WASHINGTON — Municipal securities dealers, their finance professionals, and political action committees will have to disclose most contributions they make to bond ballot election campaigns under Municipal Securities Rulemaking Board rule changes the Securities and Exchange Commission approved Wednesday.
Under the changes to the MSRB’s Rule G-37 on political contributions and Rule G-8 on books and records, firms for the first time would be required to disclose contributions over $250 made to PACs that are formed to raise money for ballot initiatives in states like California where voter approval is required for bond sales. Dealers would be required to keep internal records of contributions of $250 or less.
The disclosures would be required on all contributions made on or after Feb. 1, though they will not be reported until first-quarter filings are made with the MSRB in April. In addition to contributions above $250, firms will have to report in-kind, non-cash contributions — such as the use of an inhouse election consultant — even though some industry groups warned that they would be hard to quantify.
The MSRB action was sparked by a letter last December from the heads of public finance at three of the largest Wall Street firms, including Frank Chin, former chairman of the MSRB, who is a managing director of manager of public finance at Citi.
The letter said Rule G-37’s restrictions should, out of an abundance of caution, be expanded to include contributions to ballot campaigns so dealers have the same restrictions as those imposed on contributions to issuer officials.
However, the MSRB said it would be premature to extend G-37 to cover contributions to ballot committees because there is not enough evidence to show firms are being awarded bond business based on their contributions. Instead, the board opted for enhanced disclosures and said it may consider imposing restrictions on the contributions at a later date.
Under G-37, dealers cannot engage in negotiated municipal securities business with an issuer for two years if they or their muni financial professionals contribute to issuer officials who can influence the awarding of bond business. However, they can contribute up to $250 to any issuer official for whom they can vote.
A separate G-37 proposal that would require the reporting of dealer-affiliated bank and bank-holding company PAC contributions to issuer officials is still pending before the board.
