Effective today, the Municipal Securities Rulemaking Board (MSRB) pay-to-play rule extends to municipal advisors. MSRB Rule G-37 prohibits certain political contributions for two years prior to engaging in a municipal securities business where a related official received contributions.

On August 4, the MSRB clarified the two-year look-back ban on contributions from municipal advisors. The MSRB stated contributions by persons who become associated with a dealer, become municipal finance professionals of the dealer, and are affected by today’s amendments to Rule G-37 are subject to the two-year look-back period.

Contributions made in the two years prior to today may subject a dealer to a prohibition on municipal securities business.

A Municipal Securities Rulemaking Board (MSRB) pay-to-play rule amendment set to take effect on August 17 is being challenged in federal court.

However, the Securities and Exchange Commission (SEC) argues it cannot defend the lawsuit because the Consolidated Appropriations Act of 2016 prohibits the SEC from using federal funding to finalize, issue, or implement any regulation regarding the disclosure of political contributions, contributions to tax-exempt organizations, or dues paid to trade associations.

The SEC argues the same federal restrictions preclude the commission from using funds to defend the MSRB rule on its merits.

The challenge to the amendment is being made in the Sixth Circuit Court of Appeals in Cincinnati. It was brought by the Georgia and Tennessee Republican parties and the New York State Republican Committee.

Currently, MSRB Rule G-37 prohibits certain political contributions for two years prior to engaging in a municipal securities business where a related official received contributions. The amendment extends the pay-to-play rule to municipal advisors.

California Treasurer John Chiang announced that municipal finance firms seeking state business will be required to certify that they do not make contributions to bond election campaigns. Firms that fail to provide the certification will be suspended from the state’s pool of acceptable underwriters.

The new requirement aims to stop pay-to-play deals where municipal finance firms offer to fund or provide campaign services in exchange for contracts.

Photo of John Chiang by State of California on Wikimedia Commons.

Lobbying

“Lyft Agrees to $6,000 FPPC Fine for Not Reporting Lobbying Costs” by Taryn Luna for Sacramento Bee

Campaign Finance

Florida: “Raising Money for the Mayor, and Making Money from His Administration” by Douglas Hanks for Miami Herald

New Jersey: “Jersey City Mayor, Councilman at Odds Over Planned Pay-to-Play Changes” by Terrence McDonald (Jersey Journal) for NJ.com

Washington: “Public Disclosure Commission Recommends Action Against Eyman” by Chris Winters for Everett Herald

Ethics

Pennsylvania: “A.G. Office: Philly lobbyist misused welfare grants to pay for line dancing lessons, other expenses” by Claudia Vargas and Jeremy Roebuck for Philadelphia Inquirer

Wisconsin: “Ex-AG Lautenschlager Named to Lead New Ethics Commission” by Patrick Marley for Milwaukee Journal Sentinel

Elections

“Gay Political Power Reaching Record as U.S. Attitudes Shift” by Jeff Green for Bloomberg.com

“Bernie Sanders Endorses Hillary Clinton” by MJ Lee, Dan Merica, and Jeff Zeleny for CNN

“Dallas Shooting and Open-Carry Laws Loom Over Cleveland Convention Plans” by Yamiche Alcindor for New York Times

Legislative Issues

Louisiana: “Good Idea Gone Awry? How Term Limits Impact Sessions of Louisiana Legislature” by Mark Ballard for New Orleans Advocate

Jersey City Councilman Michael Yun has proposed changes to the city’s pay-to-play laws.

The changes would broaden the laws to include the city’s autonomous agencies as well as restrict some vendors from contributing to city elected officials seeking higher office. The proposal would also extend the ban on no-bid city contracts, from one year to four years, for those who contribute more than $300 to a candidate.

Yun, a longtime critic of Mayor Steve Fulop, claims the changes are meant to close loopholes in the current law and not to target Fulop. In the past, Fulop’s donors have received large contracts with the city Municipal Utilities Authority, an autonomous agency not bound by current pay-to-play rules. Fulop is also rumored to be considering a 2017 gubernatorial run.

Yun submitted his proposal to corporation counsel for review and hopes to receive initial approval from council at its July 13 meeting.

Photo of Jersey City by David Jones on Wikimedia Commons.

The D.C. Council has preliminarily approved a bill that will bring more transparency and accountability to the government procurement process. Among other structural and procedural reforms, the measure establishes the Office of the Ombudsman for Contracting and Procurement.

The bill will need approval at a second reading before it is sent to the Mayor. A stricter reform measure that included a one year pay-to-play restriction failed to pass.

The State Board of Elections has proposed new pay-to-play disclosure rules and regulations.

