WASHINGTON -- The Municipal Securities Rulemaking Board said yesterday that it will delay the effective date of its controversial political contributions rule until April 1 and has voted to beef up the rule's disclosure requirements.
"The board previously announced that the prohibitions on business contained in Rule G-37 will arise from contributions made on or after Jan. 1, 1994," the board said in a press release. "The board is concerned, however, 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 changed to April 1, 1994."
The board issued the statement one day after it held a special meeting in New York t tighten the disclosure provisions of a draft rule on political contributions it unveiled on Nov. 11.
The delay is the second announced by the board in its attempts to implement its proposed Rule G-37 on political contributions and prohibitions on municipal securities business, which is running into a buzz saw of oppositin from state and local government groups. The board said on Dec. 7 that it would delay the effective date of its rule by at least two months, from Jan. 1 to March 1.
"The board has retained the basic outlines of the rule as announced in November and has added certain disclosure requirements," the MSRB said in the statement. But it said it will make no further comment on the specifics of the rule until January, when it publishes the measure in its quaterly report to dealers, "MSRB Reports."
"The deal is done. They've worked out the disagreements with Securities and Exchange Commission Chairman Arthur Levitt [Jr., who had] wanted a harder rule," said one industry source, who asked not to be identified.
The proposal generally would bar dealers who make contributions to politicians from doing business for two years with the cities and states served by those officials. The board said yesterday that it will file the proposal with the SEC for review no later than mid-January.
The latest changes came after Levitt said in an interview with The Bond Buyer Nov. 14 that the rule may not require enough disclosure of contributions. He expressed disappointment that the board dropped a provision in an earlier draft that would have required dealers to report any contributions they make to issuer clients to the MSRB.
The board could then make the information available to the public through its central repository for bond information, in a procedure that was hailed by election reform groups.
Levitt also said the rule may not go far enough to prevent dealers from funneling contributions through advisers, consultants, and others who work outside of municipal departments. Levitt could not be reached for comment yesterday.
The MSRB's announcement comes as a torrent of opposition is developing against the agency's political contributions rule.
The National League of Cities adopted a resoluton Dec. 5 condemning the MSRB's rule for "denying citizens their constitutional right to full participation in the electoral process" and mandating "significant new, unfunded financial disclosure burdens and requirements on cities."
The league reportedly is organizing a number of issuer groups to ask regulators to delay their contributions standard for a year.
The 1,700-member National Association of Counties adopted a resolution Dec. 10 urging the MSRB to delay its proposed rule until regulators have consulted more extensively with issuers and studied the rule's costs and benefits.
North Carolina veteran Treasurer Harlan Boyles charged in a letter to Levitt last week that the rule infringes on issuer's rights and objected to issuers being "bashed and tarred" by the MSRB and SEC.
The Florida Association of Counties also has circulated a sample letter calling for a boycott of 17 Wall Street firms that have endorsed a voluntary ban on local campaign contributions.
