WASHINGTON -- Two House chairmen asked the Securities and Exchange Commission yesterday to broaden its inquiry into political contributions to include bond counsel, consultants, and, other experts involved in municipal bond financings.
The congressmen also asked the SEC whether it has run into resistance from the roughly 70 municipal underwriting firms the agency has begun to question on the issue, and whether Congress should issue subpoenas to help elicit information from those firms.
The inquiries came in a one-page letter to Mary Schapiro, acting chairwoman of the SEC, from Rep. John Dingell, D-Mich., chairman of the House Energy and Commerce Committee. and Rep. Edward Markey, D-Mass., chairman of the panel's subcommittee on telecommunications and finance.
The congressmen said in their letter that a preliminary review of the ongoing investigation "appears to indicate" that the political contributions problem may not be limited to municipal dealers. They said it "also may encompass bond counsel, consultants, and other experts who figure in these municipal financing deals."
"We respectfully request that you expand your inquiry to include these parties," since the committees "need a complete and accurate record on which to write legislation, as necessary to address the issues that have been raised," the letter says.
"Please advise whether you are receiving appropriate cooperation from these firms, and, if not, whether there are any actions, such as the issuance of subpoenas, that you would deem necessary on our part in order to secure the appropriate level of cooperation," the letter says.
On May 24, the two chairmen sent a letter to the SEC and two other federal regulatory groups announcing they were launching an investigation into the municipal bond market to determine if new federal regulations are needed, including ones governing political contributions.
The SEC followed up with a four-page letter in June to roughly 70 bond firms nationwide asking them to answer 13 detailed questions about the political contributions made by the firms and their employees to municipal officials since January 1990.
But many underwriters chafed at the request, complaining that certain questions were drafted in an incriminatory manner and that the amount of information being sought was overwhelming.
A group of top securities lawyers representing many of the firms met with the SEC recently to outline some of the firms' complaints. Last week, the agency reportedly narrowed the list of items dealers were supposed to supply and gave them an additional four months to answer.
Meanwhile, some dealers complained that underwriters are bearing the brunt of the inquiry, when bond counsel and financial advisers heavily contribute to the campaigns of state and local officials whose underwritings they assist.
Jane Dickey, president of the National Association of Bond Lawyers and a partner with Rose Law Firm in Little Rock, could not be reached yesterday to comment on yesterday's letter.
Amy Dunbar, chief lobbyist for NABL, said, "We'll wait to see what exactly the SEC is looking for. We as an organization can't respond because we aren't the ones involved. But to the extent that we can help [individual firms] in the response process, we certainly will try to do so."
George Brakatselos, vice president of the Public Securities Association, said it is "appropriate" to go beyond municipal dealers and look at other participants in the transactions. "They are involved also."
The Municipal Securities Rulemaking Board is expected to consider tough new limits on political contributions by broker dealers at a quarterly meeting July 28-30 in Colorado Springs.