The board seeks to align current rules with the recent legislative change requiring business entities to disclose contributions of certain subsidiaries, even if those subsidiaries do not have contracts with the state. In addition, the new regulations would increase the amount of time a vendor has to file the initial contribution disclosure form and would clarify internal disclosure obligations and processes for vendor employees and CEOs under current state law.

The proposed rules and regulations remain open for public comment through May 30, 2016.

Rep. Steve McLaughlin is seeking bipartisan support for a package of ethics reform bills. The bills seek reform on multiple fronts by lowering the permissible amount individuals, unions, corporations, lobby groups, or businesses can donate to a PAC; increasing disclosure requirements for pay-to-play lobbying; placing eight-year term limits on legislative leaders; and stripping pensions from those convicted of public corruption offenses.

The proposed bills come in response to former Assembly Speaker Sheldon Silver’s recent 12-year prison sentence for conviction on multiple corruption charges.

Photo of Rep. Steve McLaughlin courtesy of the New York State Assembly website.

Gov. Larry Hogan signed a pay-to-play bill, amending campaign finance reporting requirements for filers doing public business. House Bill 112 requires filers disclosing contributions to also include contributions of any subsidiary entity the filer owns or controls by 30 percent or more, regardless of whether the subsidiary is doing public business in Maryland.

A limited exception exists for publically-traded banking institutions not owned or controlled by anyone in excess of 10 percent if they are not contracted with Maryland in connection with public business.

The law takes effect October 1, 2016.

Attorney General Karl A. Racine proposed a new bill to close the current loophole allowing unlimited donations to political action committees (PACs) in non-election years. The bill also contains a pay-to-play provision creating a two-year period of ineligibility for “high value” city business for any company that contributes to a candidate or elected official.

The legislation comes after public concern raised last year when Mayor Muriel E. Bowser’s PAC received unlimited contributions from businesses seeking contracts from her administration.

Q. I want to contribute to an acquaintance in Maryland.  I know there are pay-to-play restrictions.  What are my personal limitations?

A. Is your company “doing public business” with the state of Maryland?  “Doing public business” means having a single contract (an agreement in any form entered into by a governmental entity for a procurement) with a single governmental entity involving cumulative consideration of at least $200,000.  Governmental entity means: (1) the State, a county, a municipal corporation, or other political subdivision of the State; and (2) a unit of the State, a county, a municipal corporation, or other political subdivision of the State.

Contributions in Maryland are still permissible even though your employing organization is doing public business.  The issue is not permissibility, but whether disclosure is required.  If you are an officer or director and the contribution is $500 or more, it must be disclosed.

• Director is a member of the board of directors of a business entity
  [M.C.E.L. §14-101(g)].
• Officer includes an individual who serves as a business entity’s chief executive officer, president, vice president, secretary, treasurer, chief financial officer, managing partner, managing member, or principal or in any other formal or informal role in which the individual exercises substantial independent responsibility for managing the affairs of a business entity [M.C.E.L. §14-101(k)].

If you fall into either category, disclosure is required to the Board of Elections on May 31 and November 30.

You can directly submit questions for this feature, and we will select those most appropriate and answer them here. Send your questions to: experts@stateandfed.com.

(We are always available to answer questions from clients that are specific to your needs, and we encourage you to continue to call or e-mail us with questions about your particular company or organization. As always, we will confidentially and directly provide answers or information you need.) Our replies to your questions are not legal advice. Instead, these replies represent our analysis of laws, rules, and regulations.

Today, the Municipal Securities Rulemaking Board (MSRB) announced new pay-to-play regulations, extending current pay-to-play rules to municipal advisors, including those acting as third-party solicitors. “The integrity of the municipal market will be well-served by regulations to help ensure that all municipal advisors that do business with state and local governments do so based on the merits of their work and not on financial influence,” said MSRB Executive Director Lynnette Kelly in a press release. The new regulations take effect on August 17.

A 2014 Superior Court decision is being reviewed by the San Francisco Ethics Commission. Critics of the decision argue it created a loophole wherein money a candidate raised via a general purpose committee can be used to elect or defeat candidates for other offices.

Further, the decision allows candidates and officeholders to skirt contribution limits and raise money from sources that would otherwise be prohibited.

The San Francisco Ethics Commission is being urged to consider regulations that would prevent candidates from circumventing the rules.

On January 5, California legislators introduced a bill with pay-to-play implications. Sen. Jerry Hill introduced a bill forbidding members of the state Board of Equalization from acting on any tax matters involving donors who had given any amount of money to their political campaigns in the previous 12 months.

Hill and his fellow lawmakers are concerned about a loophole that currently exists allowing companies with an interest in board decisions to skirt the limit.

The bill is now being considered in committee.

Photo of Sen. Jerry Hill by Dave on Wikimedia Commons.