On August 31, the Securities and Exchange Commission issued an alert (Risk Alert) to inform firms engaged in municipal securities business about areas of concern identified in compliance examinations with respect to Municipal Securities Rulemaking Board (MSRB) “Pay-to-Play” prohibitions.

The areas of concern identified by examination staff included the following:

  • Compliance with MSRB Rule G-37’s ban on doing business with a municipal issuer within two years of a political contribution to officials of the issuer by any of the firm’s municipal finance professionals.  
  • Possible MSRB Rule G-8 recordkeeping violations.  
  • Failure to file accurate and complete Form G-37 with regulators regarding political contributions.  
  • Inadequate supervision.

In addition to identifying these areas of concern, the Risk Alert describes observations by examination staff regarding supervisory practices and controls for compliance with MSRB rules that some firms have elected to adopt. These include training programs for municipal finance professionals, self-certification of compliance with firm requirements regarding political contributions, surveillance of employee political contributions and preclearance or restrictions on political contributions. The Risk Alert emphasizes that the practices listed may not be applicable to a particular firm’s business, and other approaches to compliance policies and procedures may be appropriate.

Click here to see Risk Alert.