Regulators Offer Muni Reforms

Article excerpt

Municipal securities dealers should be banned from making political contributions to influence state and local government officials who award bond underwriting business, federal and industry regulators say.

The ban is proposed in three separate studies by the Securities and Exchange Commission, the National Association of Securities Dealers and the Municipal Securities Rulemaking Board.

It comes in response to ethics investigations in two states, New Jersey and Massachusetts, that raised questions about the relationship of municipal bond officials and the securities dealers with whom they do business.

Like a similar proposal last month by the securities rulemaking board, the three studies stop short of suggesting an outright contributions ban. Only those gifts specifically intended to influence an official's actions would be prohibited.

The three studies also identified improvements in the information given to investors in municipal securities before they put their money on the line.

The $1.2 trillion securities market raises money for state and local public works projects like schools, prisons and highways.

"Because of the tax-exempt nature of most municipal bonds, a large proportion of municipal investors are individuals, with varying degrees of sophistication," said the SEC in its 60-page report. …