[Federal Register Volume 68, Number 222 (Tuesday, November 18, 2003)]
[Notices]
[Pages 65096-65106]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-28763]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48752; File No. SR-MSRB-2003-08]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Municipal Securities 
Rulemaking Board Relating to Interpretation of Rule G-37 on Political 
Contributions and Prohibitions on Municipal Securities Business

November 6, 2003.
    On October 30, 2003, the Municipal Securities Rulemaking Board 
(``Board'' or ``MSRB'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') a proposed rule change (File No. 
SR-MSRB-2003-08) pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder.\2\ The 
proposed rule change is described in Items, I, II, and III below, which 
Items have been prepared by the Board. The purpose of the proposed rule 
change is to provide interpretive guidance concerning rule G-37, on 
political contributions and prohibitions on municipal securities 
business. The Board has designated this proposed rule change as 
constituting a stated policy, practice, or interpretation with respect 
to the meaning, administration, or enforcement of an existing rule of 
the Board under Section 19(b)(3)(A) of the Act, which renders the 
proposed rule change effective upon receipt of this filing by the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB is filing herewith a proposed rule change consisting of 
technical revisions to previously adopted interpretations of rule G-37 
(hereafter referred to as ``the proposed rule change''). The text of 
the proposed rule change below. Additions are italicized; deletions are 
bracketed.
* * * * *

Rule G-37 Qs & As

I. Persons/Entities Subject to the Rule

I.1
    Q: To whom does [r]Rule G-37 apply?
    A: In general, [r]Rule G-37 applies to brokers, dealers and 
municipal securities dealers (collectively referred to as dealers), 
municipal finance professionals, and PACs controlled by the dealer or 
any municipal finance professional. In addition, the recordkeeping and 
disclosure provisions apply to non-MFP executive officers of the 
dealer.

(May 24, 1994)

II. Prohibition on Engaging in Municpal Securities Business (Rule G-
37(b))

II.1
    Q: What actions would cause a dealer to be prohibited from engaging 
in municipal securities business with an issuer?
    A: Rule G-37(b) prohibits a dealer from engaging in municipal 
securities business with an issuer within two years after any 
contribution to an official of such issuer made by: (i) the dealer, 
(ii) any municipal finance professional associated with such dealer; or 
(iii) any PAC controlled by the dealer or any municipal finance 
professional.

(May 24, 1994)
II.2
    Q: Is there an exception to this prohibition on engaging in 
municipal securities business?
    A: There is one exception to [r]Rule G-37(b). The prohibition does 
not apply if the only contributions to officials of issuers are made by 
municipal finance professionals entitled to vote for such officials, 
and provided such contributions, in total, are not in excess of $250 by 
each such municipal finance professional to each official of such 
issuer, per election.

(May 24, 1994)
II.3
    Q: What is the municipal securities business that a dealer would be 
banned from engaging in with an issuer if certain political 
contributions are made to officials of such issuers?
    A: The term ``municipal securities business'' is defined in [r]Rule 
G-37(g)(vii) to encompass certain activities of dealers, such as acting 
as negotiated underwriters (as managing underwriter or as syndicate 
member), financial advisors and consultants, placement agents, and 
negotiated remarketing agents. The rule does not prohibit a dealer from 
engaging in competitive underwritings or competitive remarketing 
services for the issuer.

(May 24, 1994)
II.4
    Q: If a[n] non-MFP executive officer makes a contribution to an 
official of an issuer, is the dealer prohibited from

[[Page 65097]]

engaging in municipal securities business with that issuer?
    A: No. The prohibition section applies only to contributions made 
by the dealer, its municipal finance professionals, or any PAC 
controlled by the dealer or any of its municipal finance professionals. 
The definition of non-MFP executive officer does not include any 
municipal finance professional. However, contributions by non-MFP 
executive officers are subject to the reporting/disclosure provisions 
of the rule. In addition, pursuant to section (d), dealers are 
prohibited from using non-MFP executive officers (as well as any other 
person or entity) as a conduit for making contributions to officials of 
issuers.

