New Jersey ban on negotiated sales now unnecessary, PSA says.

The New Jersey ban on negotiated sales is no longer needed because of new federal regulations banning most political contributions from bond dealers, the Public Securities Association said Friday.

Testifying before an advisory panel appointed by Gov. Christine Todd Whitman to study the ban created under former Gov. Jim Florio, PSA president Heather Ruth said the state should allow for broader financing policies that would permit the state and its authorities to sell bonds on a negotiated as well as competitive basis.

New Jersey's ban, which does not cover local governments, allows for some negotiated sales by the state and its authorities, if deemed absolutely necessary.

The ban was instituted in 1993, after a federal investigation was launched into a number of New Jersey bond deals and dealers, including Armacon Securities, a firm associated wit Florio's chief of staff Joseph Salema, who later resigned. The order for the ban was issued to avoid any impropriety in New Jersey bonds sales or syndicate selections.

Ruth told the panel, the Advisory Panel on Government Contracting Procedures, that Florio's order was unnecessary because of the Municipal Securities Rulemaking Board's Rule G-37, "which has the practical effect of banning political contributions by municipal securities dealers to any issuer with whom they do business." The rule, which is being challenged in federal court, went into effect April 25.

Bond issuers should have the options of choosing whether to sell debt through competitive auction or negotiated sales, Ruth told the panel.

"Whether an issuer should issue bonds on a competitive or negotiated basis should be governed by one primary consideration: which method will not only assure maximum investor acceptance, but also minimize interest costs now and in the future," she said.

About 15 representatives from bond dealers were also slated to testify on Friday, as well as representatives from bond issuing authorities in the state.

The advisory panel is made up of New Jersey Treasurer Brian Clymer, state Attorney General Deborah Poritz, and the governor's chief of staff, Peter Verniero.

The panel will hold two more hearings, one devoted to testimony from bond counsel firms, which say the have been hit hard by the Florio ban. Many bond counsel firms have complained that the ban has curtailed profits and could hurt the quality of legal opinions on bond issues.

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