Series 7: 3.6.36 Rule G-37—Regulation Of Political Contributions

3.6.36  Rule G-37—Regulation of Political Contributions

Often referred to as the pay-to-play rule, this rule prevents securities professionals from winning business through campaign donations to elected officials. It has two main components. First, it prohibits municipal securities dealers and municipal advisors from engaging in certain types of business with a municipality if they or their employed securities professionals have made political contributions to an official of the municipality. This ban on business lasts two years from the date of the triggering contribution. Second, the rule requires municipal securities dealers and municipal advisors to disclose specific information related to political contributions.

To trigger the ban, the candidate or official to whom the contribution was made must have the ability to direct municipal securities or advisory business toward the dealer or advisor. A contribution to a municipal official or entity that does not have the influence to direct business toward the firm will not trigger the ban. However, neither municipal finance professionals (MFPs) nor municipal advisor professionals (MAPs) will be restricted by this rule if they are entitled to vote for the official and do not contribute more than $250 per election in which they are entitled to vote. This is called the de minimis exception. Note that this exception only applies to associated persons and not to the firms themselves.

A contribution to a candidate who is ultimately unsuccessful is treated the same as a contribution to a successful candidate, for purposes of whether the contribution triggers the ban o