By Shafroth, Frank
Nation's Cities Weekly , Vol. 16, No. 36
The Municipal Securities Rulemaking Board (MSRB) last week released the details of its proposed new rules to prohibit municipal bond dealers from making political contributions, directly or indirectly, to local and state officials for the purpose of obtaining a city or town's bond business and to require municipal securities dealers to disclose all direct and indirect contributions to elected and non-elected local officials.
The MSRB issued the proposed rules as Congress and the Securities and Exchange Commission (SEC) have begun to investigate "the present scheme of federal regulations in light of the current scandals involving alleged illegal payoffs, influence peddling, conflicts of interest, and questionable sales practices."
Rep. John Dingell (D-Mich.), chairman of the House Energy and Commerce Committee, and Rep. Ed Markey (D-Mass.), chairman of the subcommittee on Telecommunications and Finance, have scheduled a first hearing on the tax-exempt municipal market this week, including raising the question of amending current federal law in order to permit direct federal regulation of how cities and municipal officials issue tax-exempt municipal bonds.
Under the proposed MSRB rule, bond firms and dealers would carry the burden of proving to regulators that any political contributions made to any local official or city were not made with the intention of getting, retaining, or "otherwise influencing" a city's decision to select or award municipal bond business to the firm or dealer. In effect, a firm would be required to demonstrate that it made a contribution without any intent to win or keep business from a city or town.
The proposed rule includes a second part requiring municipal bond dealers to disclose, for a four-year period, all political contributions made, directly or indirectly, to officials of cities with whom they have done business. …