MSRB NOTICE 2000-09 (MARCH 1, 2000)


With respect to the amendments to rule G-38 that require dealers to report their consultants’ political contributions and political party payments, the Board is reminding dealers that the amendments will become effective on April 1, 2000.  Dealers will need to have Consultant Agreements in place by April 1 that conform to the new amendments.  Pursuant to those amendments, a dealer is required to include within its Consultant Agreement a provision to the effect that the consultant agrees to provide the dealer each calendar quarter with either: 

(1) a listing of reportable political contributions to official(s) of an issuer and reportable payments to political parties of states and political subdivisions during such quarter, or 

(2) a report that no reportable political contributions or reportable political party payments were made during such quarter, as appropriate. 

The amendments to rule G-38 include a reasonable efforts provision.  This provision provides that a dealer will not be found to have violated rule G-38 if the dealer fails to receive from its consultants all required information about reportable political contributions and reportable political party payments and thus fails to report such information to the Board if the dealer can demonstrate that it used reasonable efforts in attempting to obtain the necessary information.  To avail itself of the reasonable efforts provision contained in rule G-38 a dealer must: 

(1) state in the Consultant Agreement that Board rules require disclosure of consultant contributions to issuer officials and payments to state and local political parties; 

(2) send quarterly reminders to its consultants of the deadline for their submissions to the dealer of contribution and payment information; 

(3) include language in the Consultant Agreement to the effect that: (a) the Consultant Agreement will be terminated if, for any calendar quarter, the consultant fails to provide the dealer with information about its reportable contributions or payments, or a report noting that the consultant made no reportable contributions or payments, and such failure continues up to the date to be determined by the dealer but no later than the date by which the dealer is required to send Form G-37/G-38 to the Board with respect to the next succeeding calendar quarter, such termination to be effective upon the date the dealer must send its Form G-37/G-38 to the Board, and (b) the dealer may not make any further payments to the consultant, including payments owed for services performed prior to the date of termination, as of the date of such termination; and  

(4) enforce the Consultant Agreement provisions described above in a full and timely manner and indicate the reason for and date of the termination on its Form G-37/G-38 for the applicable quarter.

March 1, 2000