Exemptive Relief under MSRB Rule G-37

To balance the need to maintain the high standards and integrity of the municipal securities market with the First Amendment protections of political contributions, MSRB Rule G-37 provides mechanisms through which brokers, dealers, municipal securities dealers and municipal advisors (collectively “regulated entities”) may be able to obtain relief from a prohibition on engaging in municipal securities business or municipal advisory business with a municipal entity.

To assist regulated entities with guidance on the scope and limitations of exemptive relief available under MSRB Rule G-37, below is a summary of the grounds for exemptive relief, followed by summaries of letters from the Financial Industry Regulatory Authority (FINRA) that respond to written applications for exemption. The letters are intended to help regulated entities understand the decision to grant or deny exemptive relief. Visit finra.org to access all Rule G-37 FINRA exemption letters.

Grounds for Exemptive Relief
Automatic Exemption: Regulated entities may avail themselves of an automatic exemption, without the need to apply to a regulator for exemptive relief, if they meet the following conditions under Rule G-37(j):

  • The regulated entity must have discovered the contribution within four months of the date of the contribution;
  • The contribution must not have exceeded $250; and
  • The contributor must obtain a return of the contribution within 60 calendar days of the date of discovery of the contribution by the regulated entity.

A regulated entity is entitled to no more than two automatic exemptions per 12-month period. Additionally, a regulated entity may not execute more than one automatic exemption relating to contributions by the same person regardless of the time period.

Application for Exemption: Regulated entities may apply for an exemption with the appropriate regulatory authority. In determining whether to grant an exemption, the regulatory authority must consider a number of factors specified under Rule G-37(i) and may consider other factors as well. If an exemption is granted, it may be done so conditionally or unconditionally.

Where to Apply for Exemptive Relief
According to Rule G-37(i), dealers registered with FINRA may submit an application for exemptive relief with FINRA, while dealers registered with a bank regulator may submit an application for exemptive relief with the applicable bank regulator. Additionally, municipal advisors that are FINRA members may submit an application for exemption with FINRA, while all other municipal advisors may submit an application for exemption to the U.S. Securities and Exchange Commission or its designee.

Summaries of Exemptive Relief
The summaries provided below are for informational purposes only and do not include all the facts and circumstances that may have been relevant to the determination to grant or deny exemptive relief. The summaries are categorized for ease of use, and each summary contains a link to the full exemptive letter. Currently, this page displays only the exemption letter summaries for calendar years 1996-2017. Summaries of letters provided before 2007 are from the National Association of Securities Dealers (NASD), FINRA's predecessor. This page will be updated periodically with additional exemption letters.

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Contributions Before Becoming a Municipal Finance Professional

1. Exemptive Relief Granted – June 1, 2016 

FINRA granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of two contributions: one made by an individual who later became a municipal finance professional (MFP) of the firm and another made by a company in which the MFP has an ownership interest. Prior to becoming an MFP, the individual caused the company to donate $1,000 to the gubernatorial campaign of a public service commissioner candidate. The individual subsequently made a $5,000 contribution to the candidate’s campaign in his own name, and later requested and received a return of the contributions. 

The firm requested an exemption from the Rule G-37 prohibition based on the premise that the individual was not an employee of the firm when he made the contributions and was not an MFP at the time and thus was not aware of Rule G-37. The firm also represented that the contribution was not related to the firm or municipal securities business; the individual and the candidate are personal friends and the individual has supported the candidate in prior campaigns. Additionally, the firm is well established with a long history of underwriting in the state. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter. 

Read the full letter.

2. Exemptive Relief Granted – January 28, 2016

FINRA granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a city as a result of contributions made by a municipal finance professional (MFP) of the firm in the two years prior to joining the firm. Prior to joining the firm, the individual made a $500 contribution to Candidate A for a city council campaign, a $500 contribution to Candidate B for a mayoral campaign, a $500 contribution to Candidate C for a city council campaign, and a $500 contribution to Candidate D for a city council campaign. The individual later requested the return of these contributions.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contributions were made, the individual was not an MFP and that neither the individual nor the firm anticipated an employment relationship. Additionally, the firm represented the contributions were unrelated to municipal securities business. The individual was eligible to vote for each of the candidates and made the contributions as a result of the individual’s personal and political relationships. The firm also already had significant relationships with the city and has served as an underwriter on numerous transactions with the city and its agencies. Lastly, the firm represented that it has instituted or would institute a series of preventive steps described in the exemption letter.

Read the full letter.

3. Exemptive Relief Granted – December 14, 2015

FINRA granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a city as a result of a contribution made by a banker prior to joining the firm as a vice president of public finance. The banker donated $100 to the 2015 exploratory campaign of the city’s mayor. The banker was not eligible to vote for the mayor at the time of the contribution and attempted to obtain a return of the contribution.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contributions were made, the banker was not a municipal finance professional and neither the banker nor the firm anticipated an employment relationship. Additionally, the firm represented the contributions were unrelated to municipal securities business. Before joining the firm, the banker served as chief of staff to the mayor and the contribution was the result of the banker's political beliefs and friendship with the mayor. Additionally, the firm had a long relationship with the city; the firm’s senior banker was involved in the issuance of nearly $600 million of the city's debt securities over the past 30 years. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

4. Exemptive Relief Granted – May 21, 2015

FINRA granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of a $50 contribution by an analyst prior to joining the firm. The analyst made the contribution to a candidate who was seeking election as governor of the state. The analyst was not eligible to vote for the candidate at the time of the contribution.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contribution was made, the analyst was not a municipal finance professional and neither the analyst nor the firm anticipated an employment relationship. The firm represented the contribution, made at a fundraiser the analyst attended with friends, was unrelated to any municipal securities business. Also, the firm’s public finance department had significant business relationships with the state prior to the contribution and has served as an underwriter on numerous transactions with the state and its agencies. Additionally, the firm discovered the contribution during its due diligence review in connection with the hiring of the analyst and immediately took preventive steps to ensure that the firm did not engage in business with the state until further notice. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

5. Exemptive Relief Granted – February 11, 2015

FINRA granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a city and a school district as a result of two contributions by an associate: a $100 contribution to the primary election campaign of a mayoral candidate and a $99 contribution to the general election campaign of a school district board candidate. The associate was not eligible to vote for either of the candidates.


