The WSJ printed a compliance watch last week on a Municipal Securities Rulemaking Board proposal to regulate broker dealers’ contributions to bond campaigns on the ballot.
Current MSRB rules on contributions don’t address bond ballot campaigns at all – just contributions to individuals’ political campaigns. Broker dealers and the financial professionals they employ aren’t barred from making political contributions to individuals. But they can’t do business with an issuer – the municipality floating the bond – within two years after making contributions over $250 to an official of that municipality. Broker dealers must also disclose those contributions to public officials on an MSRB form.
The prohibition and disclosure requirement doesn’t apply to contributions to bond ballot campaigns – a gap that critics say is ripe for abuse. Bond ballot campaign contributions attracted attention not just from public finance watchdogs, but from the securities industry itself.
MSRB Notice 2009-35 is available here.