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 2015-2017. This page may 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.

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.

Acquisition of Another Firm

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.