WASHINGTON -- Municipal dealers are wringing their hands over the job ahead in responding to the Securities and Exchange Commission's 13-point inquiry about their political contribution practices.

"It's going to be a nightmare in terms of gathering information," said a source from one Wall Street firm about the letter signed by SEC enforcement chief William McLucas.

"If everyone got all the information that the SEC asked for, it will fill the Empire State Building," said the source, who asked not to be identified.

But firms may get at least a temporary reprieve from the task, according to one knowledgeable source, who said yesterday that the SEC is redrafting some of the questions in the four-page letters that it sent last month to roughly 70 firms.

He said the agency is expected to give firms until November to respond to most of the questions. rather than by the current deadline of July 12.

"We're pulling our hair out," said another official from a Wall Street firm. "We don't keep these records. We have to go through every travel and expense report to see if [we gave] over $100" to anyone, or took them out for a drink or dinner, he said, referring to two questions in the letter asking firms and individuals to identify all political contributions, payments, or valuables worth $100 or more given to issuers associated with bond deals.

"I'm going to have to go back to my checkbook and give them" everything, he said. "Internally we're

going through the whole thing. We're laboriously looking at [everything]," he said.

"There are a number of people who won't want" to disclose the information on First Amendment grounds, he said.

Despite the extension of the deadline, firms would still have to answer three of the general questions in the letters by the original deadline, sources said. Those are questions 1, 2, and 11. Questions I and 2 ask firms to identify all municipal securities offerings for which the firm acted as lead or colead underwriter since Jan. 1, 1990. or as financial adviser.

Question 11 asks firms to describe the "controls and supervisory procedures" they have in place concerning "contributions or payments" by political action committees, directors, officers, and employees to incumbents of or candidates for any position in any "municipal entity."

But answers to the other questions, which deal with actual political contributions by the firms and their employees, would not have to be supplied until late this fall.

One question that sources hope the SEC will revise asks firms and employees to identify payments made for the purpose of "influencing" the selection of the firm as lead underwriter for financial adviser.

SEC assistant director of enforcement Julie Lutz would not comment on whether the agency has sent letters to dealers and whether it is revising those letters.

"There's a general sense of consternation that such a potentially huge amount of data is being requested," PSA president Heather Ruth said in a telephone interview. "Everyone I talk to has lots of questions" about what does such and such question mean, she said.

"The question that people are wringing their hands over is what to do about individual contributions they don't know about," Ruth said. "If a firm doesn't ask employees to give it that information routinely, the question is" how appropriate is it to ask employees for the information, she said.

"We're trying to help firms who call us to get in touch with other people who are trying to respond. We're not taking any direct action. Clearly there is some sort of informal sharing" of information, she said.

"I would be surprised if there isn't a wide variety of practices" by firms, she said.

Several officials at firms contacted yesterday predicted that the crackdown by regulators is going to lead to major shifts in firms' procedures.

"I think the world is changing," said a representative from another major Wall Street house. He said his firm is studying an array of options to recommend to regulators -- everything from requiring firms and company officials to report contributions to the Municipal Securities Rulemaking Board's central repository to imposing some kind of across-the-board ban on contributions by companies to issuers with whom they are currently doing business.

"I'd love to see us have some kind of standardized procedure that every firm would voluntarily follow," said Gerald McBride, chairman of the PSA's municipal division.

"People are going to become more and more stringent," McBride predicted. "Most large firms are going to make sure that they do have procedures if they don't [already]. I think there are going to be formal procedures. I welcome that. I would find it hard to believe that any major firm would not already have a process. And they are probably going to review processes they have to make sure they are tighter."

McBride, executive vice president of the tax-exempt division of Prudential Securities Inc., said his firm has had detailed procedures for handling political gifts for about five years.

"We go to an internal source and we tell him we want to make a political contribution and why, and then we make sure we are allowed to give either personal money or PAC money," he said. "We make sure we're not violating any laws in the municipality."

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