WASHINGTON — Industry groups are urging the Municipal Securities Rulemaking Board to abandon a proposal to alter its Rule G-37 that would require municipal securities dealers to disclose the names of political action committees controlled by bank holding companies or other affiliates.

Separately, the MSRB filed on Monday proposed changes to its Rule A-3 on membership with the Securities and Exchange Commission that would mandate public members comprise a majority of its nominating committee. The proposal reflects that the MSRB became a majority-public self-regulator as of Oct. 1.

Industry push-back on the bank-PAC proposal comes in response to MSRB concerns that Rule G-37 is being flouted indirectly as a number of securities firms have converted to banks or bank holding companies whose PACs may make contributions to issuer officials. Currently, such PAC contributions are not subject to disclosure under G-37.

The Securities Industry and Financial Markets Association and the ABA Securities Association said the proposal would create the false impression of a nexus between muni dealers and their affiliated PACs, according to separate comment letters they filed with the MSRB late last month. The two groups also said the proposal would erode existing informational barriers between muni dealers and affiliated PACs, and that it falls outside the MSRB’s jurisdiction.

“If dealers are attempting to use affiliated bank or bank holding company PAC contributions as a quid pro quo for the awarding of municipal securities business, then the agencies that enforce the MSRB’s rules already have the ability to prosecute such conduct as a violation of Rule G-37,” wrote Carolyn Walsh, deputy general counsel at the ABA Securities Association.

A third letter, from the Tulsa-based Bank of Oklahoma, said that if the MSRB wants to increase public awareness of PAC activity, it should instead provide website links to state and federal disclosures.

If more information is needed, the MSRB should take up the matter with federal regulators, wrote Tom Vincent, senior vice president and manager of corporate governance and wealth management compliance at the bank.

“Should the affiliation of a PAC with a particular parent company not be apparent from the PAC filings, some change as to current PAC disclosure requirements imposed by the Federal Election Commission may be requested by the MSRB,” Vincent wrote.

The MSRB’s proposal was designed to replace more expansive draft rule changes floated last year to require the disclosure of specific contributions affiliated PACs make to issuer officials. The board redrafted the proposal, which it floated in August, after industry groups voiced objections practically identical to those now being raised.

Along with the redrafted proposal in August, the board also proposed new G-37 interpretive guidance on factors muni dealers should take into account in determining whether they control an affiliated bank or bank holding company PAC. The SEC has yet to sign off on the guidance.

The circumvention of G-37 has been an issue of concern for the SEC, which issued in March a rare 21(a) report detailing how a former vice chairman of JPMorgan Chase Bank, who oversaw but did not work for the bank’s bond underwriting subsidiary, made political contributions to a former California treasurer.

The report, which took no enforcement action against JPMorgan, said that a bank holding company executive who oversees but is not an employee of a broker-dealer subsidiary’s muni unit may still be considered a “municipal finance professional” and therefore be subject to G-37 restrictions on political contributions.

Under G-37, dealers cannot engage in negotiated municipal securities business with an issuer for two years if they, their municipal financial professionals, or MFP-controlled PACs contribute to issuer officials who can influence the award of muni bond business. However, MFPs can contribute up to $250 to any issuer official for whom they can vote. The rule also requires the quarterly disclosure of any contributions dealers make to issuer officials, candidates or bond ballot election campaigns.

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