Some of the nation's largest municipal bond dealers are scheduled to meet today at the New York City offices of the Securities and Exchange Commission to finalize a voluntary ban on campaign contributions.
A draft of the proposal obtained by The Bond Buyer appears to be more sweeping than an effort recently proposed by the market's self-regulatory group.
Today's meeting has been described as a follow-up to an accord reached on Oct. 18, when 17 of the largest firms in the market agreed to bar their municipal bond departments from making contributions to state and local officials who are responsible for awarding lucrative negotiated bond underwriting deals.
During today's meeting, bond firm executives will present a more detailed version of the October accord to SEC chairman Arthur Levitt Jr., sources with knowledge of the event said.
The updated ban prohibits the firms, municipal finance professionals, executives affiliated with the firm's municipal department, and "senior executives of direct or indirect parents of the municipal securities dealer who are also employees of the municipal securities dealer" from making contributions at the state or local level.
The agreement also restricts charitable contributions in which state and local officials are involved, as well as contributions to other efforts such as ballot propositions.
Market sources say the agreement's provisions are even more restrictive than a proposal by the Municipal Securities Rulemaking Board, the market's self-regulator. Under the MSRB approach, municipal executives can make contributions under a threshold level in the jurisdiction in which they live. The MSRB proposal must still be approved by the SEC.
The updated voluntary approach, initiated by Frank Zarb, vice president and chief executive officer at Primerica Corp., the holding company for Smith Barney Shearson, has emerged after several industrywide meetings featuring legal officials from major municipal bond firms.
Sources with knowledge of the effort say legal advisers for Goldman, Sachs & Co. and Merrill Lynch & Co. developed a "statement of initiative" and asked their colleagues to agree to a set of principles as described in the 10-page document. On Monday, sources say the firms voted on the accord.
It is difficult to determine if all the firms that agreed to the original accord are also in agreement with a more detailed ban, a source with knowledge of the meeting said.
"Many of the firms' CEOs have not seen the agreement" said one municipal executive, who asked not to be quoted by name. "The lawyers finished this new agreement on Monday. And they took votes and the votes were not all unanimous."
Other market executives said the updated approach was approved by the majority of the firms. "My impression is that everybody is comfortable with it," one municipal market executive said.
The original ban was announced at SEC headquarters in Washington, D.C., by Levitt, who gave firms 60 days to develop a more detailed approach.
Today's meeting will probably feature a much larger crowd than the 17 bond firms that signed the initial agreement. According to confidential documents obtained by The Bond Buyer, at least three more firms appear to have joined the voluntary accord: Dean Witter Reynolds Inc., Kemper Securities, and Morgan Keegan & Co. Sources say there could be as many as 20 other newcomers.
An SEC official said Levitt has not reviewed documents relating to the proposed ban and would not comment on the matter until he meets with firm executives.