(May 24, 1994)
II.5
    Q: Would a dealer be prohibited from engaging in municipal 
securities business with a state agency, whose board members are 
appointed by the governor, if the dealer makes contributions to the 
governor?
    A: Yes, the definition of ``official of an issuer'' in Rule G-
37(g)(vi) includes any person who was, at the time of the contribution, 
an incumbent, candidate or successful candidate for any elective office 
of a state or of any political subdivision, which office has authority 
to appoint any person who is 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 by an 
issuer. [The Board intended to prohibit a dealer from engaging in 
municipal securities business with this state agency in these 
circumstances. The Board recently filed with the SEC an amendment to 
rule G-37 to clarify the definition of ``official of an issuer.'' See 
the rule filing, SR-MSRB-94-5, for more information about this 
amendment.]

(May 24, 1994)
II.6
    Q: May a municipal finance professional who is entitled to vote for 
an issuer official make contributions to pay for such official's 
transition or inaugural expenses without causing a prohibition on 
municipal securities business with the issuer?
    A: Yes, under certain conditions. The de minimis exception allows a 
municipal finance professional to contribute up to $250 per candidate 
per election if the municipal finance professional is entitled to vote 
for that issuer official. The de minimis exception is keyed to an 
election cycle; therefore, if a municipal finance professional 
contributed $250 to the general election of an issuer official, the 
municipal finance professional would not be able to make any 
contributions to pay for transition or inaugural expenses without 
causing a prohibition on municipal securities business with the issuer. 
If a municipal finance professional made no contributions to an issuer 
official prior to the election, then the municipal finance professional 
may, if entitled to vote for the candidate, contribute up to $250 to 
pay for transition or inaugural expenses and payment of debt incurred 
in connection with the election without causing a prohibition on 
municipal securities business.
(September 9, 1997)
II.7
    Q: Are any payments made to issuer officials, other than political 
contributions, covered by the rule?
    A: No. However, any other payments may be subject to [r]Rule G-20 
on gifts and gratuities.
(May 24, 1994)

Primary, State Caucus or Convention

II.8
    Q: If an issuer official is involved in a primary election prior to 
the general election, may a municipal finance professional who is 
entitled to vote for such official contribute $250 to the issuer 
official's primary as well as general election?
    A: Yes, the municipal finance professional could contribute up to 
$500 to each such official (i.e., $250 per election).
(May 24, 1994)
II.9
    Q: If the locality in which the incumbent or candidate is seeking 
election as an issuer official holds a convention or caucus (instead of 
a primary election) prior to the general election, may a municipal 
finance professional entitled to vote in that locality contribute $250 
to the incumbent or candidate's convention or caucus election campaign, 
as well as $250 to the incumbent or candidate's general election, 
without causing a ban on municipal securities business with the issuer?
    A: Yes, if the issuer official has been qualified to be considered 
at the state caucus or convention.
(June 15, 1995)

MFP as Incumbent or Candidate

II.10
    Q: If a municipal finance professional also is an incumbent or 
candidate for political office in a municipality in which the municipal 
finance professional's employer (i.e., the dealer) conducts municipal 
securities business, must the dealer terminate the municipal finance 
professional or are there any restrictions on the kind of business a 
dealer can engage in with that issuer?
    A: No. However, the dealer, any municipal finance professional and 
any PAC controlled by the dealer or municipal finance professional must 
ensure that the dealer does not engage in municipal securities business 
with the issuer if contributions (other than the de minimis 
contributions allowed under section (b)) are made to an official of the 
issuer. The municipal finance professional who is an incumbent or 
candidate for office is not limited to contributing the de minimis 
amount to his or her own campaign in such instances.
(May 24, 1994)

