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94-34 SEC Approves MSRB Rule G-37


Senior Management
Internal Audit
Legal & Compliance

Executive Summary

On April 13, 1994, the Securities and Exchange Commission (SEC) approved Municipal Securities Rulemaking Board (MSRB) Rule G-37 regarding political contributions and prohibitions on municipal securities business. Related amendments to Rules G-8 and G-9 on record-keeping and record retention, respectively, were also approved. The limitations and requirements established by Rule G-37, and the changes to Rules G-8 and G-9, went into effect on April 25, 1994. Attached to this Notice is a Special Notice To Selected Members conducting a municipal securities business that was distributed April 18, 1994.


MSRB Rule G-37 establishes several requirements affecting municipal securities broker/dealers, including limitations on business activities triggered by political contributions, limitations on soliciting or coordinating political contributions, and broker/dealer recordkeeping and disclosure.

The rule addresses practices known as "pay to play." These typically involve payments in the form of political contributions that help finance election campaigns for state or local officials. Widespread reports regarding the existence of these practices have prompted concern that they increase costs borne by issuers, dealers, and investors; create artificial barriers to competition; and undermine the integrity of the municipal securities market.

* * * * *

Members are urged to review the new rule in its entirety. Rule G-37, the amendment to Rules G-8 and G-9, background information, and a detailed discussion of industry comments were published in SEC Release No. 34-33868, which appeared in the April 13, 1994, Federal Register. A copy of the release follows this Notice.

Questions regarding this Notice may be directed to Walter J. Robertson, Director, Compliance Department (202) 728-8236, or Brad Darfler, District Coordinator (202) 728-8946.

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