SEC Frees Muni Firms of Bar on Contributions

March 16, 2001
Wall Street Journal

Municipal securities firms no longer need to abide by a 1993 voluntary agreement restricting political contributions, acting Securities and Exchange Commission Chairwoman Laura Unger said.

Ms. Unger said the rule was no longer necessary given the subsequent adoption of formal rules restricting so-called pay-to-play practices in the municipal-bond market, where firms dole out contributions in exchange for bond deals. Under her predecessor, Arthur Levitt, the SEC wanted firms to continue abiding by the voluntary rules because they imposed some extra restrictions on political contributions.

In recent years, public-policy experts have questioned all the municipal-contribution regulations, because firms sidestepped the restrictions by giving money to “soft-money” accounts, where the rules don’t apply. “While the original intent may have been laudable, money has been funneled through political consultants or parties that weren’t regulated to begin with,” said Mark Schwartz, a former investment banker and municipal-bond whistleblower.