The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contributions were made, the analyst was chief executive officer of a charitable organization and thus not a municipal finance professional. The firm represented the contributions were unrelated to municipal securities business and were based on the associate’s political beliefs and friendship with the school district candidate. The request also stated that the firm has significant relationships with the city and school district that predate the associate working in the municipal securities business, the campaigns and the contributions. Additionally, the firm discovered the contributions during its due diligence review in connection with hiring the associate and immediately took preventive steps to ensure that the firm did not engage in business with the city and school district until the ban ends. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

6. Exemptive Relief Granted – June 27, 2011

FINRA granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of a contribution by an individual who later became a municipal finance professional (MFP) of the firm. Prior to becoming an MFP, the individual made a $25 contribution at a fundraising event for a candidate for governor of the state. The individual was not eligible to vote for the candidate.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that the individual was not an employee of the firm when he made the contribution and was not an MFP at the time. The firm also represented that the contribution was not related to the firm or municipal securities business; the contribution was the result of the friendship between the individual’s sister and the candidate’s wife. Additionally, the firm has significant relationships with the state that existed prior to hiring the individual and have nothing to do with the individual or his contribution. Moreover, upon discovery of the contribution, the firm immediately took steps to ensure that the firm did not engage in business with the state until the end of the ban. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

7. Exemptive Relief Granted – September 7, 2010

FINRA granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a city as a result of contributions made by an individual prior to joining the firm and becoming a municipal finance professional (MFP) of the firm. Prior to joining the firm, the individual made three contributions totaling $550 to a member of the city council and later requested and received a return of the contributions.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contributions were made, the individual was not an MFP and that neither the individual nor the firm anticipated an employment relationship. The firm also represented the contributions were unrelated to municipal securities business. The individual made the contributions as a result of the individual’s personal friendship with the candidate and political beliefs. Additionally, the firm already had significant relationships with the city prior to the contributions. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

8. Exemptive Relief Granted – June 2010

FINRA granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of a contribution made by an individual prior to a reorganization of the firm, after which the individual was given the responsibility of supervising the firm’s municipal trading desk and became a municipal finance professional (MFP). Prior to the reorganization, the individual did not have any functional role or involvement in the firm’s municipal securities activities. The individual donated $1,000 to a candidate for governor and later requested and received a return of the contribution.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contributions were made, the individual was not a municipal finance professional and it was not contemplated at that time that he would be promoted and become a municipal finance professional. The firm also represented the contributions were unrelated to municipal securities business. The firm had a long relationship with the state and had underwritten over $7.5 billion of bonds since 2006. Additionally, the firm represented that it had, and continues to have, a detailed and comprehensive program to comply with Rule G-37, and that it is establishing additional compliance procedures. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

9. Exemptive Relief Granted – June 10, 2009

FINRA granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a city as a result of contributions made by an individual prior to joining the firm and becoming a municipal finance professional (MFP) of the firm. Prior to joining the firm, the individual made three contributions that, in total, exceeded $250 to a city council member, and later requested and received a return of the contributions.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contribution was made, the individual was not a municipal finance professional and neither the individual nor the firm anticipated an employment relationship. The exemption was granted based on six key factors: (1) at the time of the contribution, the contributor was not an MFP; (2) the contribution was discovered during a pre-hiring due diligence review; (3) the individual requested and received a refund of the contributions; (4) the firm represented that it already had significant business relationships with the city; (5) the firm represented that it would take preventive measures, including ensuring the individual will not be involved in municipal securities business with the city for at least two years from the date of the contribution; and (6) the contributions were motivated by a personal relationship with the city council member. Additionally, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

10. Exemptive Relief Granted – April 3, 2009

FINRA granted Rule G-37 exemptive relief to Firm A, which was prohibited from engaging in municipal securities business with a state as a result of a $1,500 contribution by an individual to a committee engaged in joint fundraising. At the time of the contribution, the individual was not a municipal finance professional. Firm A stipulated that the contribution was an indirect contribution to a candidate who is an official of the state. The individual requested and received a refund of the contribution.

Firm A requested an exemption from the Rule G-37 prohibition based on the premise that previously and at the time of the contribution, Firm A did not engage in municipal securities business, but unexpectedly and rapidly acquired Firm B. Firm A represented that after acquiring Firm B, Firm A determined that the individual is a municipal finance professional because he is an officer of Firm A. However, he does not have any involvement in the firm’s municipal securities business. Additionally, Firm A represented the contribution was not based on municipal securities business, but solely on the individual’s personal political beliefs. Finally, Firm B had longstanding municipal securities business prior to the contributions. Firm A also represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

11. Exemptive Relief Granted – June 29, 2007

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of contributions made by an individual prior to joining the firm and becoming a municipal finance professional (MFP) of the firm. Prior to joining the firm, the individual made contributions of $2,252 to the state governor and $40 to a county councilman for whom he was not entitled to vote. The individual requested a return of the contribution to the county councilman. The individual has not requested a return of the contribution to the governor because it was made from the individual’s fundraising committee, which was closed by the state Board of Elections and thus there is no entity to which the contribution can be returned.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contribution was made, the individual was not an MFP and neither the individual nor the firm anticipated an employment relationship. The firm also previously engaged in municipal finance business in the state and represented that neither the hiring of the individual nor the contributions were necessary to obtain municipal securities business in the state. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

12. Exemptive Relief Granted – October 16, 2006

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a city as a result of contributions made by an individual prior to joining the firm and becoming a municipal finance professional (MFP) of the firm. The individual made contributions based on solicitations from personal acquaintances and not a direct request from the candidate or the campaign. The individual was not eligible to vote for candidates in the city.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that: at the time the contributions were made, the individual was not an MFP and was not employed by the firm; for the six years prior to being hired by the firm, the individual had no involvement in municipal securities business; the firm had a detailed and comprehensive compliance program in regards to Rule G-37 and the contributions were discovered as a result of that program; and the individual requested and received a return of the contributions. The firm also represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

13. Exemptive Relief Granted – August 30, 2006

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of contributions made by an individual prior to joining the firm and becoming a municipal finance professional (MFP) of the firm. Prior to joining the firm, the individual made a $1,000 contribution to the state governor.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contribution was made, the individual was not an MFP and neither the individual nor the firm anticipated an employment relationship. The exemption was granted based on five key factors: (1) the individual has never had any involvement in the municipal securities business; (2) at the time the contribution was made, the individual was not employed by the firm and neither the individual nor the firm were considering an employment relationship; (3) the firm represented that it already had significant business relationships with the state and neither the hiring of the individual nor the contributions were necessary to obtain municipal securities business in the state; (4) the firm represented that it had a comprehensive compliance program and the contribution was discovered during a pre-hiring due diligence review; and (5) the individual requested and received a return of the contribution. Additionally, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

14. Exemptive Relief Granted – October 11, 2005

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with two states as a result of contributions made by an individual prior to joining the firm and becoming a municipal finance professional (MFP) of the firm. Prior to joining the firm, the individual made contributions of $697 to a candidate for governor in State A and $1,000 to the current State B Treasurer’s campaign for U.S. Senate.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contribution was made, the individual was not an MFP and was not employed by the firm. The exemption was granted based on four key factors: (1) prior to being hired by the firm, the individual was not engaged in the solicitation of municipal securities business; (2) at the time the contribution was made, the individual was not employed by the firm, and the firm has long relationships as an underwriter for both states, so neither the hiring of the individual nor the contributions were necessary to obtain municipal securities business; (3) the firm represented that it would institute a series of preventive steps described in the exemption letter; and (4) the individual requested and received a return of the contributions. Additionally, the firm represented that it has a detailed and comprehensive compliance program in regard to Rule G-37 and the contributions were discovered during a pre-hiring due diligence review.

