Although the Securities and Exchange Commission is pushing for extensive restrictions against campaign contributions from municipal bond firms, the agency understands that distinctions need to be made for minority-owned and women-owned firms, SEC Commissioner Richard Roberts said last week.
"My approach would be to be involved in political races as long as there's no connection between it and your business," Roberts said.
"My solution would be to ban political contributions to anyone you're doing business with, but maybe not ban all political contributions," Roberts said in a telephone interview.
Roberts made his comments in ref. to a meeting with regional municipal dealers he attended in Chicago last Wednesday.
The meeting, sponsored by the Public Securities Association, was held for the senior executives of regional firms and other interest groups representing dealers, bond lawyers, financial advisers, and issuers.
"I challenged the group to move farther than the Municipal Securities Rulemaking Board rule on a voluntary basis," Roberts said.
The MSRB has proposed a political contributions ban barring firms from doing municipal business with an issuer to whom one of its municipal securities professionals, the firm, or a dealer-controlled political action committee has given a contribution within the last two years.
The proposed ban, known as Rule G-37, has an exception allowing municipal securities professionals to give a contribution of up to $250 to a candidate in a jurisdiction where they are entitled to vote.
Roberts said that he received a mixed reaction to his comments.
"We are sensitive to any kind of restriction that is not necessarily the best process," said Alphonso E. Tindall Jr., chairman of the National Association of Securities Professionals. Tindall and another association representative met with SEC Chairman Arthur Levitt in Washington on Nov. 10. Tindall also attended the Chicago meeting.
The association represents minority-owned and women-owned firms and professionals in the securities industry.
"Corruption is something we don't want to see in our business." Tindall said. However, he added, "The process [banning contributions] is not necessarily the most reasonable in accomplishing that goal."
"The impact is a little disparate in relation to women and African Americans," Tindall said. "There are some rights issues here that are extremely important to us. We are not a group that has been given tremendous opportunity to participate in the past and we're sensitive to that."
Rather than thwarting corruption, banning contributions could limit individuals' abilities to support the candidates of their choice, Tindall argued.
"African American and women candidates in the past have gotten support from African Americans and women. And lots of high net worth individuals are in finance and in municipal finance," he said. "If you effectively ban the giving or limit it, that's just an onerous restriction that may not be necessary."
While there has been criticism that the SEC is interested in formulating a ban solely with the input of an "exclusive Wall Street club in mind," that is not the case, Roberts said.
"Our view has always been to be inclusive, not exclusive," he said.
Roberts said the SEC was pleased with the voluntary ban adopted by the "Group of 17" major Wall Street dealers who met with Levitt in New York last month. The commission is now "attempting to take that concept and encourage others to pick up on that," he said.
"There might be different shades as long as the differences are slight," Roberts said.
Following last week's meeting, the PSA said it would form a task force to draft model policies and procedures that regional firms can use to implement the MSRB's proposed political contributions rule.
The commissioner declined to comment on whether the SEC plans to develop its own political contributions ban, but said the commission preferred that dealers voluntarily formulate a policy.
"A ban has constitutional and jurisdictional limitations. It is best handled voluntarily," Roberts said.
