The Public Securities Association yesterday offered in final form guidelines to help municipal market firms comply with a new federal ban on campaign contributions.
The advice came in the form of a "drafting guide" released yesterday by the PSA, the municipal market's trade organization. A preliminary draft has been circulated in recent weeks, and many firms have already implemented its procedures, executives said.
The guide is intended to help the firms comply with a recently enacted ban on campaign contribution by the Municipal Securities Rulemaking Board, called Rule G-37. The PSA's guide suggests firms develop procedures for recordkeeping, supervision, and disciplinary action for violaters.
In addition, the PSA suggests firms develop "general standards and codes of conduct that would apply to public finance professionals, executive officers, and other members of the firm involved in the municipal finance business."
R. Fenn Putman, PSA chairman and a managing director with Lehman Brothers, said in a statement: "The PSA is dedicated to strengthening the integrity of the marketplace, and this document demonstrates that municipal bond dealers are committed to implementing internal rules that fully comply with both the provisions and spirit of Rule G-37."
The new MSRB rule, which went into effect on Monday, prohibits municipal market dealers from doing business with a municipality for a period of two years after making a campaign contribution to any official in that municipality. The rule also covers contributions by a dealer's political action committee. The rule permits an exemption for political campaign contributions of $250 or less to officials for whom the contributor may vote.
The MSRB could not be reached for comment.
At the moment, firms that underwrite municipal bonds are grappling with the contribution ban and new compliance procedures the rule has forced upon their employees.
Although many firms have develop procedures to implement the contribution rule, officials at the PSA and the rulemaking board say many firms continue to have questions on how best to implement the new rule.
"The guide was developed so firms have a model to go by when developing their own policies and procedures," said PSA spokesman Pen Pendleton.
Officials at several major firms said the draft rules mean very little to them. Many of the large firms have already developed compliance procedures, or have directed their legal staffs to do so.
Instead, the guidelines will be particularly useful for many regional bond firms, which, unlike the market's major players, do not have the resources to create their own compliance guidelines.
Dain Bosworth executive vice president Nelson D. Civello co-chaired the PSA task force that developed the guidelines. Dain Bosworth is a regional firm located in Minneapolis, Minn.
Civello said yesterday in a telephone interview that the guidelines were developed with the regional firms in mind, and specifically their complaints about a private ban on campaign contribution reached in October 1993 by 17 of the market's largest firms.
At the time, the regional firms felt compelled to join the private ban, also known as the Group of 17 ban, but frustrated that they did not have the legal resources to develop procedures to carry out its edict.
The regional firms' focus on how they might comply with the Group of 17 accord led to a formation of a PSA task force to deal with issues surrounding the private accord and begin focusing on the pending MSRB ban on campaign contributions.
"[The PSA guidelines] grew out of the certain frustration that many regional firms felt when they heard of the Group of 17 and how far down the road they have gone with their expensive New York law firms," Civello said.
The guidelines may also serve to "level the playing field," one market executive said, forcing dealers that had not intended to develop compliance procedures to do so. "Now, every firm will develop a minimal level of procedures," said one market executive. "From that standpoint, the guidelines are good."
The PSA's G-37 Model Supervisory Procedures Task Force, which is made up of 64 member firms, developed the guidelines over the last four months.
