WASHINGTON -- The Municipal Securities Rulemaking Board's rule on political contributions wasn't on the agenda of the National Association of Securities Professionals' annual meeting in Washington last week -- but it was definitely on everyone's mind.
"I believe it's constitutionally unsound," former Atlanta Mayor Maynard H. Jackson told attendees during the opening session.
The theme of the conference was "Reinventing America's Competitiveness: The Role of the Capital Markets." But some speakers used the event to voice their views on the MSRB's recently enacted Rule G-37, which generally bars municipal dealers that make contributions to issuer clients from doing business with them for two years afterwards.
The association, which represents women and minorities in the securities industry, opposes Rule G-37 because it limits members' ability to support women and minority candidates.
In an interview Friday following his keynote address, Jackson said the rule is "fundamentally unfair" because "it selects only one segment of the industry and proposes restrictions that are not anywhere else on the American scene.
"Not even bond lawyers are restricted," said Jackson, chairman of Atlanta-based Jackson Securities Inc.
"I don't think the Securities and Exchange Commission or any congressional inquiry ever will find any causal connection between campaign donations in the securities industry and actually getting business as a result," he said. "The causal connection does not exist."
In some instances, Jackson said he believed regulators would find that a firm that gave a $100 contribution was awarded underwriting business, instead of the firm that contributed $1,000.
"There may be a little bit more of a connection established between campaign contributions and access: to getting calls retured or a meeting with an administrator," Jackson said.
"But there will be others who didn't get calls returned by the recipient," Jackson added.
Enacted in April, the MSRB rule bars dealers from making contributions to issuers with whom they do business. Moreover, it prohibits dealers from soliciting contributions on behalf of officials, and from making contributions indirectly. Municipal securities professionals can donate up to $250 to candidates running for office in the jurisdiction where they live.
"I don't have any problem with a ban, provided it applies to everybody across the board," including banks, construction firms, lawyers, accountants, and insurance companies, Jackson said.
During a luncheon speech Saturday, New Orleans Mayor Marc Morial suggested that disclosure requirements would be adequate to curb any influence peddling based on campaign contributions.
"Anyone foolish enough to take a whole lot of money from one individual" would find himself the subject of a television commercial produced by his opponent, Morial said.
"You can't get away with it because your opponent will make an issue of it," Morial said.
Conference participants noted that at least some black politicians around the country are having trouble raising funds for their campaigns, and they said Rule G-37 was at least partly to blame.
"That makes me angry, because we can't support them," one participant said.
The ban also came up last Thursday at the opening event of the conference, a meeting of the association's board of directors.
Board members and attendees asked why the ban focuses only on the activity of municipal professionals and not on other areas of the finance industry, or on other firms that contract with local governments, said Raymond J. McClendon, chairman of the conference.
McClendon, past chairman of the association, is also chairman and chief operating officer of Pryor, McClendon, Counts & Co.
Some attendees suggested that instead of a ban, regulators impose contribution reporting standards in the request-for-proposal underwriter selection process.
While there have been allegations that large investment banks would seek to skirt the ban by channeling contributions through professionals outside of the municipal finance department, some at the association alleged that firms have also sought to undermine the ban by contributing directly to state political parties.
"The outcome, whatever the intent, is negative to African- Americans and other new entrants," Carl H. Davis, a vice president and resident manager for Prudential Securities Inc. in Long Beach, Calif., said of the rule.
Rather than make political contributions, Lafayette Square Partners Inc., which is not a minorityowned firm, puts efforts into community service, said Linda E. LaPrade, director of taxable fixed income.
Members of the Washington-based firm's board of directors and an owner participate in local youth programs and sponsor urban development projects, she said.
"A lot of this activity is done in a forum where we can get the attention" of local issuers, LaPrade said.
"We think that's a good alternative," she added.