Washington, D.C., Aug. 31, 2012
– The Securities and Exchange Commission issued an alert to strengthen compliance with a Municipal Securities Rulemaking Board rule that limits political contributions by municipal securities professionals to campaigns of public officials of issuers with whom they are doing or seek to do business.
The Risk Alert issued by the agency’s Office of Compliance Inspections and Examinations notes that SEC examiners have observed practices that raise concerns about firms’ compliance with their obligations under MSRB Rule G-37, which clamped down on so-called "pay to play" practices. These concerns include:Possible recordkeeping violations
Failure to file accurate and complete required forms with regulators regarding political contributions
Inadequate supervision
The Risk Alert identifies practices that examiners have seen some firms use to comply with applicable federal, state, and local rules on contributions. These include training programs for municipal finance professionals, self-certification of compliance with restrictions on political contributions, surveillance for unreported political contributions, and preclearance or restrictions on political contributions when permitted by state or local law. The Risk Alert stresses that the practices are described only to inform firms about approaches being used to strengthen compliance efforts; these practices may not be applicable to a particular firm, and other practices may be appropriate to consider instead.
"This Risk Alert is intended to help firms to strengthen their compliance and risk management efforts with regard to political contributions," said OCIE Director Carlo di Florio. "We hope that by describing practices that our examiners have observed, we will promote compliance by helping firms to consider how each of them can most effectively meet their obligations under MSRB rules."
The alert is the fourth this year and the sixth in a continuing series of Risk Alerts that the SEC’s examination staff began issuing in 2011. It is intended to assist senior management, risk management, and legal and compliance staff as they review compliance with Rule G-37 by brokers, dealers, and municipal securities dealers.
The following staff contributed substantially to preparing this Risk Alert: Robert Miller, Suzanne McGovern, Julius Leiman-Carbia, and George Kramer.
