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Rules of the Game: Wall Street Donation Rules May Cost Perry

Tom Williams/CQ Roll Call File Photo

Texas Gov. Rick Perry has a Wall Street problem.

It's not just that finance industry players regard Perry with suspicion, thanks in part to his recent attacks on Federal Reserve Chairman Ben Bernanke. Perry's bigger problem is that federal rules actually bar certain finance-sector professionals from donating to his campaign.

Perry is the only presidential candidate in the field affected by the rules, which are aimed at curbing pay-to-play abuses in the lucrative municipal bonds and public pension industries. The federal rules penalize certain investment advisers and municipal securities dealers who make campaign contributions to state officials running for federal office. Perry is the only White House hopeful who fits that bill.

"There are going to be certain people who would like to make contributions to his campaign, or solicit contributions for his campaign, who will not be able to," said Kenneth Gross, who heads the political law practice at Skadden, Arps, Slate, Meagher & Flom. "I wouldn't call it debilitating. But it will certainly put him at some disadvantage in fundraising to all the other candidates who don't have these restrictions."

The unique application of certain financial regulations to the Perry campaign has caused something of a stir on Wall Street, where a client memo that Gross put out has been widely circulated. It's unclear how the rules will play out, but they could potentially hamstring dozens of CEOs and political action committees in the politically generous finance sector.

At issue are two regulations a Municipal Securities Rulemaking Board regulation dating to 1994 and a Securities and Exchange Commission rule that took effect in March. The former applies to financial services firms that underwrite municipal bonds, the latter to advisers who manage the assets of state pension funds. In both cases, such firms may not do business in a particular state for two years if they donate or raise money for a covered candidate.

"It will definitely affect Gov. Perry," said Jan Baran, head of the election law practice at Wiley Rein LLP. "The issue is how much. First of all, how many investment advisers are likely contributors to any Republican presidential candidate? And second, how many are likely donors to Gov. Perry?"

Indeed, Perry's campaign and its allies have downplayed the rules and their effect. Perry "will do whatever it takes to follow the laws and regulations," said campaign spokesman Mark Miner. He added, "There's a lot of enthusiasm and excitement in and around the country, and we're confident that we'll have the resources to run a credible campaign from behind."

One Perry backer was more blunt.

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