Rule

should be held. The petitioners, of course, urge us to subject

Rule 2030 to strict scrutiny on the ground that we are

reviewing an action by the SEC as opposed to the Congress,

which they say alone has the “expertise” to weigh the first

amendment considerations involved. Pet’rs’ Br 52. This

novel theory runs up against our precedent holding the

“closely drawn” standard, which is “a lesser but still rigorous

standard of review” prescribed by the Supreme Court,

“remains the appropriate one for review of a ban on campaign

contributions,” Wagner v. FEC, 793 F.3d at 5-6 (citing

several Supreme Court cases, the most recent of which is

McCutcheon v. FEC, 572 U.S. 185, 197 (2014) (plurality

opinion)). We therefore ask whether Rule 2030 is closely

drawn to serve a “sufficiently important” governmental

interest. Id. at 7-8.

As the SEC points out, we answered this question when

we upheld MSRB Rule G-37 against the first amendment

21

challenge in Blount. Because MSRB Rule G-37 is identical in

every constitutionally relevant way to FINRA Rule 2030,

Blount compels our holding for the SEC in this

indistinguishable case. Then, as now, the Supreme Court has

said that “preventing corruption or the appearance of

corruption are the only legitimate and compelling government

interests thus far identified for restricting campaign

finances,’” FEC v. Nat’l Conservative Political Action

Comm., 470 U.S. 480, 496-97 (1985)); Blount, 61 F.3d at 944;

see also Wagner v. FEC, 793 F.3d at 8, 22 (restrictions on the

first amendment right to make political contributions may be

particularly necessary in the “contracting context,” which

“greatly sharpens the risk of corruption and its appearance”

because “there is a very specific quo for which the

contribution may serve as the quid: the grant or retention of

the contract”). We determined MSRB Rule G-37 survives

even strict scrutiny because the rule restricts only a “narrow

range of ... activities for a relatively short period of time.”

Blount, 61 F.3d at 947-48; see also Wagner v. FEC, 793 F.3d

at 26 (“The availability of other avenues of political

communication can thus be relevant, although it is of course

not dispositive”). Rule 2030 contains identical safeguards

and therefore survives our review today; its restrictions are

closely drawn to further a compelling governmental interest,

as can be seen in the specific instances of quid pro quo

conduct identified by the SEC. See Part II.C above; 81 Fed.

Reg. at 60066/1-2.

Rather than attempt to twist the logic of Blount in their

favor, the petitioners advance two reasons for thinking our

precedent is no longer good law. First, they invoke the

plurality opinion in McCutcheon for the proposition that

“Blount relied heavily on several strands of reasoning that the

Supreme Court has since rejected.” Pet’rs’ Br. 50. Under the

petitioners’ blinkered reading of that opinion, the present case

22

runs afoul of the Court’s admonition that a “‘prophylaxis-

upon-prophylaxis approach’ requires that we be particularly

diligent in scrutinizing the law’s fit.” 572 U.S. at 221.

McCutcheon, of course, involved an aggregate limit on

political contributions that was “layered on top [of the base

limits prescribed by the FECA], ostensibly to prevent

circumvention of the base limits.” Id. But the holding of

McCutcheon is not that a belt and braces approach is

necessarily unconstitutional, but that the court must be

“particularly diligent in scrutinizing the law’s fit” with the

governmental interest it is supposed to serve. Id. And so we

did in Blount by applying strict scrutiny, a standard even more

exacting than the “closely drawn” standard we apply now, to

evaluate the first amendment claim against MSRB G-37. 61

F.3d at 943-48.

Second, the petitioners would have us distinguish Blount

because this court was not there asked to consider the

“disparate impact that a restriction like Rule 2030 will have

on candidates running for the same seat” where one candidate

is a covered official and the incumbent (or another candidate)

is not. Pet’rs’ Br. 52. In support of their claim that this

disparity necessarily makes the Rule unconstitutional, the

petitioners quote dicta from two cases but disregard their

reasoning: Davis v. FEC, 554 U.S. 724, 738 (2008), and

Riddle v. Hickenlooper, 742 F.3d 922, 929 (10th Cir. 2014).

