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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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