MSRB Takes on Pay-to-Play Again - This Time in the Muni Advisory World

The Municipal Securities Rulemaking Board (“MSRB”) is at it again. MSRB is wasting no time putting rules in place to address pay-to-play practices for the advisory community. MSRB called a special meeting to address this issue, among others, on the heels of the 2010 Dodd-Frank Act, which expanded MSRB’s jurisdiction to include the regulation of municipal advisors, in addition to dealers, which MSRB has regulated since 1975. The MSRB Board of Directors agreed to issue a request for comment on a rule that would restrict municipal advisors from engaging in or soliciting business from municipal entities when an advisor has made certain political contributions to a municipal officer responsible for awarding that business. The rule would mirror the one currently in place for dealers. MSRB officials have said the rule would not be retroactive.

“We are wasting no time in seeking to implement a rule to address ‘pay-to-play’ practices in the municipal market,” said MSRB Chair Michael Bartolotta. “The MSRB already stringently regulates this area of the municipal market with rules restricting pay-to-play by municipal securities dealers, and putting similar rules in place for the advisory community is one of our top priorities.”

The Board also discussed its continued efforts to provide guidance on contributions by political action committees of companies affiliated with dealers. MSRB’s interpretive guidance takes effect on December 12, 2010. In light of such guidance, MSRB has decided not to take further action on an earlier proposal to require dealers to name PACs of their affiliated companies. Stay tuned for updates in this area.

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