Attendance at Fund-Raising Dinner

II.11
    Q: May a dealer continue to engage in municipal securities business 
with an issuer if a municipal finance professional pays for and attends 
a fund-raising dinner for a candidate who is seeking election to a 
position as an official of such issuer?
    A: A municipal finance professional who contributes funds in this 
instance would subject the dealer to a prohibition on municipal 
securities business with the issuer unless the municipal finance 
professional is entitled to vote for such candidate and any 
contributions do not exceed $250 to such candidate per election. In 
addition, any municipal finance professional who attends the dinner for 
the purpose of soliciting contributions by others for the issuer 
official would violate [r]Rule G-37's prohibition on soliciting 
contributions. See also Rule G-37(c).
(May 24, 1994)

Two-Year Look Back

II.12
    Q: A municipal finance professional (i.e., a municipal investment 
banker subject to the two year look back) was associated with dealer X 
at the time he made a contribution which resulted in the dealer being 
prohibited from engaging in municipal securities business with the 
issuer. Then, less than two years after making the contribution, the 
municipal finance professional becomes associated with dealer Y. Is 
dealer Y also subject to the prohibition on business?
    A: Both dealers are subject to the prohibition for two years from 
the date

[[Page 65098]]

the municipal finance professional made the contribution. Of course, 
dealer Y's prohibition on business only begins when the municipal 
finance professional becomes associated with that dealer.
(May 24, 1994)
II.13
    Q: Prior to becoming associated with any dealer, a person makes a 
contribution to an issuer official. Less than two years after making 
the contribution, that person becomes a municipal finance professional 
(i.e., a municipal investment banker subject to the two year look 
back). Would the hiring dealer be prohibited from engaging in municipal 
securities business with that issuer?
    A: Yes. Rule G-37 attempts to sever any connection between the 
making of contributions and the awarding of municipal securities 
business by prohibiting the dealer from engaging in municipal 
securities business with the issuer for two years from the date the 
contribution was made. As noted above, the dealer's prohibition on 
business would begin when the municipal finance professional becomes 
associated with that dealer. Thus, if the individual was hired, for 
example, six months after making the contribution, then the dealer's 
prohibition on business would extend for one and one half years.
(May 24, 1994)
II.14
    Q: If a dealer hires an individual as a retail sales person, would 
the contributions made by that person prior to being hired subject the 
dealer to the two-year prohibition on municipal securities business?
    A: The rule's two-year prohibition is triggered by contributions by 
dealers, municipal finance professionals, and political action 
committees controlled by a dealer or a municipal finance professional. 
If a retail sales person is not a municipal finance professional and 
does not become a municipal finance professional within two years after 
making a contribution to an issuer official, then such contributions 
will not trigger the ban on business. However, if the retail sales 
person is, or within two years becomes, a municipal finance 
professional (e.g., by solicitation of officials of an issuer), then 
contributions made by that person will subject the hiring dealer to the 
two-year ban on business. [For additional guidance in this area, please 
refer to Q's & A's numbered 14 through 16 published in the June 1994 
issue of MSRB Reports.] A retail sales person would not be considered 
to be a municipal finance professional solely because of his or her 
municipal securities retail sales activities. (See Rule G-37(g)(iv)).
(December 7, 1994)
II.15
    Q: A person is associated with a dealer in a non-municipal finance 
professional capacity, and makes a contribution to an issuer official. 
Less than two years after making the contribution, that person becomes 
a municipal finance professional (i.e., a municipal investment banker 
subject to the two year look back). Would the dealer be prohibited from 
engaging in a negotiated underwriting with that issuer?
    A: Yes, the dealer is subject to the prohibition for two years from 
the date the contribution was made.
(May 24, 1994)
II.16
    Q: A person is associated with a dealer in a non-municipal finance 
professional capacity and makes a political contribution to an official 
of an issuer for whom such person is not entitled to vote. Less than 
two years after such person made the contribution, the dealer merges 
with another dealer and, solely as a result of the merger, that person 
becomes a municipal finance professional of the surviving dealer. Would 
the surviving dealer be prohibited from engaging in municipal 
securities business with that issuer?
    A: Yes. Rule G-37 would prohibit the surviving dealer from engaging 
in municipal securities business with the issuer for two years from the 
date the contribution was made. Of course, the surviving dealer's 
prohibition on business would only begin when the person who made the 
contribution becomes a municipal finance professional of the surviving 
dealer. The Board notes, however, that [r]Rule G-37 was not intended to 
prevent mergers in the municipal securities industry or, once a merger 
is consummated, to seriously hinder the surviving dealer's municipal 
securities business if the merger was not an attempt to circumvent the 
letter or spirit of rule G-37. Thus, the dealer may wish to seek an 
exemption from the ban on business pursuant to Rule G-37(i) from its 
appropriate regulatory authority.
(June 29, 1998)

