WASHINGTON – The Municipal Securities Rulemaking Board today filed with the Securities and Exchange Commission a change to an interpretative notice regarding both its Rule G-37 on political contributions and Rule G-38 on consultants, which clarifies that a “solicitation” is “a communication made under circumstances reasonably calculated to obtain or retain municipal securities business for the dealer.”
“The determination of whether a particular communication is a solicitation is dependent upon the specific facts and circumstances relating to such communication,” the MSRB said in the six-page revised version of the interpretative notice.
The new definition would become effective only after it is approved by the SEC. The commission will not approve it until after it has published the proposal and asked for comments on it.
The board made the change at the request of SEC officials who wanted a more explicit definition of solicitation for dealers faced with complying with the rules.
The definition of solicitation is key to determining whether dealer personnel would be considered municipal securities professionals who are subject to G-37. Under that rule, a dealer is barred from engaging in negotiated municipal securities business with an issuer for up to two years if one of its municipal finance professionals makes a significant political contribution to an issuer official. The rule states that any employee who solicits muni business on behalf of the dealer automatically becomes a municipal securities professional who is covered by the rule.
The definition is also important in determining whether dealer payments to non-affiliated persons of a dealer would be prohibited under G-38. Earlier this year, the MSRB overhauled that rule so that it bans dealers from using anyone other than employees to obtain or retain municipal securities business for them.
