Political Law Update for Banks, Utilities, Insurance Companies and Regulated Industries | Genova Burns LLC

Summer is drawing to a close and we are entering the home stretch for the 2021 gubernatorial elections in New Jersey. Because of the importance of this choice, companies and individuals who normally oppose politics can get involved in political activity. This process can be especially difficult for New Jersey’s regulated industries – banks, utilities, insurance companies, and more – as the rules governing their political activities have changed recently.

Today’s column provides an overview of what regulated industry companies need to know in order to get involved in the political process.

• Regulated industry companies and their majority shareholders are not permitted to make direct socio-political contributions to New Jersey political candidates or committees. This ban is based on a 1911 law designed to shield the potential political influence of government-regulated companies. Therefore, no bank, utility, or insurance company cash funds may be used to make direct political contributions to New Jersey state or local beneficiaries.
• A major change in law came in June 2021 when the U.S. District Court in New Jersey ruled that this law did not prohibit 1911 regulated industrial companies from making independent spending. An independent issue is a political announcement asking the public to support or oppose a candidate; but most importantly, this communication must not be coordinated with the candidate or the candidate’s representatives. Based on this recent court ruling, banks, utilities, and insurance companies can now make their own expenses to encourage the public to support the candidate of their choice, and they can also donate money to a Super PAC, an organization that raises money but does itself independent editions only. If there is no coordinated activity with the candidate, regulated industry companies now have new opportunities to participate in the political process.
• The prohibition on direct political contributions from a regulated company extends to individual contributions only if the individual is a majority shareholder in the company. However, less-than-controlling owners, officers, directors, and employees have always been free to use personal means to make political contributions to recipients in New Jersey. However, these individuals must be aware that their personal political contributions may be covered by New Jersey pay-to-play laws. For example, an insurance company executive is legally allowed to contribute to a gubernatorial candidate, but if that contribution exceeds $ 300 per election, the executive’s personal contribution jeopardizes the company’s eligibility for New Jersey Executive Branch contracts. The same applies to contributions made to New Jersey state, county, or township political party committees and legislative leadership committees. Submissions to local candidates and committees are prohibited in this jurisdiction in connection with local government contracts. With government contracts at stake, all businesses need to make sure they and their employees understand the complexities of New Jersey’s many pay-to-play laws. It is always better to review and review a post before it is published, as in many cases the law does not allow a refund to fix a violation.
• A long series of opinions from the New Jersey Attorney General has made it clear that employees of a regulated industrial company can form and operate a volunteer employee PAC. This means that employees of a regulated industrial company can choose to raise money from the employee community and others, and then make direct contributions to candidates and committees in New Jersey. This PAC is obliged to represent the interests of the entire employee community. In addition, the company may not provide funds or other company resources to use the PAC. Instead, the organization must be fully funded by individuals, and if corporate resources are used by the PAC, these costs must be prepaid or reimbursed to the company immediately.
• Regulated industry companies are free to lobby, but should be aware that their lobbying is likely to be subject to registration and reporting to the New Jersey Election Law Enforcement Commission.

Compliance Tip: While New Jersey law certainly makes things more complex for a bank, utility, or insurance company, there are options for them to get involved in the political process. These companies need to make their voices heard in Trenton and across the state, but they also need to have procedures and policies in place to ensure compliance with the law.