Read the full letter.

15. Exemptive Relief Granted – October 11, 2005

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a city as a result of contributions made by an individual prior to becoming a municipal finance professional (MFP) of the firm. The individual made a $500 contribution to the city council president and a $500 contribution to a city council member and was not entitled to vote for either candidate. At the time of the contributions, the individual was engaged by the firm as a consultant but did not engage in municipal securities business. The firm later hired the individual as an MFP.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contribution was made, the individual was not an MFP of the firm. The exemption was granted based on four key factors: (1) prior to being hired by the firm, the individual was not engaged in the solicitation of municipal securities business from the city issuers; (2) the firm has a long relationship as an underwriter for the city, so neither the hiring of the individual nor the contributions were necessary to obtain municipal securities business; (3) the firm represented that it would institute a series of preventive steps described in the exemption letter; and (4) the individual requested and received a return of the contributions. Additionally, the firm represented that it has a detailed and comprehensive compliance program in regard to Rule G-37 and the contribution was discovered as a result of a routine pre-hire inquiry.

Read the full letter.

16. Exemptive Relief Granted – September 22, 2005

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a city as a result of contributions made by an individual prior to being employed by the firm and becoming a municipal finance professional (MFP) of the firm. The individual made a $150 contribution to a city council candidate and a $200 contribution to a city council member who was a candidate for mayor of the city. The individual was not entitled to vote for either candidate.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contribution was made, the individual was not an MFP and was not employed by the firm. The exemption was granted based on four key factors: (1) prior to being hired by the firm, the individual was not engaged in the solicitation of municipal securities business; (2) the firm has a long relationship as an underwriter for the city, so neither the hiring of the individual nor the contributions were necessary to obtain municipal securities business; (3) the firm represented that it would institute a series of preventive steps described in the exemption letter; and (4) one of the contributions has been returned and a reasonable effort was made to obtain a return of the other. Additionally, the firm represented that it has a detailed and comprehensive compliance program in regard to Rule G-37 and the contribution was discovered as part of its new employee pre-screening process.

Read the full letter.

17. Exemptive Relief Granted – May 25, 2005

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with two counties as a result of contributions made by an individual prior to joining the firm and becoming a municipal finance professional (MFP) of the firm. Prior to joining the firm, the individual made contributions totaling $1,985 to 14 candidates for county offices in the two counties. The firm became aware of the contributions when the individual disclosed them in response to the firm’s political contribution disclosure form. The firm’s policies require that this form be completed and reviewed prior to a new employee’s first day of work, however, the individual requested an early employment date six months prior to his original start date. Due to a flaw in the firm’s clerical procedures, the individual was permitted to start his employment prior to completion and review of the political contribution disclosure form.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contribution was made, the individual was not an MFP and was not employed by the firm. The exemption was granted based on five key factors: (1) the firm took prompt remedial action when it became aware of the contributions and placed the individual on “inactive” status, directed him not to engage in any work for the firm and instituted a ban on municipal securities business with the issuers of which any recipient of the individual’s contributions is an issuer official; (2) the individual was not an MFP prior to his employment with the firm and during his employment with the firm, the individual did not engage in municipal securities representative activities or solicit municipal business; (3) the firm has long relationships as an underwriter for both counties and the state, so neither the hiring of the individual nor the contributions were necessary to obtain municipal securities business; (4) the firm agreed to undertake an education initiative for all employees of the firm’s municipal securities group; and (5) the firm has made a reasonable effort to obtain a return of the contributions. Additionally, the firm represented that it has a detailed and comprehensive compliance program in regard to Rule G-37.

Read the full letter.

18. Exemptive Relief Granted – October 27, 2004

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of contributions made by an individual prior to joining the firm and becoming a municipal finance professional (MFP) of the firm. Prior to joining the firm, the individual made a $1,000 contribution to a candidate for governor.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contribution was made, the individual was not an MFP and was not employed by the firm. The exemption was granted based on four key factors: (1) prior to being hired by the firm, the individual was not engaged in the solicitation of municipal securities business; (2) the firm has a long relationship as an underwriter for the state and state agencies, so neither the hiring of the individual nor the contribution were necessary to obtain municipal securities business; (3) the firm represented that it would institute a series of preventive steps described in the exemption letter; and (4) the contribution has been returned. Additionally, the firm represented that it has a detailed and comprehensive compliance program in regard to Rule G-37 and the contribution was discovered as part of its new employee pre-screening process.

Read the full letter.

19. Exemptive Relief Granted – January 7, 2003

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of a contribution made by an individual prior to becoming a municipal finance professional (MFP) of the firm. Prior to becoming an MFP, the individual made a $1,000 contribution to a candidate for governor. After the contribution was made, the firm’s parent company reorganized and, as a result, the individual became an MFP since she would be an indirect supervisor of MFPs.

The exemption was granted based on five key factors: (1) the individual was not an MFP at the time the contribution was made; (2) once it became aware of the contribution, the firm took action by retaining outside counsel to review the proposed reorganization and potential ban on municipal securities business; (3) the firm told the individual that when the MFPs become part of her business unit, the firm will consider her to be an MFP and her municipal securities business activities will be limited as a result of the contribution; (4) the firm has agreed to limit the individual’s municipal securities activities; and (5) the contribution was returned. Additionally, the firm represented that it has a detailed and comprehensive compliance program in regard to Rule G-37 and as a result of following those procedures, the contribution and potential ban on municipal securities business were discovered. Lastly, the firm represented that the individual will not solicit municipal securities business, sell municipal securities or directly supervise such solicitations or sales for two years from the date of the contribution.

Read the full letter.

