The 17 investment banks that agreed last week not to provide state and local officials with campaign contributions have scheduled a second meeting on the subject today, several Wall Street executives said.
Municipal market executives are describing today's event in New York City as a follow-up to the accord reached Oct. 18, when the chief executives representing the nation's top municipal bond underwriters agreed to ban all business-related political contributions to state and local officials.
In recent months, the municipal market has received unprecedented scrutiny following reports of conflict-of-interest investigations into campaign contributions, and other alleged market abuses.
The ban, arranged by Frank Zarb, vice chairman and group chief executive at Primerica Corp., was announced at the Securities and Exchange Commission's headquarters in Washington, D.C., by the agency's chairman, Arthur Levitt Jr. Primerica owns Smith Barney Shearson, one of the largest municipal bond underwriters.
Market executives said that Levitt, who has played a key role in the effort to ban political contributions, called for the follow-up meeting.
An SEC source said Levitt will not attend today's event, but requested a second meeting so the firms can address problems he found with the accord.
The source said that while Levitt was "very pleased" with the effort, he found the accord left room for improvement.
Specifically, the chairman wants firms to close loopholes he sees in the Oct. 18 agreement by writing new language further restricting political contributions from affiliates, consultants, and employees that do not work in each firm's municipal department.
Today's meeting will be held at the headquarters of Merrill Lynch & Co., a spokesman for Merrill confirmed. Federal authorities are investigating what Merrill has described as "trading irregularities" in its account with a small, politically connected municipal bond firm in New Jersey.
In a prepared statement, the Merrill spokesman said, "At the request of chairman Levitt, the firms will now work jointly on details of the new policy for political contributions. Merrill Lynch is simply providing a meeting place for that process."
Under the accord, "each firm, employee, political action committees, and each firm's municipal finance professionals, their supervisors, and senior management will be prohibited from making political contributions at state and local levels."
The agreement also addressed contributions made by firm employees not involved with municipal bond business and contributions made by affiliated companies.
Levitt, who has promised to play an active role in addressing municipal industry problems, wants firms to have policies in place within 60 days of the Oct. 18 agreement.
The voluntary accord follows a recommendation by the Public Securities Association that underwriters stop giving political contributions until market regulators finish working on a proposed ban on contributions. The Municipal Securities Rule-making Board, the industry's self-regulatory agency, is considering a ban on all political contributions from underwriters to state and local officials.
