WASHINGTON — The Municipal Securities Rulemaking Board has issued new educational materials for issuers explaining what information dealers should make public about their contributions to campaigns to get voters to approve bond offerings.
The release comes several months after the MSRB gained approval from the Securities and Exchange Commission to begin requiring dealers to make additional bond ballot contribution disclosures.
Effective as of this past July, the new disclosure requirements make public the timing of dealer contributions and the identity of the issuer of the voter-approved bonds. Dealers must also disclose any underwritings related to contributions.
The new information is designed to help the board determine whether dealers’ contributions to bond ballot campaigns that secure voter approval for taxpayer-funded public projects, could influence the issuers’ awards of muni underwriting business to those dealers. The new guidance is part of an ongoing effort at issuer education that the MSRB announced earlier this year. The board has previously released information to help issuer officials understand their disclosure responsibilities, while this one aims to educate them about what dealer firms that contribute to bond ballot campaigns must post to the board’s EMMA website.
A survey of bond ballot contributions in California by The Bond Buyer in 2010 demonstrated a very strong link between firms donating money and receiving underwriting business for the bonds.
“Contributions to these campaigns by municipal securities dealers that may seek to do business with the issuer of the bonds can affect perceptions of municipal market integrity. To promote transparency, municipal securities dealers must publicly disclose detailed information about cash or in-kind contributions to bond ballot campaigns and any resulting municipal securities business,” state the new issuer materials released by the MSRB.
MSRB executive director Lynnette Kelly said the board is continuing to explore the possibility of doing more to curb the negative perception created by pay-to-play.
“As part of its mission to promote market transparency, the MSRB is evaluating the perceived link between dealers’ financial contributions and the awarding of municipal securities underwriting business,” she said. “If the additional disclosures demonstrate a pattern between giving to bond ballot campaigns and getting underwriting business, the MSRB will consider further action to address the appearance of pay-to-play.”
A group of 12 dealer firms sent a letter to the MSRB in July asking the board to amend its Rule G-37 to include bond ballot contributions. Rule G-37 prohibits dealers from engaging in any negotiated business with an issuer for two years if it or its municipal finance professionals make significant contributions to an issuer official who can influence the award of bond business.