20. Exemptive Relief Granted – November 15, 2002

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a city as a result of a contribution made by an individual prior to becoming a municipal finance professional (MFP) of the firm. The individual made a $1,000 contribution to a candidate for mayor and pre-cleared the contribution pursuant to the firm’s procedures, but at the time the contribution was made, the individual was not an MFP or involved in the firm’s municipal securities business. The individual later became a member of the management committee of the firm’s parent company, a committee of which the firm has previously identified members as MFPs.

The exemption was granted based on six key factors: (1) the individual was not an MFP at the time the contribution was made; (2) once it became aware of the contribution, the firm took action by voluntarily instituting a ban on new municipal securities business with the city; (3) the firm notified the individual of her status as an MFP and the accompanying restrictions; (4) the firm agreed to establish information barriers to minimize the potential for quid pro quo resulting from the contribution; (5) the firm represented that it had fixed technical problems with its political contributions database and established new procedures for additions to the management committee; and (6) reasonable efforts were made to obtain a return of the contribution. The firm also represented that it maintains and implements a detailed and comprehensive compliance program in regard to Rule G-37. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

21. Exemptive Relief Granted – September 30, 2002

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of a contribution made by an individual prior to becoming a municipal finance professional (MFP) of the firm. The individual made a $1,000 contribution to the re-election campaign of the state’s attorney general. The firm’s parent company later reorganized and, as a result, the individual became an MFP.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contribution was made, the individual was not an MFP and was not employed by the firm. The exemption was granted based on five key factors: (1) the individual was not an MFP at the time the contribution was made; (2) once it became aware of the contribution, the firm took action by voluntarily refraining from new municipal securities business with the state; (3) the firm notified the individual of his status as an MFP and the accompanying restrictions; (4) the firm agreed to restrict the individual’s municipal securities activities; and (5) the contribution was returned. The firm also represented that it maintains and implements a detailed and comprehensive compliance program in regard to Rule G-37. Lastly, the firm represented that the individual will not solicit municipal securities business, sell municipal securities or directly supervise such solicitations or sales.

Read the full letter.

22. Exemptive Relief Granted – June 11, 2002

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of contributions made by an individual prior to becoming a municipal finance professional (MFP) of the firm. Prior to joining the firm, the individual made two contributions totaling $2,100 to a candidate for governor of the state. The firm became aware of the contributions when the individual filled out a political contribution information form as part of the firm’s hiring procedures.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that at the time the contribution was made, the individual was not an MFP and was not employed by the firm. The exemption was granted based on two key factors: (1) the contributions were made prior to the individual’s employment at the firm; and (2) at the time of the contributions, the individual had no involvement in soliciting new municipal securities business or participating in existing municipal securities business. The firm also represented that it maintains and implements a detailed and comprehensive compliance program in regard to Rule G-37. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

23. Exemptive Relief Granted – July 17, 2001

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business as a result of a contribution made by an individual prior to becoming a municipal finance professional (MFP) of the firm. Prior to becoming an MFP, the individual made a $1,000 contribution to a candidate’s primary campaign. After the contribution was made, the firm redistributed certain general supervisory responsibilities, at which time the individual assumed general supervisory oversight of the firm’s municipal department and became an MFP as a result.

The exemption was granted based on the fact that at the time of the contribution, the individual had never been an MFP and was not involved in the firm’s municipal securities business. The firm also represented that it would institute a series of preventive steps described in the exemption letter to address any potential investor protection concerns.

Read the full letter.

24. Exemptive Relief Granted – October 10, 2000

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a county as a result of a $300 contribution to a county executive made by an individual prior to joining the firm and becoming a municipal finance professional (MFP). Prior to joining the firm, the individual was not employed in the municipal securities business and was not an MFP. The firm planned to appoint the individual to its Board of Directors and represents that board members may be considered MFPs under Rule G-37.

The firm requested an exemption based on the premise that at the time of the contribution, the individual was not an MFP and had never worked in the municipal securities business. The firm also represented that the individual was eligible to vote for the county executive and thus the contribution was only $50 more than permitted under the rule. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

25. Exemptive Relief Granted – June 30, 2000

NASD granted Rule G-37 exemptive relief to a firm that would have been prohibited from engaging in municipal securities business with a county as a result of a $100 contribution made by a prospective employee before becoming a municipal finance professional (MFP) of the firm. The contribution was made to a city council member for whom the individual was not eligible to vote.

The firm requested an exemption from the Rule G-37 prohibition based on the premise that the individual has never worked in the municipal securities business and had no reason to know of the rule. The firm also stated that the contribution could not have been made for a purpose inconsistent with the rule since it was a de minimis contribution made to a personal friend long before the employment opportunity with the firm came to the individual’s attention. The firm also argued that since the contribution was extremely small, it was unlikely to influence decisions regarding municipal securities business. Additionally, the firm represented that it has maintained and enforced procedures reasonably designed to ensure compliance with the rule. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

26. Exemptive Relief Granted – July 31, 1997

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of a contribution by an employee of the firm. NASD found that placing the employee on the firm’s executive committee made the employee a municipal finance professional and triggered the two-year prohibition under Rule G-37.

NASD granted the firm a conditional exemption consisting of a reduced prohibition period ending on November 1, 1997. The exemption was granted based on four key factors: (1) the firm had developed and instituted procedures reasonably designed to ensure compliance with the rule; (2) the firm had no knowledge of the contribution prior to or at the time of the contribution; (3) the firm had taken all available steps to cause the employee to obtain a return of the contribution; and (4) the firm had taken other appropriate remedial or preventative measures. NASD also noted that the violation did not occur as a result of a lack of knowledge, but from a lack of communication about the intent to place the employee on the executive committee.

Read the full letter.

27. Exemptive Relief Denied – January 27, 1997

NASD denied Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business as a result of a contribution made by an individual prior to becoming a municipal finance professional (MFP) of the firm. Prior to joining the firm, the individual made two contributions totaling $150 to a city council member for whom the individual was not eligible to vote. The individual was not aware that the contributions could trigger a prohibition under Rule G-37 until they attended a firm-element continuing education session after joining the firm. The firm represented that after learning of the contribution, it sent a questionnaire to other newly-hired MFPs to determine if others had made political contributions prior to joining the firm and found that no other employees had made similar contributions. The firm also represented that it modified its compliance manual by adding a provision prohibiting employees from soliciting or making contributions to any official of an issuer with whom the firm is engaging or seeking to engage in municipal securities business.

NASD denied the exemption based on the fact that the violation related directly to the failure of the firm to adopt procedures to review for political contributions prior to extending offers of employment.

Read the full letter.