Refund of Inadvertent Contribution

II.17
    Q: A disgruntled municipal finance professional made a contribution 
purposely to subject the dealer to the two-year prohibition on 
business. When the contribution is discovered by the dealer, a refund 
of the contribution is requested and obtained. Is the dealer still 
banned from engaging in business with that issuer? In addition, does 
the contribution have to be disclosed on Form G-37?
    A: Rule G-37(b) prohibits a dealer from engaging in municipal 
securities business with an issuer within two years after any 
contribution to an official of such issuer by any municipal finance 
professional associated with such dealer if the contribution does not 
meet the de minimis exemption. Section (i) of the rule provides a 
procedure whereby dealers may seek relief from the appropriate 
enforcement agency of the rule G-37 prohibition on business [, in 
limited circumstances]. In determining whether to grant such an 
exemption, one of the factors the enforcement agency will consider is 
whether the dealer has taken all available steps to obtain a return of 
the contribution. Even if a refund of the contribution has been 
obtained, dealers are required to seek an exemption from the ban on 
business. In addition, dealers also must disclose the contribution on 
Form G-37. Dealers may wish to indicate on the form (and in their own 
records) that a refund of the contribution was obtained. See Rule G-
37(i).
(August 18, 1994)

Volunteer Work

II.18
    Q: Is a municipal finance professional prohibited from performing 
volunteer work on an issuer official's behalf?
    A: Rule G-37 is not intended to prohibit or restrict municipal 
finance professionals from engaging in personal volunteer work. 
However, soliciting and bundling of contributions would invoke 
application of the rule. In addition, if the municipal finance 
professional uses the dealer's resources (e.g., a political position 
paper prepared by dealer personnel) or incurs expenses in the conduct 
of such volunteer work (e.g., hosting a reception), then the value of 
such resources or expenses would constitute a contribution. Personal 
expenses incurred by the municipal finance professional in the conduct 
of such volunteer work, which expenses are purely incidental to such 
work and unreimbursed by the dealer (e.g., cab fares and personal 
meals), would not constitute a contribution.
(May 24, 1994)

[[Page 65099]]

Dealer Resources

II.19
    Q: If an employee of a dealer is donating his or her time to an 
issuer official's campaign, does the dealer have to disclose this as a 
contribution to such official? In addition, would the fact that the 
employee is taking a leave of absence from the dealer cause a different 
result?
    A: An employee of a dealer generally can donate his or her time to 
an issuer official's campaign without this being viewed as a 
contribution by the dealer to the official, as long as the employee is 
volunteering his or her time during non-work hours, or is using 
previously accrued vacation time or the dealer is not otherwise paying 
the employee's salary (e.g., an unpaid leave of absence).

(August 18, 1994)

Making Contributions to Issuer Officials on Behalf of Other Persons

II.20
    Q: A municipal finance professional signs a check drawn on a joint 
account, which is owned by the municipal finance professional and 
another person, and submits it to an issuer official as a contribution 
along with a writing which states that the contribution is being made 
solely by the other holder of the joint account. Would any portion of 
this contribution be attributable to the municipal finance professional 
under [r]Rule G-37?
    A: If a municipal finance professional signs a check, whether the 
check was drawn on a joint account or not, and submits it as a 
contribution to an issuer official, then the municipal finance 
professional is deemed to have made the full contribution, regardless 
of any writing accompanying the check that provides or directs 
otherwise. Moreover, if this amount exceeds, or does not qualify for, 
the de minimis exception, then by making such a contribution the 
municipal finance professional will trigger the rule's ban on business 
thereby prohibiting his dealer/employer from engaging in municipal 
securities business with the particular issuer for two years.

