A new rule banning municipal bond underwriters from making campaign contributions continues to confuse some market executives fearful that even the donations permitted by regulators may lead to trouble.

Federal regulators and officials working for the municipal market's leading trade organization, the Public Securities Association, said this week that they continue to field interpretative questions about the ban, which took effect on Monday.

The rule, enacted by the Municipal Securities Rulemaking Board, forbids market executives from doing business with state and local governments for two years after making a campaign contribution.

The rule, however, allows market executives to contribute up to $250 to candidates running for office where the executive lives.

Wall Street sources say much of the concern stems from what they see as "gray areas" in the rule, Known as G- 37. For example, many market executives said they interpret the rule as banning charitable contributions solicited by state and local officials.

"Nobody is trying to stop a situation where people want to give a legitimate charitable contribution," said Christopher Taylor, the MSRB's executive director. "We're. not to shut down the world from that point of view."

Despite Taylor's comments, several market executives say just how much activity is covered by the rule remains unclear, particularly when pubic officials or their surrogates in the bond market request contributions for charitable activities.

"I'm not giving anything" one market executive said.

Taylor said the board!s staff is answering questions from public finance executives, and even government officials seeking money from Wall Street, concerning the ban and what types of activities are covered by the ban.

In recent weeks, Wall Street executives said they have received many requests from state officials to make charitable contributions. For example, John Dyson, deputy mayor for finance in New York City, has dialed up Wall Street executives asking for contributions to finance the restoration of City Hall.

In fact, a conversation on the subject between Dyson and MSRB chairman David Clapp, who is a general partner at Goldman, Sachs & Co., was featured in a recent profile of Clapp in Public Issues, a magazine published by the Municipal Bond Investors Assurance Corp.

In the article, Clapp, who could not be reached for comment, said. "I can and I am legally able to contribute to a restoration of City Hall."

Several market executives took issue with Clapp's interpretation of the MSRB rule. But Taylor sided with Clapp.

"That's not a political contribution to my knowledge," Taylor said, adding that charitable donations fall under MSRB rule G-20.

Rule G-20 prohibits broker-dealers from making charitable contributions in excess of $100 a year to public officials. The New York City example, however, concerns a donation for City Hall, not the mayor's favorite charity, and is allowed, Taylor said.

Taylor said the board is taking industry comments on Rule G-20 and will discuss the matter at its next meeting.

For now, however, market executives and their trade representative are focused on campaign contributions.

The same day the contribution ban went into effect, several of the municipal bond market's largest firms met in the offices of PaineWebber Inc. to discuss the federal ban, as well as the voluntary industry accord reached last year to ban campaign contributions, according to a memo obtained. by The Bond Buyer.

PaineWebber general counsel Theodore Levine called the meeting, along with officials from the PSA.

"That agenda for the meeting would include a discussion as to the continued survival of the voluntary initiative, the creation of a subgroup to meet periodically and discuss issues raised by the voluntary initiative, and any other related issues you may want to discuss," the memo said.

PSA president Heather Ruth, who did not attend the meeting but Was briefed on its agenda by a PSA official who attended the meeting, confirmed that the gathering was designed to help industry officials, and particularly the firms' legal staffs, flesh out problems in carrying out both contribution bans.

"The questions are the kind of questions that develop when you implement the details [of a rule] through a fairly detailed and highly specific compliance process," Ruth said.

Ruth said the private ban will probably continue amid a recent legal challenge to the MSRB rule by Alabama bond dealer Wilham Blount. "I think [industry ban) will continue at least for a while," she said.

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