28. Exemptive Relief Denied – January 7, 1997

NASD denied Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business as a result of a contribution made by an individual prior to becoming a municipal finance professional (MFP) of the firm. The individual was employed by an affiliated entity of the firm, which was not a broker-dealer, but they became an MFP after being transferred to the firm as part of an internal reorganization. A few months prior to joining the firm and becoming an MFP, the individual made a $50 contribution a candidate for mayor for whom the individual was not eligible to vote. The firm’s procedures require that new employees be pre-cleared for their contribution history before extending an offer of employment, however the individual’s contribution was not discovered until after the individual joined the firm.

NASD denied the exemption on the basis that the firm failed to follow its written policies and procedures. NASD noted that while the individual’s employment with the firm was due to an internal reorganization, it resulted in the individual being a new employee of the firm. Had the firm’s procedures for new hires been followed, the firm would have learned of the contribution before the individual’s transfer from the affiliated entity.

Read the full letter.

Firm Compliance Procedures for Rule G-37

1. Exemptive Relief Denied – May 17, 2006

The NASD’s National Adjudicatory Council (NAC) affirmed a decision by the NASD Office of Regulation Policy to deny exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of multiple contributions made to an elected official of the state by an officer of the firm.

The officer, who was a municipal finance professional of the firm based on his membership on the firm’s management committee, made three contributions totaling $700 to the reelection campaign of an elected official. The firm’s policies and procedures required the head of the firm’s public finance division to pre-approve all political contributions. Prior to making each contribution, the officer sought and received such pre-approval. However, in approving the second and third contributions, the head of the public finance division failed to note that the combined contributions exceeded $250. The firm then engaged in municipal securities business with the state and did not discover that it was subject to a prohibition on engaging in such business until a routine NASD examination.

The NAC found that the firm’s procedures were not reasonably designed and implemented to achieve compliance with Rule G-37. The NAC found the system deficient largely because it relied on one individual to approve all political contribution requests and provided no back-up plan or procedure to ensure that review was accurate. In this situation, the officer followed the firm’s procedures and the head of the public finance business erroneously approved contributions that triggered the Rule G-37 ban on business. Additionally, the NAC considered that the firm had actual notice of the contributions but failed to discover the ban prior to NASD intervention and violated that ban. The NAC found this as further evidence that the firm’s system was inadequate.

Read the full letter.

2. Exemptive Relief Granted – February 23, 2006

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of a $1,000 contribution made by municipal finance professional (MFP) of the firm to a candidate for governor who is currently the state Attorney General. The MFP was head of the firm’s Institutional Investor Sales for the Fixed Income Division and coordinated with sales forces, including the municipal securities institutional investor sales force, to ensure that their activities complemented each other and did not conflict.

The MFP disclosed the contribution in response to the firm’s quarterly survey of MFPs. The firm represented that under the compliance program, the MFP had an obligation to seek advance approval prior to making any political contribution. When the contribution was discovered, the firm attempted to implement a ban on engaging in municipal securities business and began a due diligence investigation to determine if the firm had engaged in municipal securities business after the date of the contribution. As a result of that due diligence, the firm discovered and disclosed to the NASD that the firm had engaged in prohibited municipal securities business after the contribution was made.

The NASD granted an exemption based on six key factors: (1) the MFP had never engaged in the solicitation of municipal securities business and never primarily engaged in municipal securities representative activities; (2) the firm had no knowledge of the contribution prior to the date it was made, promptly discovered the contribution through the application of its policies and procedures and commenced an investigation to determine if the firm had engaged in prohibited post-contribution business; (3) the firm began improving its written procedures and represented that it will undertake special training of all relevant departments and individuals; (4) the firm represented that it has an established relationship with the state and the contribution was not necessary to secure municipal securities business; (5) the firm undertook a special education initiative with the firm’s MFPs and special compliance training for the individual; and (6) the contribution was returned. Additionally, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

3. Exemptive Relief Granted – September 20, 2005

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of a $300 contribution made by a municipal finance professional (MFP) of the firm to a candidate for governor for whom the MFP was not entitled to vote. The firm became aware of the contribution when the MFP contacted the firm’s compliance department. The firm represented that under its compliance program, the MFP had an obligation to seek advance approval prior to making any political contribution. The MFP remembered that obligation upon receipt of the firm’s quarterly request for information on political contributions.

The exemption was granted based on five key factors: (1) while registered with the firm, the MFP has not engaged in municipal securities business or solicited municipal finance business from the state during his employment with the firm; (2) the firm has a long history of municipal securities business in the state, so the contribution was not necessary to obtain municipal securities business; (3) the firm promptly instituted a ban on engaging in municipal securities business with issuers of which the candidate is an issuer official; (4) the MFP has taken personal responsibility for the contribution and acknowledged his violations of the firm’s procedures in writing; and (5) the MFP requested and received a return of the contribution. The firm also represented that it maintains and implements a detailed and comprehensive compliance program in regard to Rule G-37. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

4. Exemptive Relief Granted – August 23, 2004

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of a $1,000 contribution made by a municipal finance professional (MFP) of the firm to a candidate for governor. The MFP is the head of the firm’s corporate finance department and the firm acknowledged that he is an MFP by virtue of his membership on the firm’s Executive Committee. The firm first became aware of the contribution when the MFP disclosed it in response to the firm’s regularly scheduled quarterly request for information regarding political contributions because the MFP did not follow the firm’s established political contribution pre-clearance procedures.

The exemption was granted based on four key factors: (1) the firm represented that the MFP is not now nor was he ever engaged in the solicitation of municipal securities business; (2) the firm has a long relationship as an underwriter of the state, so neither the hiring of the individual nor the contributions were necessary to obtain municipal securities business; (3) the firm acted promptly to address the contribution, including a written censure of the MFP for failing to follow the firm policy requiring pre-approval of political contributions; and (4) the contribution has been returned. The firm also represented that it maintains and implements a detailed and comprehensive compliance program in regard to Rule G-37. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

5. Exemptive Relief Granted – November 11, 2003

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business as a result of three contributions made by a municipal finance professional (MFP) of the firm. The MFP made an in-kind contribution of $131.21 in March 2003 and a monetary contribution of $250 in June 2002 to Candidate A for city council. The MFP also made a $50 contribution in February 2003 to Candidate B for city council. The MFP was eligible to vote for Candidate A, but not Candidate B. When the MFP was designated as an MFP in December 2002, he was required to read the firm’s political contributions policy, sign a form agreeing to comply with the policy, including pre-clearing contribution requests and providing contribution information quarterly, and disclose all contributions during the prior two years. However, the MFP did not follow the policies as required. As a result, the firm only learned of the contributions to Candidate A when the MFP disclosed them in response to the firm’s quarterly request for contribution information from the first quarter of 2003. The firm first became aware of the contribution to Candidate B when the MFP advised them of the contribution on or about May 23, 2003.