(February 16, 1996)
II.21
    Q: If a municipal finance professional and another person (e.g., 
her spouse) both sign a check drawn on their joint account and submit 
the check to an issuer official as a contribution, would the 
contribution amount be attributable equally between them (i.e., 50% to 
each person) for purposes of [r]Rule G-37?
    A: Yes. If a municipal finance professional and any other person 
both sign a check drawn on their joint account and submit it to an 
issuer official as a contribution, then each person is deemed to have 
made half of the contribution, regardless of any writing accompanying 
the check that provides or directs otherwise.

(February 16, 1996)

Making Contributions to a Candidate Who Later Loses the Election

II.22
    Q: If a municipal finance professional made a political 
contribution which was not subject to the de minimis exception to an 
issuer official candidate who subsequently did not win the election, is 
the dealer banned from engaging in municipal securities business with 
that issuer (i.e., the governmental entity)?
    A: Yes. Rule G-37 defines the term ``official of such issuer'' or 
``official of an issuer'' as ``any person (including any election 
committee for such person) who was, at the time of the contribution, an 
incumbent, candidate or successful candidate: (A) for elective office 
of the issuer which office is 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 by the 
issuer; or (B) for any elective office of a state or of any political 
subdivision, which office has authority to appoint any official(s) of 
an issuer, as defined in subparagraph (A), above.'' It is clear from 
the rule that, at the time the contribution is made, if the recipient 
of that contribution is an ``official of an issuer,'' then the dealer 
is subject to the two-year ban on business with the issuer, regardless 
of whether the candidate wins or loses the election. Any other result 
would mean that municipal finance professionals could make 
contributions to issuer officials, but the ban on business would not be 
triggered (if at all) until election results were known.
(February 16, 1996)

III. INDIRECT CONTRIBUTIONS (Rule G-37(d))

Contributions by Spouses and Household Members

III.1
    Q: Are contributions to issuer officials by municipal finance 
professionals' spouses and household members covered by the rule?
    A: No, unless these contributions are directed by the municipal 
finance professional, which is prohibited by section (d) of the rule.

(May 24, 1994)
III.2
    Q: If a municipal finance professional directs a retail sales 
person (who is not a municipal finance professional) to make a 
political contribution to an issuer official, would this trigger the 
rule's two-year prohibition on business with that issuer?
    A: Yes. Section (d) of the rule prohibits municipal finance 
professionals (and dealers) from using any person or means to do, 
directly or indirectly, any act which would violate the rule. In other 
words, a municipal finance professional is prohibited from using a 
sales person (or any other person not otherwise subject to the rule) as 
a conduit to circumvent the rule. Thus, contributions made, directly or 
indirectly, by a municipal finance professional (or a dealer) to an 
issuer official will subject the dealer to the rule's two-year 
prohibition on municipal securities business with that issuer. In 
addition to triggering the prohibition, the municipal finance 
professional in this case has violated section (d) of the rule.

(December 7, 1994)

Political Parties

III.3
    Q: Are contributions to national, state or local political parties 
covered by the rule?
    A: Any such contributions would not trigger the prohibition on 
business portion of the rule (section (b)) unless such entities are 
used as a conduit to indirectly contribute to an issuer official, which 
is prohibited by section (d) of the rule. However, contributions to 
state or local political parties must be recorded under [r]Rule G-
8(a)(xvi) and disclosed in summary form under [r]Rule G-37(e), except 
for those contributions which meet the de minimis exemption. See also 
Rule G-37(e).
(May 24, 1994)

Contributions to a Non-Dealer Associated PAC and Payments to a State or 
Local Political Party

III.4
    Q: Could contributions to a non-dealer associated PAC or payments 
to a state or local political party lead to a ban on municipal 
securities business with an issuer under [r]Rule G-37?
    A: Rule G-37(d) prohibits a dealer and any municipal finance 
professional from doing any act indirectly which would result in a 
violation of the rule if done directly by the dealer or municipal 
finance professional. A