The operative question in both cases was not simply

whether the challenged rule had a disparate effect, but

whether the difference was “justified by the primary

governmental interest proffered in its defense.” Davis, 554

U.S. at 738 (cleaned up); see Riddle, 742 F.3d at 928. In

Davis, the Supreme Court held the Millionaire’s Amendment

to the Bipartisan Campaign Reform Act, which raised the

23

contribution limit for a candidate if a rival candidate

expended more than a certain amount of personal funds, could

not withstand first amendment scrutiny. 554 U.S. at 740-41.

Although the Court noted it has “never upheld the

constitutionality of a law that imposes different contribution

limits for candidates who are competing against each other,”

id. at 738, the Court invalidated the law not because of the

disparate effect upon the candidates, as the petitioners

suggest, but because the Government’s interest in “level[ing]

electoral opportunities for candidates of different personal

wealth” is not a “legitimate government objective,” id. at 741:

Because § 319(a) imposes a substantial burden on the

exercise of the First Amendment right to use personal

funds for campaign speech, that provision cannot

stand unless it is justified by a compelling state

interest. No such justification is present here.

Id. at 740 (internal quotation omitted). In contrast, the Court

has repeatedly – and, indeed, in the same case – recognized

that the prevention of “corruption and the appearance of

corruption” can justify an abridgment of first amendment

rights as long as the limits are “closely drawn” to serve that

important interest. See id. at 737; McCutcheon, 572 U.S. at

191-92; FEC v. Nat’l Conservative Political Action Comm.,

470 U.S. at 496-97.

Riddle, in which the Tenth Circuit invalidated a Colorado

statute as a violation of the Equal Protection Clause of the

Fourteenth Amendment to the Constitution of the United

States, 742 F.3d at 930, is likewise no help to the petitioners.

The state law at issue set a lower limit on contributions to

write-in candidates ($200) than to major-party candidates

($400). Id. at 924, 926. The court determined those limits

were “ill-conceived” to advance the State’s claimed interest in

24

preventing corruption or its appearance: “The statutory

classification might advance the State’s asserted interest if

write-ins, unaffiliated candidates, or minor-party nominees

were more corruptible (or appeared more corruptible) than

their Republican or Democratic opponents. But the

Defendants have never made such a suggestion.” Id. at 928.

In stark contrast, the SEC, in keeping with our observation in

Wagner v. FEC, 793 F.3d at 22-23, persuasively counters that

an elected official who can influence the award of contracts is

indeed more susceptible to corruption than an opponent who

cannot exert the same influence. Accordingly, we agree with

the SEC that any disparate effect from Rule 2030 is a feature,

not a flaw, of the narrow tailoring of the Rule; hence the Rule

is indeed closely drawn to fit the important governmental

interest behind it.

III. Conclusion

For the reasons set out in Part II above, we hold the

NGYOP has standing to sue. On the merits, we conclude the

SEC (1) had the authority to adopt Rule 2030, (2) has justified

doing so based upon both specific instances of quid pro quo

corruption and upon the inherent tendency toward an

appearance of corruption arising from the targeted

contributions of placement agents; and (3) has shown the Rule

does not violate the First Amendment because it was closely

drawn to advance a sufficiently important governmental

interest. For those reasons the petition for review is

Denied.

SENTELLE, Senior Circuit Judge, dissenting: I do not join

my colleagues in the judgment denying this petition, not because

I would grant the petition, but because I would dispense with it

by dismissal for want of jurisdiction. As the Supreme Court

reminds us, in order to bring an action in federal court a

petitioner carries the burden of establishing that it has standing

to bring the action. See, e.g., Susan B. Anthony List v. Driehaus,

573 U.S. 149, 158 (2014). To establish standing, the petitioners

would have to show (1) that they have suffered an injury-in-fact;

(2) that injury was caused by the challenged conduct of the

defendant or respondent; and (3) that a favorable decision in the

litigation would likely provide redress for the injury. Lujan v.

Defenders of Wildlife, 504 U.S. 555, 560–61 (1992). Petitioners

have failed to meet the first and most basic step of this three-part

constitutional minimum, as well as the second. First, they have

established no injury-in-fact.

The majority opinion sets forth the facts underlying this

litigation. I have no quarrel with their understanding of the

facts, but reach a different legal conclusion based on the facts

before the court. I therefore will make reference to the facts

only as necessary to support my legal reasoning. As the

majority acknowledges, neither petitioner’s conduct is regulated

by the respondent’s action, Rule 2030, and therefore they do not

claim the near-automatic standing of a regulated entity.