The exemption was granted based on six key factors: (1) the contributions were small in amount; (2) Candidate A is the MFP’s stepmother and the contribution to Candidate B was also based on a personal relationship; (3) the firm has a long history as an underwriter in the state, so the contributions were not necessary to obtain municipal securities business; (4) upon learning of the contributions, the firm ceased engaging in municipal securities business with any issuer of which the candidates were issuer officials and withdrew from a city bond deal for which the firm had already been selected as senior manager; (5) the MFP has been counseled by his immediate supervisor and the firm’s senior compliance manager and received a letter of censure from the firm; and (6) one contribution has been returned and the firm demonstrated a reasonable effort to obtain a refund of another. The firm also represented that it maintains and implements a detailed and comprehensive compliance program in regard to Rule G-37. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

6. Exemptive Relief Granted – May 15, 2002

NASD’s National Adjudicatory Council (NAC) reversed a decision by the NASD Department of Member Regulation and granted exemptive relief to a firm that was prohibited from engaging in municipal securities business as a result of contributions made to an elected official by a municipal finance professional (MFP) of the firm. The MFP made three $100 contributions to a candidate who is an elected member of the Board of Commissioners for an issuer and for whom the MFP is entitled to vote. The MFP sought and received pre-approval of the first two $100 contributions. After approving both contributions, the firm’s compliance department reminded the MFP that he was subject to a $250 per election limitation for the candidate. After approval of the second contribution, the MFP was also reminded that he had made contributions totaling $200 and any future contributions to the candidate could not exceed $50. The MFP did not seek pre-approval for the third $100 contribution but did disclose it on a quarterly questionnaire submitted to the compliance department.

The NAC considered four factors in granting the exemption: (1) the firm maintained a thorough and comprehensive set of procedures designed to ensure compliance with Rule G-37; (2) the firm had no actual knowledge of the MFP’s third contribution; (3) once the firm knew of the contribution it took steps to obtain a return of the contribution that caused the prohibition; and (4) upon learning of the contribution, the firm took remedial or preventive measures including examining the adequacy of the firm’s Rule G-37 procedures, temporarily barring the MFP from making further contributions, removing the MFP from primary oversight responsibilities for the issuer’s account, and pledging to deny the MFP any compensation received in connection with the issuer’s municipal finance business during the two-year prohibition. The NAC also noted that the firm voluntarily contacted the Department of Member Regulation and disclosed the facts related to the situation.

Read the full letter.

7. Exemptive Relief Granted – May 1, 2002

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a city as a result of a $500 contribution made by a municipal finance professional (MFP) of the firm to a member of the city council. The MFP made the contribution nine months after he ceased to hold a position or exercise responsibilities that causes a person to be designated an MFP. However, the MFP was still an MFP at the time of the contribution because Rule G-37 provides that a person designated an MFP “shall retain the designation for two years after the last activity or position which gave rise to the designation.” The firm became aware of the contribution when the MFP disclosed it as part of the firm’s quarterly survey of MFPs. The MFP believed that the contribution had been pre-cleared by his assistant, who usually prepares his contribution checks. However, as that assistant was not in, another assistant prepared the check. The contribution was not pre-cleared, despite standing instructions to do so.

The exemption was granted based on four key factors: (1) the contribution was made nine months after the MFP held a position which would have designated him an MFP; (2) the MFP is only an MFP because of the rule’s two-year “look back” provision; (3) the MFP previously had no day-to-day involvement in the firm’s municipal securities business and since ceasing to hold a position that would cause him to be designated an MFP, he had no involvement in the firm’s solicitation or execution of municipal securities business; and (4) the contribution, which was an accommodation to a long-standing relationship with the business client of the firm’s parent company, was small and eventually returned. The firm also represented that it maintains and implements a detailed and comprehensive compliance program in regard to Rule G-37. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

8. Exemptive Relief Denied – January 29, 2002

NASD denied Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business as a result of a $1,000 contribution made by a municipal finance professional (MFP) of the firm to a candidate for governor. The firm became aware of the contribution when the MFP disclosed it according to the firm’s procedures that require all MFPs to make a quarterly contribution report. When the firm learned of the contribution, it notified the MSRB and NASD and withdrew from a significant number of transactions with the state. The firm represented that at the time of the request, the MFP had no involvement in the day-to-day securities business of the firm and received no compensation based on municipal finance business or the profitability of the firm.

The firm requested an exemption from the Rule G-37 prohibition based on three premises: (1) at the time of the request, neither the MFP nor the candidate were in any position to participate in municipal securities business; (2) the firm had policies and procedures in place related to political contributions prior to the adoption of Rule G-37 and regularly provided training and reminders to employees concerning those policies; and (3) upon learning of the contribution, the firm took remedial action to withdraw from or avoid engagement in municipal securities business prohibited under the rule and estimated that it had foregone at least $3.5 million in revenue as a result of the contribution. The firm also represented that it would be willing to take a series of preventive steps to more formally separate the MFP from the firm’s municipal securities business if granted an exemption.

In response, NASD noted that this contribution is the second time in three years that the MFP made a political contribution without following the firm’s pre-clearance procedures. Following the MFP’s earlier political contribution, the firm did not follow firm policy for remediation. Additionally, NASD considered that the MFP has an extremely high profile within the firm and the state’s political and business community. Having recently made a prohibited contribution, the MFP should have been aware of the restrictions in the rule and the firm’s policies and procedures for political contributions as well as the potential economic hardship to the firm from a ban on municipal securities business with the state.

Read the full letter.

9. Exemptive Relief Granted – November 14, 2001

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a city as a result of a $250 contribution made by a municipal finance professional (MFP) of the firm to a candidate for city council. When the contribution was made, the MFP mistakenly believed that she was eligible to vote for the candidate and did not pre-clear the contribution per the firm’s procedures. When the MFP learned that she did not reside in the candidate’s district, she contacted the firm’s compliance department to report the contribution.

The exemption was granted based on a few key factors, including that: (1) the contribution was inadvertent and de minimis and the MFP requested and received a return of the contribution and (2) the candidate never had the opportunity to influence the award of municipal securities business because the candidate was not an elected official, was never elected to office and died during the election campaign. The firm also represented that it maintains and implements a detailed and comprehensive compliance program in regard to Rule G-37.

Read the full letter.

