WASHINGTON -- The Municipal Securities Rulemaking Board plans to phase in its political contributions rule so that only those gifts made on or after the rule would take effect would have to be reported.

But board officials are warning dealers not to try to circumvent the intent of the rule by rushing out and making contributions before the effective date because enforcement officials will be watching them closely.

Officials are projecting that the earliest the rule could take effect is Jan. 1.

Christopher A. Taylor, MSRB executive director, said that enforcement officials at the National Association of Securities Dealers and the Securities and Exchange Commission can use the board's existing "fair practices" rule to go after any dealer that tries to get around the new rule before it goes into effect.

"If someone goes out there and makes large contributions and we hear [about it], it will be the subject of inquiry under existing rules," Taylor said in a telephone interview yesterday. "Someone would be foolish to do that."

"It's amazing how quickly regulators hear that so-and-so made a contribution to [a candidate] and the [firm was subsequently] awarded a bond deal. The competition produces the information. If dealer A sees dealer B making a political contribution, be assured we usually hear about it. They will let us know that someone is trying to evade the rule and beat the gun."

Taylor added, "If I were a dealer right now and a politician called me and said ~how would you like to [make a] contribution,' I wouldn't touch it with a 10-foot pole. It's a possible violation of G-17. People ought to be very cautious."

The board is expected to vote on whether to make the rule final at its November quarterly meeting. Then the SEC will call for comment on the plan. Taylor said the earliest the rules could be put into effect is the first quarter of 1994. The board could make the rule retroactive to Jan. 1, he said.

The rule detailed by the board Monday would bar municipal bond dealers from making direct or indirect contributions designed to capture business. It also would require dealers to disclose political gifts made to issuers with whom they do business over a four-year period: the two years before they are awarded a deal and the two years after. Comments on the proposal are due Sept. 30.

Taylor outlined how the disclosure requirements would work if the rule took effect Jan. 1.

"If you do a deal Feb. 1, 1994, any contribution in the month of January would have to be disclosed" in a separate initial report to the board. he said. Then dealers would submit a semiannual update about contributions made to that issuer for a period of two years after the deal, he said.

Taylor warned that the rule could kick in earlier for financial advisers than for underwriters. "The [decision about who is] financial adviser typically comes a lot earlier than when the decision about the underwriter is made," he said.

He added that the board has not determined precisely how the information would be supplied to the public through its Municipal Securities Information Library. But he said it would be "readily available. "

MSIL data already is easy to access, Taylor said. "You can go to the MSRB's Alexandria, Va., office and get the stuff. You can order up the tape. There are information vendors that will sell you bits and pieces. I expect the same thing to be applicable here" in terms -of disclosing the political contributions data, he said.

"If a news reporter says, I have questions about a $20 million deal and about whether so-and-so politician was involved, he or she will be able to punch up the name of the deal and find out what the report is," Taylor said.

The MSRB head said he does not know yet whether viewers could see the full report in the data base or whether the person would have to go to MSRB shelves and look at the actual report. "But they would know right away what the deal is and they could call it up."

Taylor said that the political contributions information retrieval system would be separate from the two existing systems in the board's Municipal Securities Information Library.

The OS/ARD system collects official statements and advanced refunding documents and makes them available to subscribers on magnetic computer disks.

The Continuing Disclosure Information Pilot system, CDI, collects three-page disclosure notices from bank trustees and issuers nationwide and rapidly transmits those notices to subscribers. The MSRB said this week that it has asked the SEC for an additional 18 months to run the pilot, through April 6, 1995.

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