Many state and local jurisdictions allow voters to decide whether the jurisdiction should issue bonds to fund municipal projects.  The Municipal Securities Rulemaking Board (MSRB) is concerned that municipal securities dealers are using political contributions to these bond ballot campaigns to secure business by the issuer of the bonds on the ballot.  Yesterday, the MSRB proposed changes to its pay-to-play rule (Rule G-37) that would increase the disclosure of bond ballot contributions by dealers in an attempt to reduce these pay-to-play concerns.

MSRB Rule G-37 already requires municipal securities dealers to disclose information about contributions to bond ballot campaigns.  The MSRB states that it is now seeking additional details on these contributions to “assist the MSRB in [its] ongoing study of the perceived correlation between giving bond ballot campaign support and getting underwriting business.” It is important to note that this is all about disclosure; contributions to bond ballot campaigns do not trigger the two year prohibition on municipal business that can be triggered by contributions to certain government officials. 

The proposed rule amendments seek the following additional details on bond ballot contributions:

  • the complete name of the municipal entity issuing the bonds authorized by the bond ballot campaign;
  • the specific date (month, day, and year) on which the contributions were made;
  • the complete name of any primary offerings resulting from the bond ballot campaign, for which the dealer now engages in municipal securities business;
  • details on any payments or reimbursements the dealer received related to bond issuances resulting from bond ballot campaigns to which the dealer contributed.

The proposal also amends the definition of a “contribution” to include in-kind contributions to bond ballot campaigns. 

This proposal indicates that the MSRB is continuing to monitor closely the political activity of municipal securities dealers for possible pay-to-play activity.