[[Page 65100]]

dealer would violate [r]Rule G-37 by doing business with an issuer 
after providing money to any person or entity when the dealer knows 
that such money will be given to an official of an issuer who could not 
receive such a contribution directly from the dealer without triggering 
the rule's prohibition on business. For example, in certain instances, 
a non-dealer associated PAC or a local political party may be 
soliciting funds for the purpose of supporting a limited number of 
issuer officials. Depending upon the facts and circumstances, 
contributions to the PAC or payments to the political party might well 
result in the same prohibition on municipal securities business as 
would a contribution made directly to the issuer official.
(August 6, 1996)
    [Q: Does rule G-37 address contributions to non-dealer associated 
or ``special interest'' PACs?]
    [A: Rule G-37 does not deal directly with contributions to non-
dealer associated or ``special interest'' PACs. Unless the non-dealer 
associated or ``special interest'' PAC solicits contributions for the 
purpose of supporting an issuer official, contributions to these PACs 
should not result in a ban on business under section (b) of rule G-37.

(August 18, 1994)]
III.5
    Q: If a dealer receives a fund raising solicitation from a non-
dealer associated PAC or a political party with no indication of how 
the collected funds will be used, can the dealer make contributions to 
the non-dealer associated PAC or payments to the political party 
without causing a ban on municipal securities business?
    A: Dealers should inquire of the non-dealer associated PAC or 
political party how any funds received from the dealer would be used. 
For example, if the non-dealer associated PAC or political party is 
soliciting funds for the purpose of supporting a limited number of 
issuer officials, then, depending upon the facts and circumstances, 
contributions to the PAC or payments to the political party might well 
result in the same prohibition on municipal securities business as 
would a contribution made directly to the issuer official.

(August 6, 1996)

Making Payments to a National Political Party for Its Non-Federal 
Account (Rule G-37(e))

III.6
    Q: If a national political party accepts payments in which 
contributors have designated that their payments be deposited into the 
account for a state or local political party, must the dealer record 
such payments and report them on Form G-37?
    A: Yes. Rule G-37 requires that dealers record and report payments 
made to state and local political parties and the ultimate recipient in 
the above scenario is a state or local political party so designated by 
the contributor.

(February 16, 1996)

IV. DEFINITIONS (Rule G-37(g))

Contribution

IV.1
    Q: How is the term ``contribution'' defined in [r]Rule G-37?
    A: The term ``contribution'' is defined in [r]Rule G-37(g)(i) to 
mean any gift, subscription, loan, advance, or deposit of money or 
anything of value made: (i) for the purpose of influencing any election 
for federal, state or local office; (ii) for payment of debt incurred 
in connection with any such election; or (iii) for transition or 
inaugural expenses incurred by the successful candidate for state or 
local office.

(May 24, 1994)
IV.2
    Q: Is [r]Rule G-37 applicable to contributions given to officials 
of issuers who are seeking election to federal office, such as the 
House of Representatives, the Senate or the Presidency?
    A: Yes. Rule G-37(g)(i) defines ``contribution'' as, among other 
things, any gift, subscription, loan, advance, or deposit of money or 
anything of value made for the purpose of influencing any election for 
federal, state or local office.

(June 15, 1995)
IV.3
    Q: Does [r]Rule G-37 encompass all contributions to candidates for 
federal office?
    A: No. Rule G-37 encompasses, for federal offices, only those 
contributions to an official of an issuer who is seeking election to a 
federal office.

(May 24, 1994)
IV.4
    Q: Are contributions to bond election committees supporting ballot 
measures for bonds and tax levies subject to the requirements of 
[r]Rule G-37?
    A: No.

(May 24, 1994)

Charitable Donations

IV.5
    Q: Would a charitable donation to an organization made by a dealer 
at the request of an issuer official meet the definition of 
``contribution'' in [r]Rule G-37?
    A: No. Charitable donations are not considered political 
contributions for purposes of [r]Rule G-37 and therefore are not 
covered by the rule.

