MSRB Considers Mandatory Disclosure of Bond Ballot Contributions

Date: June 22, 2009

Contact:             Jennifer A. Galloway, Chief Communications Officer
                         (703) 797-6600
                         jgalloway@msrb.org


MUNICIPAL SECURITIES RULEMAKING BOARD CONSIDERS
MANDATORY DISCLOSURE OF BOND BALLOT CONTRIBUTIONS
Draft Rule Would Shine Light on Political Donations

Alexandria, VA -The Municipal Securities Rulemaking Board (MSRB) today announced that it is seeking public comment on a draft amendment to its pay-to-play rules that would require municipal securities dealers and their political action committees to publicly disclose bond ballot contributions.  The amendment would not ban municipal securities business as a result of contributions to bond ballot measures, but would provide information to the MSRB on whether to consider further action in this area.

"The Board believes that public disclosure of bond ballot contributions would shine needed light on this area of the municipal securities business," said MSRB Executive Director Lynnette Kelly Hotchkiss. "The Board is concerned that the private nature of such political contributions by dealers is negatively affecting the integrity of the market. By making these donations public, their potential effects can be fully known."

Existing MSRB rules prohibit dealers from engaging in municipal securities business with municipal bond issuers if certain political contributions have been made. The MSRB believes its Rule G-37 has provided substantial benefits to the industry and the investing public by greatly reducing the direct connection between political contributions given to issuer officials and the awarding of municipal securities business to dealers, thereby effectively eliminating pay-to-play practices in the new issue municipal securities market. MSRB Rule G-37 has served as a regulatory model for other government entities seeking to curb pay-to-play activities.

The MSRB is requesting comment on whether dealer contributions to bond ballot campaign committees have the potential to result in actual pay-to-play practices or the perception of pay-to-play practices, both of which can negatively impact the integrity of the municipal market. Bond ballot measure campaigns typically occur as a result of a state or local government placing a ballot measure before voters to approve specified municipal borrowing. Many state and local jurisdictions are required to authorize the issuance of municipal bonds through voter approval to fund municipal finance projects. 

The MSRB also seeks to understand whether dealer contributions to bond ballot campaign committees create any conflict-of-interest issues similar to or different from those raised by contributions to political candidates.

For additional information, please see MSRB Notice 2009-35.


The MSRB protects investors, state and local governments and other municipal entities, and the public interest by promoting a fair and efficient municipal securities market. The MSRB fulfills this mission by regulating the municipal securities firms, banks and municipal advisors that engage in municipal securities and advisory activities. To further protect market participants, the MSRB provides market transparency through its Electronic Municipal Market Access (EMMA®) website, the official repository for information on all municipal bonds. The MSRB also serves as an objective resource on the municipal market, conducts extensive education and outreach to market stakeholders, and provides market leadership on key issues. The MSRB is a self-regulatory organization governed by a 21-member board of directors that has a majority of public members, in addition to representatives of regulated entities. The MSRB is overseen by the Securities and Exchange Commission and Congress.