The municipal market's largest players are planning to overhaul a historic private ban on campaign contributions, a move that could weaken several key aspects of the agreement.

The private ban, reached last fall and which now covers more than 50 municipal bond dealers, forbids municipal market players from making campaign contributions to state and local officials who also select municipal bond underwriters.

But many industry participants have complained that the voluntary ban is too strict and runs counter to legal limits on campaign contributions recently imposed by the Municipal Securities Rulemaking Board.

David Clapp, chairman of the MSRB, a general partner at Goldman, Sachs & Co., and one of the key players in spearheading the private ban, said on Wednesday that lawyers representing the market's largest firms "are about to get out" a revision of the private accord.

Clapp said the revisions will "clear differences" between the private accord and the board's restrictions on campaign contributions, known as Rule G-37.

The MSRB's restrictions, which are widely regarded as less restrictive than the private agreement, allow executives to make $250 donations to state and local officials, but only where the executives are registered to vote.

Under the MSRB's rule, firms are prevented from doing business for two years in areas of the country where they have made campaign contributions, while the private accord bans all contributions from market players. The MSRB's version also requires firms to report contributions of its municipal finance staff, while the private accord forces firms to report contributions made by many more executives.

In recent months, the market's largest players have called on their compliance staffs to "rationalize" the two rules, one firm executive said. Many market players have complained that it's difficult enough to comply with the MSRB's guidelines, much less the private accord, which mandates additional restrictions.

As a result, industry lawyers have met privately to develop a refinement of the accord, known as "interpretation No. 2."

Lawyers who have been present at recent meetings include those from PaineWebber Inc., Goldman, Sachs & Co., Morgan Stanley & Co., J.P. Morgan Securities Inc., CS First Boston, Merrill Lynch & Co., several regional firms, and Salomon Brothers Inc., according to market sources.

Several sources present at the meetings said Salomon has played a surprisingly strong role in helping to develop a consensus on the accord's revisions. In October 1987, Salomon left the municipal bond market, Several industry executives said the firm's upfront role in the discussions may be a precursor to its re-entry into the municipal field.

Gedale Horowitz, senior managing director at Salomon Brothers, said the firm "has no present intentions" to rejoin the municipal market. Horowitz said Salomon's involvement in the private accord comes at the request of SEC chairman Arthur Levitt Jr., who last full called on the major Wall Street bond houses to join together privately and ban contributions.

As for the upcoming revisions, market players will probably submit a revision to market regulators next week, changing the accord in several key areas, and most importantly, allowing dealers to make a "de minimis" contribution to state and local officeholders.

As with the other proposed changes, not all firms agree on every aspect. Theodore Levine, general counsel of PaineWebber, has taken a lead role in bringing together what one participant has described as a fractious group to discuss revisions in the private accord.

Levine could not be reached for comment, but other lawyers with knowledge of the meetings said firms are attempting re-draft the accord in such a way that it will reflect the rule-making board's guidelines.

"I don't think anyone is opposed to allowing [market executives] to make de minimis contributions," said one attorney representing a major Wall Street firm.

One important player who may find fault with the revision is SEC Chairman Levitt. He played a key role with Clapp and former Primerica Corp. vice chairman Frank Zarb in developing the private accord.

Levitt has not seen the revisions, and a SEC spokeswoman said he will not comment until he reviews them. In the past, Levitt has said that the accord is pivotal in cleaning up the so-called pay-to-play scandals, where municipal dealers are expected to make campaign contributions to state and local officials who choose underwriting syndicates.

Levitt also views the accord as a stop-gap solution if the rulemaking board's restrictions are successfully challenged in court. At the moment, Alabama bond dealer William Blount is challenging the rule as unconstitutional.

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