(May 24, 1994)

Municipal Finance Professional

IV.6
    Q: Who is considered a municipal finance professional?
    A: To determine if a particular person is a municipal finance 
professional, first determine whether the person is an ``associated 
person'' of a dealer (other than a bank dealer) under Section 3(a)(18) 
of the Securities Exchange Act of 1934 (Act), or an associated person 
of a bank dealer under Section 3(a)(32) of the Act. Then determine 
whether the associated person fits within one of the four categories 
listed in the definition of municipal finance professional under 
[r]Rule G-37.
    Under Section 3(a)(18) of the Act, ``associated person of a broker 
or dealer'' is defined as:
    [sbull] Any partner, officer, director, or branch manager (or any 
person occupying a similar status or performing similar functions);
    [sbull] Any person directly or indirectly controlling, controlled 
by, or under common control with the dealer;
    [sbull] Or any employee of such broker or dealer, except those 
whose functions are solely clerical or ministerial.
    Under Section 3(a)(32) of the Act, ``person associated with a 
municipal securities dealer'' when used with respect to a municipal 
securities dealer which is a bank or a division or department of a bank 
means:
    [sbull] Any person directly engaged in the management, direction, 
supervision, or performance of any of the municipal securities dealer's 
activities with respect to municipal securities; and
    [sbull] Any person directly or indirectly controlling such 
activities or controlled by the municipal securities dealer in 
connection with such activities.
    Under [r]Rule G-37(g)(iv), a municipal finance professional is 
defined as:
    1. Any associated person primarily engaged in municipal 
representative activities pursuant to [r]Rule G-3(a)(i) (such 
activities include underwriting, trading, sales, financial advisory and 
consultant services, research or investment advice on municipal 
securities, or any other activities which involve communication, 
directly or indirectly, with public investors relating to the 
activities listed in this paragraph),

[[Page 65101]]

provided, however, that sales activities with natural persons shall not 
be considered to be municipal securities representative activities for 
purposes of Rule G-37(g)(iv);
    2. Any associated person who solicits ``municipal securities 
business'' as defined in [r]Rule G-37 (which includes negotiated 
underwriting activities, private placement activities, negotiated 
remarketing services, financial advisory and consultant services);
    3. Any associated person who is both (i) a municipal securities 
principal or a municipal securities sales principal and (ii) a 
supervisor of any persons described in paragraphs 1 or 2 above;
    [3.] 4. Any associated person who is a [Direct] supervisor[s] of 
the associated persons described in paragraph 3 above, up through and 
including: [(1)] (i) for dealers that are not bank dealers, the CEO or 
similarly situated official; and [(2)] (ii) for bank dealers, the 
officer or officers designated by the bank's board of directors as 
responsible for the day-to-day conduct of the bank's dealer activities.
    [4.] 5. For dealers other than bank dealers: any associated person 
who is a member of the executive or management committee, or similarly 
situated officials, if any. For bank dealers: any member of the 
executive or management committee of the separately identifiable 
department or division of the bank, as defined in [r]Rule G-1, if any. 
However, if the only associated persons meeting the definition of 
municipal finance professional are those described in this paragraph 5, 
the broker, dealer or municipal securities dealer shall be deemed to 
have no municipal finance professionals.
    Each person listed by the dealer as a municipal finance 
professional is deemed to be such for purposes of [r]Rule G-37. 
[Remember that the prohibition on business applies to contributions 
made within the previous two years, beginning with contributions made 
on April 25, 1994.]

(May 24, 1994)
IV.7
    Q: Does the definition of municipal finance professional include 
all registered representatives?
    A: No. The definition of municipal finance professional includes, 
among others, any associated person primarily engaged in municipal 
representative activities pursuant to [r]Rule G-3(a)(i), but excludes 
sales activities with natural persons. [These activities include 
underwriting, trading, sales, financial advisory and consultant 
services, research or investment advice on municipal securities, or any 
other activities which involve communication, directly or indirectly, 
with public investors relating to the activities listed in this 
paragraph.]