10. Exemptive Relief Granted – August 8, 2001

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a city as a result of a $125 contribution made by a municipal finance professional (MFP) of the firm to a candidate for city comptroller for whom the MFP was not eligible to vote. The MFP made the contribution more than a year after they transferred from the firm’s municipal finance department to another department, at which time they ceased to hold a position or exercise responsibilities that cause a person to be designated an MFP. However, the MFP was still an MFP at the time of the contribution because Rule G-37 provides that a person designated an MFP “shall retain the designation for two years after the last activity or position which gave rise to the designation.” The firm became aware of the contribution through the MFP’s required quarterly disclosure of political contributions.

The exemption was granted based on four key factors: (1) the contribution was made more than a year after the MFP transferred from the firm’s municipal finance department; (2) the MFP is only an MFP because of the rule’s two-year “look back” provision; (3) the MFP had no involvement with the firm’s municipal securities business with the city; and (4) the contribution was made to a candidate who was not, at the time the exemption request was granted, an issuer official, had no apparent opportunity to influence the city’s municipal securities business and the contribution was returned. Additionally, the contribution was small and solicited by a personal friend involved with the campaign. The firm also represented that it maintains and implements a detailed and comprehensive compliance program in regard to Rule G-37. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

11. Exemptive Relief Denied – January 12, 2000

NASD denied Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of a $200 contribution to the governor of a state made by the firm’s chief executive officer who is a municipal finance professional (MFP) of the firm. The MFP was not entitled to vote in that state. The firm characterized the contribution as inadvertent, claiming that the MFP mistakenly believed that the contribution was supporting the governor’s presidential election campaign, despite the fact that the payment was directed to the governor’s gubernatorial committee. The MFP did not follow the firm’s procedures that require pre-clearance of political contributions.

The firm requested an exemption based on the representation that the firm had established comprehensive and detailed procedures to ensure compliance with the rule, including the requirement that all public finance employees of the firm obtain prior approval of political contributions. The firm also noted that when the MFP realized the contribution was given to the gubernatorial committee, the MFP requested and received a return of the contribution. Finally, the firm stated that upon discovery of the contribution, the firm retained local counsel to determine the full extent of any business restriction as a result of the contribution and promptly notified managers in the firm’s public finance department of the business restriction to prevent the firm from seeking to obtain municipal securities business from a restricted entity. The firm noted in its request for an exemption that it had already been subject to these business restrictions for over a year.

In response, NASD noted that while the firm maintains procedures regarding compliance with Rule G-37, the CEO did not follow these procedures and that this lapse by a senior official is significant. NASD also noted that the return of the contribution was not outweighed by the overriding interest in having an MFP adhere to his or her firm’s procedures with regard to Rule G-37. Finally, while the firm has been subject to business restrictions for over a year, the rule’s two-year prohibition serves fundamental investor protection and market integrity purposes.

Read the full letter.

12. Exemptive Relief Denied – December 2, 1997

NASD denied Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a county as a result of a $250 contribution made by a municipal finance professional (MFP) of the firm to a candidate for the county council for whom the MFP was not entitled to vote. The MFP reported the contribution to the firm after it had been made. The MFP later requested and received a return of the contribution.

NASD denied the exemption based on the fact that the violation was directly related to the failure of the firm to develop and institute procedures reasonably designed to ensure compliance with the rule.

Read the full letter.

13. Exemptive Relief Granted – May 20, 1997

NASD granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business as a result of two contributions by a municipal finance professional (MFP) of the firm. The second contribution violated Rule G-37 because when consolidated with the first, the contributions totaled $480, which is significantly over the $250 de minimis contribution exemption.

NASD granted the firm a conditional exemption consisting of a reduced prohibition period of one year from the date of the second contribution ending on July 9, 1997. The exemption was granted based on a few key factors, including that the second contribution resulted from human error rather than insufficient compliance procedures, failure by the firm to educate key personnel or ignorance of the rule. NASD also noted that the MFP was knowledgeable of the rule’s requirements and followed the firm’s pre-screening compliance procedures that would have prevented the inadvertent second contribution if not for an administrative error.

Read the full letter.

14. Exemptive Relief Denied – February 28, 1997

NASD denied Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business. NASD found that the contribution resulted from the firm’s failure to develop and institute procedures reasonably designed to ensure compliance with Rule G-37.

Read the full letter.

15. Exemptive Relief Denied – February 28, 1997

NASD denied Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business. NASD found that the firm failed to implement procedures sufficient to educate its municipal finance professionals regarding the provisions of Rule G-37 or otherwise prevent the contributions.

Read the full letter.

16. Exemptive Relief Denied – February 28, 1997

NASD denied Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business. NASD found that the firm failed to develop and institute procedures reasonably designed to ensure compliance with Rule G-37.

Read the full letter.

17. Exemptive Relief Denied – February 28, 1997

NASD denied Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business. NASD found that the firm failed to implement procedures sufficient to educate its municipal finance professionals regarding the provisions of Rule G-37 or otherwise prevent the contributions.

Read the full letter.

Affiliate Firm Contributions

1. Exemptive Relief Granted – August 15, 2002

NASD granted Rule G-37 exemptive relief to Firm A, which was prohibited from engaging in municipal securities business as a result of a contribution made by a municipal finance professional (MFP) of an affiliated firm. The MFP made a $500 contribution to a candidate for an elected office of an issuer. The MFP is a senior executive officer of Firm B, which is an affiliate of Firm A. Firm A represented that the MFP is not involved in soliciting municipal securities business but is an MFP because of his supervision of other MFPs and the common-control relationship between Firm A and Firm B. Firm A became aware of the contribution as part of a routine quarterly survey of Firm A’s executive officers and MFPs.

The exemption was granted based on five key factors: (1) upon learning of the contribution, Firm A took prompt action and voluntarily instituted a ban on any new business solicitation with the issuer; (2) Firm A sent a reminder to all Firm A and Firm A affiliate employees about the requirements for pre-clearance of political contributions; (3) at the time of the contribution, the MFP had no involvement in soliciting new municipal securities business or participating in existing municipal securities business; (4) Firm A agreed to establish information barriers to minimize the potential for quid pro quo resulting from the contribution; and (5) the contribution was returned. The firm also represented that it maintains and implements a detailed and comprehensive compliance program in regard to Rule G-37. Lastly, the firm represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

2. Exemptive Relief Granted – June 27, 2002

NASD granted Rule G-37 exemptive relief to Firm A, which was prohibited from engaging in municipal securities business with a state as a result of a contribution made by a company that was later purchased by the firm’s parent company. The purchased company made a $5,000 contribution to a candidate’s re-election campaign. Firm A became aware of the contribution as part of its pre-merger review of the company. The company was not merged into and is not a subsidiary of Firm A, but was merged into Firm Y, an affiliate of Firm A that functions as part of Firm A’s equities division.

