Washington - The Securities and Exchange Commission will launch an initiative shortly to get bond lawyers, regional municipal dealers, issuers, and other market players to follow the lead of major underwriters and voluntarily restrict political contributions, an SEC source said yesterday.
"We are sending letters out shortly to trade associations and others inviting them to look at what the firms did and see how they can sign onto the [same] principles," said the source, who was close to negotiations between officials of the SEC and Wall Street that led to last week's historic agreement.
Seventeen firms voluntarily agreed to bar their municipal departments from contributing to state and local officials who are responsible for awarding lucrative negotiated deals.
Last week's agreement with major firms was "not intended to leave people out," said the source. "They brought this package [to us]. Now, we would love to show that to the rest of the brokerage community" and other market participants, said the source, who asked not to be identified. "We're about to see how we can make contact with those groups most efficiently. A lot of firms [already] have been contacting us, wanting to be helpful."
Reports of the SEC's plan comes as the National Association of Bond Lawyers, under pressure to act to curb political gift giving, is expected to announce shortly the appointment of a 10-member panel to develop recommendations on whether lawyers should restrict contributions to state and local officials they do bond deals with.
The panel would be overseen by a three-member task force on government relations that was appointed in September by association president Neil Arkuss, a partner with Palmer and Dodge in Boston, to confront such issues as curbing political contributions and improving secondary market disclosure.
SEC Chairman Arthur Levitt said Oct. 18 at a press conference where he announced the voluntary agreement that it is his "intention to bring the principles of this agreement" to other participants in the municipal bond market, such as "bond counsel."
"We're on a fast track," said Arkuss this week in a telephone interview on the association's task force. The members are Jane Dickey, a partner with the Rose Law Firm in Little Rock; Andrew Kintzinger, a partner with Briggs and Morgan in Minneapolis; and Dale Collinson, a partner with Willkie Farr & Gallagher in New York.
"We want to move with all deliberate speed," Dickey said. "We have a lot of work to do on this issue. We need to talk to folks from a variety of firms and situations to see under what circumstances they make political contributions. We need to do some research on First Amendment questions and campaign finance law.
"Most of us continue to think that contributions are an area of interest to taxpayers," Dickey said. "It is difficult to understand why it is of interest to investors. Nevertheless, it is clearly of interest to the media and the SEC and federal legislators. Therefore, it is of interest to us."
The appointment of the association committee comes as some bond lawyers are growing increasingly concerned about the need for curbs in their industry, particularly now that dealers are excusing themselves from gift giving.
"I am concerned that the recent [pact] signed by major investment banking firms will result in increasing pressure on bond lawyers to fill the gap that it will create in political campaign coffers," said Paul A. de-Bary, a partner with Hawkins, Dela-field & Wood in New York, in an Oct. 19 letter to Arkuss.
DeBary warned that a "disparity between the ground rules [for] bankers and lawyers" could rapidly become a "dominant circumstance in our professional lives.
"I think most of us feel that it will increase the inclination of bankers to hire lawyers for political reasons rather than for substance. Moreover, it has been widely reported that politicians have seen no reason to discontinue seeking contributions from others whose business they directly or indirectly influence.
"As a result, in some cases. it will undoubtedly result in the use of bond attorneys as middlemen in the process of ~indirect' contributions," said deBary, who participated in an ethics workshop at the association's recent bond attorneys workshop in Chicago.
Thomas K. Downs, who chaired the association's session on Ethical and Opinion Responsibilities of Counsel, said in a telephone interview Monday that he personally would support a voluntary ban on any contributions that are designed to get legal work.
James Frein. chairman of the Public Securities Association's regional advisory committee, said yesterday that the panel will take up the issue at an open forum in early November in Chicago, where regional dealers will be invited to face off with politicians on the contributions question.
