The Municipal Securities Rulemaking Board, or MSRB, has proposed regulations that it believes would help prevent the influence of political contributions by municipal advisors in the award of business by state and local government officials.

Under the MSRB’s proposed Rule G-42, municipal advisors would be prohibited from conducting business with municipal entities for compensation for two years if they make certain political contributions to state or local government officials with authority to hire municipal advisors.  Municipal advisors also would be banned for two years from soliciting certain types of business engagements from municipal entities on behalf of others and from receiving compensation for prior solicitations.

The MSRB is proposing that the pay to play rule for municipal advisors be effective six months after the date the SEC approves rules defining the term “municipal advisor” under the Securities Exchange Act or at a later date as approved by the SEC. No contributions made prior to the effective date would result in a ban on business for compensation. Once the new rule is effective, the financial advisory services of dealers would no longer be subject to Rule G-37, although any ban on municipal securities business under Rule G-37 already in effect would continue until its two-year expiration date. 

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