The exemption was granted based on six key factors: (1) the contribution was made prior to signing an acquisition agreement with Firm A’s parent company; (2) at the time of the contribution, the company had no involvement in soliciting new municipal securities business or participating in existing municipal securities business; (3) the company was merged into Firm Y, an existing subsidiary of the firm’s parent that reports to and is controlled by Firm A’s equities division; (4) Firm Y has NYSE-approved information barriers to minimize the potential for quid pro quo resulting from the contribution; (5) Firm A put in place additional processes to segregate the company’s business operations from the state business; and (6) the contribution was returned. Lastly, Firm A represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.

Firm-Issued Contributions

1. Exemptive Relief Denied – March 10, 1997

NASD denied Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business as a result of two contributions made by a firm on behalf of its chief executive officer (CEO) and sole shareholder. The firm issued checks on behalf of the CEO for $250 and $50 to candidates for municipal office in a city and a county, respectively. The CEO was eligible to vote for both candidates.

The firm noted in its request for an exemption that the pattern of the firm making contributions on behalf of the CEO was clearly established prior to the effective date for Rule G-37. It also stated the CEO and the firm’s compliance officer believed that the firm could continue making contributions on behalf of the CEO if the contributions did not exceed the $250 limit and were within the jurisdiction where the CEO was eligible to vote.

In its response, NASD stated that Rule G-37 does not include a de minimis exemption for a contribution made by a firm. NASD also noted that the language of the rule is clear with respect to the limitations placed on member firms compared to individual municipal finance professionals.

Read the full letter.

2. Exemptive Relief Denied – May 13, 1996

NASD denied Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business as a result of several contributions made by a firm. The firm represented that the contributions, which were issued from the firm’s checking account, should have been made from the checking account of the firm’s president. Two of the contributions were returned to the firm, and the president’s personal checks were issued in replacement.

In its response, NASD stated that it does not matter if the checks were issued by the president or the firm. The president is a municipal finance professional and thus both they and the firm are subject to the requirements of Rule G-37. NASD found no other grounds for granting an exemption in the facts cited in the firm’s request.

Read the full letter.

Firm Mergers/Acquisitions

1. Exemptive Relief Denied – January 4, 2016

FINRA denied Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a city and an authority as a result of contributions made by a political action committee (PAC). Firm A's parent company (Firm B) acquired Firm C, the parent of Firm D. The municipal securities business previously conducted by Firm D was being undertaken by Firm A. As a result of the acquisition, Firm A inherited the remainder of Firm D’s two-year ban on municipal securities business with the issuers. Firm D’s CEO created the PAC, which was funded by contributions by Firm D’s employees. During the period cited in the exemption request, the PAC made contributions to officials of the issuers totaling $27,750 and ranging from $500 to $5,000.

Firm A requested an exemption from the Rule G-37 prohibition based on four premises: (1) the PAC contributions that triggered the ban were not dealer-controlled; (2) it would be inconsistent with the intent of Rule G-37 and related interpretive guidance to penalize Firm A for political contributions made by Firm D’s former CEO more than a year prior to the acquisition of Firm D; (3) at the time Firm A decided to acquire Firm D, Firm A was not aware of contributions made by Firm D’s former CEO and the PAC; and (4) Firm A’s current and proposed supervisory systems are adequate to address any regulatory concerns going forward.

In response, FINRA noted that: (1) the original Form G-37 disclosure filings indicate that the contributions were made “by [a] PAC controlled by the dealer” and that the firm acknowledged that the PAC was funded by Firm D employee contributions, though no information was provided with respect to the nature of this funding arrangement; (2) Rule G-37 interpretive guidance cited by Firm A in support of its argument that it would be inconsistent with the intent of Rule G-37 and related interpretive guidance to impose a ban on business on Firm A was distinguishable on the facts; (3) Firm A’s lack of due diligence regarding the political contributions made by Firm D’s former CEO and the PAC did not support its case; and (4) supervisory procedures that Firm A proposed to put into place were not sufficient to overcome regulatory concerns.

Read the full letter.

2. Exemptive Relief Granted – December 18, 2000

NASD granted Rule G-37 exemptive relief to Firm A, which was prohibited from engaging in municipal securities business as a result of a contribution made by an executive of Firm B. As a result of a merger, Firm A became a corporate subsidiary in Firm B’s Division One. Prior to the merger, no subsidiary in Division One engaged in municipal securities business. The Firm B executive made a $1,000 contribution to a sitting governor’s presidential campaign more than a year before the merger. As part of a post-merger re-organization, the firms’ parent plans to place the executive on Division One’s executive committee, whose members may qualify as municipal finance professionals (MFPs).

The exemption was granted based on three key factors: (1) the contribution was not made with the intent of obtaining municipal securities business; (2) prior to the merger, Firm B’s parent company did not engage in municipal securities business and the executive was not an MFP; and (3) at the time of the contribution, the parent company was not engaged in merger discussions with Firm A. The firm also represented that the executive would not be engaged in helping Firm A obtain municipal securities business or in municipal securities representative activities for two years from the date of the contribution.

Read the full letter.

Spousal Contributions

Exemptive Relief Granted – February 9, 2017

FINRA granted Rule G-37 exemptive relief to a firm that was prohibited from engaging in municipal securities business with a state as a result of a $500 contribution by a municipal finance professional (MFP) of the firm and the MFP’s spouse. The MFP wrote a single check in the amount of $500 from his and his spouse’s joint account in support of a candidate running for a U.S. Senate seat representing the state. The MFP was a resident of the state and permitted to make political contributions to the candidate that in total do not exceed $250 per election without triggering a ban on business for his firm. In accordance with the firm’s policies and procedures, the MFP received permission from the firm to make a $250 contribution to the candidate’s campaign. Because his spouse also intended to make a $250 contribution to the same campaign, the MFP wrote and signed a single check in the amount of $500 from their joint account. His spouse did not sign the check, but the MFP wrote “1/2 [MFP] ½ [Spouse]” in the memo line of the check.

The firm requested exemptive relief based on the premise that the MFP intended to make a contribution of only $250, and that, consistent with MSRB guidance, if the check had also been signed by the MFP’s spouse, a ban would not have been triggered. Similarly, if two separate $250 checks had been drawn on the same joint account and signed by each person, the ban also would not have been triggered. The firm also represented that it would institute a series of preventive steps described in the exemption letter.

Read the full letter.