5.2.7.3. Regulation of Political Contributions
MSRB Rule G-37, often referred to as the pay to play rule, seeks to prevent fraud and promote an open and transparent market for municipal securities that protects investors and the public. The pay to play rule prohibits municipal securities dealers from engaging in municipal securities business with government issuers if certain political contributions have been made. First, it prohibits municipal securities dealers and municipal advisors from engaging in certain types of business with a municipality where political contributions have been made by the firm or its securities professionals (known as municipal finance professionals (MFPs) for dealers and municipal advisor professionals (MAPs) for advisors). This ban on business lasts two years from the date of the triggering contribution.
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. Additionally, the ban does not prevent a firm from acting as a municipal underwriter if it won the business through a competitive bidding process. This is known as a competitive underwriting.
There is a de minimis exception for contributions of $250 or less by an MFP or MAP in an election in which she is entitled to vote. Note that the de minimis exception only applies to associated persons and not to firms.
Volunteering outside of work hours for a candidate’s campaign will not trigger the ban, unless it involves soliciting contributions. Soliciting other people to contribute to a candidate triggers the ban.
For purposes of triggering the ban, a contribution to an unsuccessful candidate is treated the same as a contribution to the candidate who wins the election.
The pay to play rule contains a lo