SEC Backs MSRB Proposal to Post Ratings Directly on EMMA

WASHINGTON — The Securities and Exchange Commission announced Wednesday that it has signed off on a Municipal Securities Rulemaking Board proposal to post ratings directly onto the board’s EMMA site.

Separately, the SEC approved interpretive guidance on the MSRB’s Rule G-37 on political contributions outlining factors muni dealers should take into account in determining whether they control an affiliated bank or bank holding company political action committee.

Despite the SEC’s support for the rating proposal, only Fitch Ratings officials have said they will participate. Standard & Poor’s said it would not feed its ratings because of concerns for the protection of its intellectual property. Moody’s Investors Service has declined to comment.

Meanwhile, the G-37 guidance will go into effect Dec. 11 and comes as a number of securities firms have converted to banks or bank holding companies whose PACs make contributions to issuer officials. Currently, such committee contributions are not subject to disclosure under G-37, though the board has drafted a separate proposal that would require muni dealers to disclose the names of PACs controlled by bank holding companies or other affiliates.

The circumvention of G-37 has been an issue of concern for the SEC, which issued a rare 21(a) report in March 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.

With few exemptions, 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 awarding of bond business.

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