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.

The Municipal Securities Rulemaking Board (MSRB) has issued a reminder regarding the application of rule g-37 to federal election campaigns of issuer officials.

In the notice, the MSRB reminds “brokers, dealers and municipal securities dealers” of prohibitions outlined in previous MSRB guidance notices, which highlight the rules and prohibitions concerning solicitations and contributions for certain state and local officials seeking election to federal office.

Generally, issuer officials are directly or indirectly responsible for, or can influence the outcome of, the hiring of a broker, dealer or municipal securities dealer for municipal securities business.

The reminder can be found here.