WASHINGTON -- The Public Securities Association said yesterday that it will invite senior managers from more than 200 regional bond firms to a closed-door session in Chicago on Nov. 17 to discuss whether member firms should voluntarily ban political contributions.

"Securities and Exchange Commission Chairman Arthur Levitt Jr. has sent us a letter seeking our help in developing a process by which municipal bond dealers can consider voluntarily discontinuing the practice of making political contributions that attempt or appear to attempt, to influence the awarding of municipal finance business," the PSA said in a one-page statement announcing the session.

"In response, the PSA will be providing a forum for senior management at regional firms to discuss issues related to the voluntary initiative endorsed by 17 of the largest municipal bond dealers," the association said, noting that invitations will be sent to the CEO or head of fixed income, the head of public finance, and the head of compliance at regional firms.

The SEC's Levitt sent a letter to 11 trade groups that represent regional dealers, issuers, bond lawyers, and financial advisers on Oct. 28 asking them to join 17 Wall Street firms that 10 days earlier had agreed to discontinue making political contributions that attempt or appear to attempt to influence the selection of the firm as an underwriter. PSA was one of the groups to receive a letter.

Calling Wall Street's initiative "a significant and substantial step forward," Levitt said in the letter that he believes that the accord's principles "should be reviewed, considered, and embraced by all participants in the municipal securities and underwriting process."

The PSA said yesterday, "The forum ill be designed to review the specifics and ramifications of such an initiative, answer questions, and fully discuss concerns the firms may have. Following the meeting each firm will -- on an individual basis -- determine whether to establish or endorse such principles."

The PSA said that it will also serve as a "clearinghouse for information" about regional firms that wish to report that they already have voluntarily banned or plan to ban political contributions. The information collected in the clearinghouse will be made available to Levitt, a PSA spokeswoman said.

She said that the PSA will not take names of firms that want to adopt a ban at the meeting. "This is an informational meeting. No conclusions, decisions, or announcements will be made at the meeting. People will come and hear and learn and go back to their firms and make their own [decisions]."

The PSA's meeting was originally planned as an open debate among dealers in the Chicago region -- one of an ongoing series of regional forums sponsored by the PSA, one industry source said. But SEC officials last month asked the trade group to close the session and invite representatives from firms nationwide to consider adopting bans, the source said.

Regulators said in telephone interviews Friday that groups other than the 11 trade groups are also welcome to join in the ban. Of the 11 groups, six are issuer groups, three represent dealers, and one each represents financial advisers and bond lawyers.

Frank Shafroth, director of federal relations for the National League of Cities, said that most groups representing elected officials did not receive letters from the SEC. Shafroth mentioned such groups as the cities league National Association of Counties, National Conference of State Legislatures, or U.S. Conference of Mayors. "I find it extremely odd," Shafroth said.

"This list was reached because it is believed to be the major groups in the municipal bond business with the most direct involvement," said Jennifer Kimball, SEC director of public affairs. "But this list is not meant to exclude anybody. Anyone else who wants to step forward, we would be more than happy [to hear from]."

"There are 45 public interest groups in the Public Finance Network," said Christopher Taylor, executive director of the Municipal Securities Rulemaking Board on Friday. "It would be wrong to assume that Levitt is making some statement that these [six issuer groups on the list] are the only people that count. It's the start of an outreach program."

"I'm not sure what position the association will take," said Milton Wells, director of federal relations for the National Association of State Treasurers. "Everybody's going to be looking and saying ~What's everybody else doing' before taking plunges off high cliffs into the vast unknown. A lot will be determined by what industry does. The willingness of issuers will be determined in part by what the industry does."

Wells pointed to yesterday's edition of The Bond Buyer, which reported that campaign finance documents for Virginia's hotly contested gubernatorial race show that the MSRB's proposed rule banning political contributions does not appear to have discouraged municipal firms and their employees from making contributions.

Catherine Spain, director of the federal liaison center for the Government Finance Officers Association, said yesterday her group will take the SEC's request to its debt committee for review. She noted that only a "very small percentage" of GFOA's members are elected officials.

"That's a tall order," said Relmond VanDaniker, executive director of the National Association of State Auditors, Comptrollers, and Treasurers, about the request by Levitt for groups to sign on to a contributions limit. Roughly 50% of the group's 150 members are elected officials.

VanDaniker said NASACT will review Levitt's request at its executive committee meeting scheduled Nov. 19 and may issue a statement afterward.

Levitt's call for industry wide participation in the ban comes as the MSRB is scheduled to meet Nov. 10-12 in Washington to vote on whether to finalize a tough rule it proposed Aug. 30 addressing political contributions by dealers.

Proposed Rule G-37 would require dealers to pledge that any contributions made to issuers were made without the intention of getting, keeping, or "otherwise influencing" the award of bond underwriting business.

"We hope to come out of the meeting to be in a position to go the next step," said the MSRB's Taylor. "[That step will be] filing with the SEC. It won't happen before Christmas." Once the MSRB adopts a rule, it will be reproposed for comment by the SEC, some time early next year.

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