WASHINGTON — With the 2012 election cycle intensifying, the Municipal Securities Rulemaking Board warned broker-dealers Wednesday that its rule banning pay-to-play political contributions applies to issuer officials who are running for president.
The board’s two-page reminder, which was posted on its website, comes as one sitting governor has jumped into the Republican presidential race and another is the subject of speculation.
A strategist for Texas Gov. Rick Perry, who launched a bid in August, recently told Politico he hoped Perry would snag more than $10 million in contributions this quarter, which ends Sept. 30.
New Jersey Gov. Chris Christie, whose name surfaces as an alternative to Perry or former Massachusetts Gov. Mitt Romney, has repeatedly denied any intent to seek the GOP nomination.
Still, the board reminded market participants about Rule G-37 on political contributions and its application to issuer officials who run for federal office, including that of president and vice president.
“In light of political campaign fundraising efforts going on around the country, we are reminding dealers that the MSRB’s political contribution rule applies to state and local government officials running for federal office,” Lynnette Hotchkiss, the MSRB’s executive director, said in a release. “We want to ensure that dealers do not inadvertently violate this important rule.”
Under G-37, dealers cannot engage in municipal securities business with an issuer for two years if they or their municipal finance professionals make significant political contributions to issuer officials who can influence the award of muni business. Municipal finance professionals, however, can contribute up to $250 per election to issuer officials for whom they can vote.
In its notice, the MSRB said when an issuer official runs for president, any muni finance professional in the country can contribute $250 to the official’s presidential campaign “without causing a ban on municipal securities business with that issuer.”
The board also said Rule G-37 would apply, in certain circumstances, when an issuer official runs for state-wide federal office, such as the U.S. Senate.
In that case, the notice said, a muni finance professional who resides in a state in which an issuer official is campaigning for state-wide federal office could contribute $250 to the official’s campaign “without causing a ban on municipal securities business with that issuer.”
“This is not a phenomenon simply of presidential politics,” said Kenneth Gross, a partner at Skadden, Arps, Slate, Meagher & Flom LLP in Washington.
Under G-37, an issuer official is defined as someone who, at the time of the contribution, is an incumbent, candidate, or successful candidate for elective office that would be directly or indirectly responsible for, or can influence the outcome of, hiring a broker-dealer for the issuer’s municipal securities business. An issuer official is also someone with authority to appoint any person who is directly or indirectly responsible for, or can influence the outcome of, hiring a broker-dealer for the issuer’s municipal securities business.
A campaign watchdog group said political contribution bans like Rule G-37 address the risk or appearance of corruption when a sitting official, such as a governor, runs for president and groups with business before the state donate to the campaign.
“A presidential campaign is another route for groups to use to attempt to gain clout,” said Michael Beckel, spokesman for the Center for Responsive Politics.
A bond attorney said the board’s notice has precedent dating back almost two decades. “I think it’s a general reminder,” said Paul Maco, a partner at Vinson & Elkins LLP in Washington.
Maco said the board issued similar guidance in 1995, when Pete Wilson, then California’s governor, ran for president.
The board cited its 1995 guidance, which does not mention Wilson by name, in the notice released Wednesday.
A spokesperson for Bond Dealers of America declined to comment on the MSRB’s notice.
Another group, the Securities Industry and Financial Markets Association, said it appreciated the refresher.
“Election season is always a good time to review internal policies and procedures with municipal financial professionals at broker-dealers who are subject to this rule,” said Leslie Norwood, SIFMA’s managing director and co-head of its muni division.