ALAMEDA, Calif. — In the wake of a recently disclosed investigation of the primary state lobbying group for California municipal underwriters, Treasurer Bill Lockyer said Tuesday he will no longer allow investment bankers to pass along the assessments they pay to the group as underwriter expenses in bond deals.
Lockyer wants underwriters to stop passing on in their bond fees the assessments the underwriters pay to the California Public Securities Association, as well as to the Securities Industry and Financial Markets Association.
The Financial Industry Regulatory Authority in January launched a probe of CalPSA, asking member firms to answer a detailed list of questions that included queries about the group’s funding, organizational structure, and policies and procedures related to Municipal Securities Rulemaking Board Rule G-37, which governs political contributions.
Lockyer, in a release Tuesday, said he learned last week that the treasurer’s office has been allowing underwriters to charge CalPSA and SIFMA assessments against bond proceeds since 2005.
That practice will stop, and the treasurer’s office plans to recoup fees paid since 2005, he said.
“Making taxpayers, in effect, foot the bill for banks’ lobbying or campaign activities is not justified under any circumstances,” Lockyer said. “It’s improper, it will stop now, it will not happen again, and we will get our money back. I urge municipal issuers in California and other states to take the same action if they’re paying these fees from bond proceeds.”
The announcement from Lockyer’s office may provide some insight into the FINRA probe, which includes several questions related to G-37 practices.
According to Lockyer, in April 2010 CalPSA raised its assessment to 2 cents per $1,000 in bonds, up to a maximum $25,000 per deal, from 1 cent, and told members the extra penny would be allocated to its initiative campaign committee. SIFMA charges 3 cents per $1,000 of bonds.
