WASHINGTON - The Municipal Securities Rulemaking Board announced yesterday that it will meet Monday to consider amending the political contributions rule the board unveiled last month and indicated that it may tighten the standard's disclosure provisions.
In a two-paragraph statement, the board also said it will delay the effective date of its upcoming rule "by at least two months," from Jan. 1 to March 1.
"The board will hold a meeting on Dec. 13th to finalize its proposed Rule G-37 on Political Contributions and Prohibitions on Municipal Securities Business," the statement says. "At the meeting the board will review the language and discuss whether to modify certain disclosure requirements."
Meeting on Nov. 10 and 11, the 15-member board adopted the "basic outlines of the rules requirements," the statement says. "Since that time, the board has reviewed public statements on the proposal by the Securities and Exchange Commission and others and has monitored industry efforts in regard to political contributions."
The rule would bar dealers who make contributions to politicians from doing business for two years with the cities and states served by those officials. The rule would not restrict contributions to politicians who serve issuers that a firm does not do business with, and it would allow individual employees to give up to $250 to candidates in the jurisdictions where the employees five.
Firms would have to keep records of their contributions and contributions by their employees and political action committees.
Federal inspectors could check the records against a firm's under-writing but the firms would not have to send their information to the MSRB.
SEC chairman Arthur Levitt Jr. recently expressed concern that the rule is too weak on disclosure. An earlier version would have required firms to report to the MSRB any contributions to municipal officials, a provision that citizens groups called a major step forward in improving disclosure of political gift giving.
MSRB executive director Christopher Taylor said in a telephone interview yesterday afternoon that he could not provide additional details on the board's upcoming revisions.
"The basic provisions of the rule will stay the same," he said. "We are only looking at the disclosure aspects and the overall rule language to make sure it comports with what the board intended."
A spokeswoman for Levitt said the SEC chairman is "encouraged that the MSRB is working hard and considering some important issues."
The board said it decided to delay the effective date because it is "considered that dealers be provided with sufficient notice of the requirements of the rule to implement effective procedures for compliance. Therefore, the Jan. 1, 1994, date will be delayed by at least two months."
George Brakatselos, vice president of the Public Securities Association, applauded the board's decision to delay the effective date of the rule. "Given the fact that the new rule is substantially different than the first version, we are pleased that now the industry will have a chance to examine the new version and comment to the commission before the effective date."
Many issuers are mounting attacks on the rule. The National League of Cities adopted a resolution Sunday condemning the board's rule as setting a "double standard" for the electoral process since contributions to federal officials would not be banned.
The League said the rule also presumes that if an elected official accepts a legitimate contribution, then that official will be unable to carry out his or her responsibility to tax-payers
The Florida Association of Counties also adopted a resolution opposing the rule last week. It distributed to Florida county commissioners a sample letter that they can send to the 17 Wall Street firms that signed a voluntary ban similar to the board's rule. The letter vows a boycott of the firms when the issuer is seeking underwriters for negotiated offerings.
"I don't think this is representative of all state and local officials," SEC member Richard Roberts said in a telephone interview yesterday about the actions taken by the League and the counties group. "This is creating the perception that some state and local officials are more interested in lining their coffers than cleaning up [the municipal bond business]. If that's correct, I'm most disappointed by the reaction. I can't imagine that is the reaction of most state and local officials."
Meanwhile, the National Association of State Treasurers announced Monday that it is developing guidelines for treasurers to follow to disclose campaign contributions they receive from bond underwriters.
Mark Schwartz, a lawyer and former investment banker with Prudential Securities, said, "When the Public Securities Association was in front of Congress, they said politics does not play much of any role" in awarding municipal business. He was referring to statements by Gerald McBride, chairman of the PSA's municipal executive committee, at oversight hearings this fall by the House Energy and Commerce Committee's subcommittee on telecommunications and finance.
"That sure doesn't seem to be the case in light of all these protests by the people in Florida and" by the League of Cities, he said. "If politics isn't involved why are all these people so upset at this point?"
