ATLANTA -- The Louisiana State Bond Commission yesterday unanimously adopted sweeping new rules to limit joint accounts between participants in negotiated bond offerings.

Under the new rules, all state or local issuers must now disclose any joint accounts in such borrowings.

The 14-member commission also revised the guidelines under which it chooses finance professionals state-level negotiated deals. It may now decide in advance, on an issue-by-issue basis, whether joint proposals will be permitted for these financings.

The new rules further require that participants in state deals provide the names of any firms or persons engaged to "promote" their selection, including attorneys, lobbyists, or public relations specialists.

In addition, no later than 45 days after issuance, each participant in state-level deals in Louisiana must provide "a full accounting for all bonds sold and all commissions earned, and any other compensation paid or earned in connection with such sale."

To put teeth in the new rules, the commission stipulated that failure to comply may result in a firm's immediate dismissal or disqualification from involvement in other issues.

"The commission came together on this issue and acted quickly because it felt a need to decide on some new rules in light of the national as well as local concerns about joint accounts" Rae Logan, the bond commission's director, said yesterday in an interview.

"The focus was first on disclosure," Logan said, "but there was also a feeling that there should be some penalty provisions and that, for the state issues, the commission should have the right to decide if joint proposals should be permitted."

But Logan said that the new rules are "absolutely not" meant to discourage woman-owned or minority-owned firms from becoming involved in Louisiana bond financings.

"We think we have taken care not to interfere with the normal underwriting process and the inclusion of many different kinds of firms in bond issues in the state," she said.

As an emergency rule, the guidelines become effective immediately, but must be submitted for commission reapproval within 120 days to remain in effect, Logan said.

"We fully intend to fine-tune these rules if necessary, but we think this is a good start," she said.

The commission's action comes in the wake of outcries that began last month over a controversial fee-splitting arrangement involving three underwriters in the sale of $604 million of general obligation debt sold by the state in February.

State officials have said that First Commonwealth Securities Corp., a New Orleans minority-based firm, received $125,694.25 from Lazard Freres & Co. and $108,289 from First Boston. In both cases, those sums represented 50% of the total proceeds that each of the two senior managers received from the transaction.

Despite the generous payment, the officials said First Commonwealth apparently played little role in selling securities during the transaction.

The fee-splitting arrangement, which was not disclosed to the full commission until state Treasurer Mary Landrieu brought up the matter at a July meeting, is now the target of an investigation by the U.S. attorney's office in Baton Rouge.

Officials at each of the three firms have denied any wrongdoing, insisting they followed all applicable state and federal laws and bond commission rules.

In the past six months, fee splitting has also become an issue of national concern following recent municipal bond scandals exposed in New Jersey and Massachusetts.

In New Jersey this spring, charges of kickbacks involving a fee-splitting arrangement played a role in Gov. Jim Florio's decision to ban almost all negotiated bond sales. More recently, in Massachusetts, sate and federal investigators are reviewing contracts between firms and issuers, particularly those involving the Massachusetts Water Resources Authority.

In order to prevent such agreements from being made without commission approval, candidates for state-level negotiated deals must not submit a disclosure form listing any agreements by and between themselves and any other financial professionals relating to the bond issue.

In addition, the new rules require that all financial professionals submitting joint proposals "must fully disclose and have approved by the commission any plan or arrangement to share tasks, responsibilities and fees earned, and disclose the financing professionals with whom this sharing is proposed and any changes thereto which may occur."

The new rules, however, also affect disclosure in local bond issues in Louisiana, deals for which the commission is not responsible for the choice of financial professionals.

"The details of any arrangement for compensation of all the financial professionals in the transaction [including any joint account or fee-splitting agreements] and the method used to calculate the fees to be earned must be provided to the commission in the written application," the new rules read.

"At closing, this information must be certified in notarized affidavit form by the financial professional to be correct and filed with the State Bond Commission within five days thereof."

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