September 5, 2012 •
A Pay-to-Play Warning for Municipal Securities Firms
An alert for municipal securities dealers concerning pay-to-play rules has been issued by a department of the Securities and Exchange Commission (SEC).
The SEC Office of Compliance Inspections and Examinations has released a National Examination Risk Alert summarizing observations and providing some guidance of pay-to-play compliance by firms engaged in municipal securities.
The alert identifies issues found “in the course of examinations regarding compliance by firms” subject to municipal securities pay-to-play prohibitions. Municipal Securities Rulemaking Board (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 alert details problems with recordkeeping, inaccurate filing of reports, and inadequate supervision by firms to ensure compliance with MSRB Rule G-37.
Additionally, the alert’s reporting staff “has observed facts that suggest that some firms may have engaged in municipal securities business with issuers within two years of their MFPs making [prohibited] contributions.”
The full report can be found at http://www.sec.gov/about/offices/ocie/riskalert-munipaytoplay.pdf.
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