MSRB Requests Comment on Disclosure of Bank PAC Political Contributions

Date: September 16, 2009

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


Alexandria, VA - The Municipal Securities Rulemaking Board (MSRB) said today it is seeking comment on whether to require disclosure of political contributions made by political action committees (PACs) of bank and bank holding companies to municipal government officials that award bond underwriting business.  Currently, any bank PAC contributions to municipal bond issuer officials that award bond business are not subject to disclosure under MSRB rules.

"The MSRB is concerned about the perception that bank and bank holding company PAC contributions could influence the awarding of municipal securities business to bank-affiliated dealers," said Lynnette Kelly Hotchkiss, Executive Director of the MSRB.

The MSRB's rule on political contributions, Rule G-37, prohibits dealers from engaging in municipal securities business with municipal bond issuers if certain political contributions have been made.  Rule G-37's prohibition on municipal securities business, as well as the contribution disclosure requirements of the rule, is triggered by certain contributions to issuer officials made by dealers, their municipal professionals, and PACs controlled by dealers or such professionals.  

In the last year, a number of traditional investment banks converted to banks or bank holding companies whose PACs may make contributions to issuer officials. MSRB Rule G-37 does not currently extend to contributions made by dealer-affiliated bank and bank holding company PACs not controlled by a dealer or its municipal professionals.  The MSRB is seeking comment on whether it should require disclosures of contributions by bank PACs to issuer officials and make them publicly available.  

The proposed disclosure of bank PAC contributions came about as a result of the MSRB's ongoing review of Rule G-37. The MSRB believes the rule 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 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.