Petitioners assert instead that NYGOP has established standing

on the theory that an organization is “harmed if its contributors

cease giving it money.” See Taxation with Representation of

Washington v. Regan, 676 F.2d 715, 723 (D.C. Cir. 1982), rev’d

on other grounds, 461 U.S. 540 (1983). While this may be a

valid theory, it simply does not apply to this case. Neither of

petitioners has shown that any contributor has stopped

contributing because of the action of the Securities and

Exchange Commission.

2

For a harm to meet the standard for the first requirement of

standing, it must be an actual or at least “certainly impending”

injury. Clapper v. Amnesty Int’l USA, 568 U.S. 398, 401 (2013).

The Supreme Court has, as the majority notes, given a slightly

relaxed construction to the effect of the “certainly impending”

standard by recognizing that a petitioner may cross the bar of the

first standing requirement by establishing a “substantial risk”

that the anticipated harm will occur. See Susan B. Anthony, 573

U.S. at 158. Nonetheless, the very language of the Supreme

Court in Susan B. Anthony establishes that for the risk of an

anticipated harm to substitute for actual injury at the first step of

the standing analysis, that risk must not only exist but be

substantial. Petitioners have not carried the burden of

establishing a substantial risk.

In an attempt to meet its weighty burden, NYGOP has

submitted the affidavit of Francis Calcagno, a placement agent

covered by Rule 2030. Calcagno cannot attest to any injury-in-

fact that has occurred to the petitioners, but only swears that if

it were not for the SEC’s rule he would solicit contributions for

the NYGOP from his friends, family, and other contacts. As the

majority recognizes, he cannot attest with certainty that any of

his contacts would contribute to petitioners in the absence of the

rule.

Petitioners argue that the affidavit brings them within the

precedent of Taxation with Representation. However, that case

only held that standing is established for an organization “if its

contributors cease giving it money.” Calcagno’s affidavit

establishes no such facts. At most, it establishes that he believes

that if it were not for the rule he would speak to unnamed

contacts, friends, and relatives on behalf of the petitioners, and

that some of those unnamed contacts, friends, or relatives could

contribute. This is not the establishment of a substantial risk.

This is at most speculation.

3

Many cases hold that speculation is not the same as

establishing injury-in-fact for purposes of standing. “Although

imminence is concededly a somewhat elastic concept, it cannot

be stretched beyond its purpose, which is to ensure that the

alleged injury is not too speculative for Article III

purposes—that the injury is certainly impending.” Clapper, 568

U.S. at 409 (citing Lujan, 504 U.S. at 565 n.2). Thus, we have

repeatedly reiterated that “threatened injury must be certainly

impending to constitute injury in fact, and [] allegations of

possible future injury are not sufficient.” Id. at 398 (internal

quotations omitted).

Petitioners’ argument for standing does not survive

examination as required by Clapper. Their “theory of future

injury is too speculative to satisfy the well-established

requirement that threatened injury must be ‘certainly

impending.’ ” Id. at 401 (quoting Whitmore v. Arkansas, 495

U.S. 149, 158 (1990)).

Even if the majority is correct in its holding that this is a

sufficient showing of injury, petitioners’ claims founder on the

second step of the standing analysis. That is, even if petitioners

have established that they suffer injury-in-fact, they have not

established that the injury-in-fact is caused by the act of

respondent. Both this court and the Supreme Court have held

that when the establishment of injury depends on the volitional

act of a third party, the claimant has not established standing as

against the respondent.

Again, I would follow the teachings of the Supreme Court.

In Clapper the Court stated, “[w]e decline to abandon our usual

reluctance to endorse standing theories that rest on speculation

about the decisions of independent actors.” 568 U.S. at 414.

4

To summarize, as the Supreme Court did in Clapper,

petitioners “bear the burden of pleading and proving concrete

facts showing that the defendant’s actual action has caused the

substantial risk of harm. Plaintiffs cannot rely on speculation

about ‘the unfettered choices made by independent actors not

before the court.’ ” Id. at 414 n.5 (quoting Lujan, 504 U.S. at

562).

Therefore, rather than deny the petition, I would dismiss it

for want of jurisdiction.