(May 24, 1994)
IV.8
    Q: Does the definition of municipal finance professional include 
any associated person who solicits municipal securities business, even 
if this solicitation activity is a very small portion of the associated 
person's work?
    A: Yes. Even if an associated person is not ``primarily engaged in 
municipal representative activities,'' that associated person can be 
considered a municipal finance professional if he or she solicits 
municipal securities business, as defined in [r]Rule G-37 (such 
business includes negotiated underwriting activities, private placement 
activities, negotiated remarketing services, financial advisory and 
consultant services).

(May 24, 1994)
IV.9
    Q: Does the definition of municipal finance professional include 
anyone other than an associated person of the dealer, for example, 
consultants, lawyers or spouses of municipal finance professionals?
    A: No. Municipal finance professionals must be associated persons 
of the dealer. Of course, if a dealer or a municipal finance 
professional seeks indirectly to make contributions to issuer officials 
through consultants, lawyers or spouses, such contributions would 
result in the dealer being prohibited from engaging in municipal 
securities business with the issuer for two years from the date of such 
contributions.

(May 24, 1994)
Solicitation
    [Q: Many retail sales persons in larger firms may not be 
``primarily engaged in'' municipal securities representative activities 
and thus may not fall within that portion of the definition of 
municipal finance professional. However, if these sales persons solicit 
municipal securities business, would they be subject to rule G-37?]
    [A: Yes. Rule G-37(g)(iv) defines a municipal finance professional 
to include, among others, any associated person who solicits municipal 
securities business. If a retail sales person solicits municipal 
securities business, then that person becomes a municipal finance 
professional. Any contributions by such persons made to an issuer 
official may subject the dealer to the two-year prohibition on business 
with that issuer.

(December 7, 1994)]
IV.10
    Q: What constitutes ``solicitation'' of municipal securities 
business?
    A: Solicitation activities may include, but are not limited to, 
responding to issuer Requests for Proposals, making presentations of 
public finance and/or municipal securities marketing capabilities to 
issuer officials, and engaging in other activities calculated to appeal 
to issuer officials for municipal securities business, or which 
effectively do so.

(December 7, 1994)
IV.11
    Q: Has a ``solicitation'' occurred if a retail sales person 
receives a ``finder's fee'' for bringing municipal securities business 
to the dealer?
    A: If a retail sales person receives a ``finder's fee'' for 
bringing municipal securities business to the dealer, then there should 
be a presumption that the sales person solicited municipal business 
from an issuer official. In such situations, the sales person becomes a 
municipal finance professional and any contributions made by that 
person to an issuer official may subject the dealer to the two-year 
prohibition on business with that issuer.

(December 7, 1994)
IV.12
    Q: Is a ``finder's fee'' solely cash compensation?
    A: No. Such compensation, for example, may take the form of: (i) an 
unusually large allocation of bonds to a particular sales person; (ii) 
sales credits; or (iii) any other kind of remuneration.

(December 7, 1994)
IV.13
    Q: Any associated person who solicits municipal securities business 
is deemed a municipal finance professional under [r]Rule G-37. The 
Board previously noted that ``solicitation'' may encompass a number of 
activities, including, for example, making presentations of public 
finance and/or municipal securities marketing capabilities to issuer 
officials, and engaging in other activities calculated to appeal to 
issuer officials for municipal securities business, or which 
effectively do so [(MSRB Reports, Vol. 14, No. 5 (Dec. 1994) at 8)]. If 
an associated person of a dealer attends a presentation by dealer 
personnel of public finance capabilities, would this also constitute 
``solicitation'' under [r]Rule G-37?
    A: Yes. If an associated person of a dealer attends such a 
presentation, then

[[Page 65102]]

he or she is assumed to have solicited municipal securities business 
and therefore is deemed a municipal finance professional under [r]Rule 
G-37. Accordingly, any contributions given to issuer officials by that 
person within the last two years could subject the dealer to the rule's 
two-year prohibition on business with such issuers. [For additional 
guidance in this area, please refer to Q&A number 4 in the June 1994 
issue of MSRB Reports (Vol. 14, No. 3), CCH Manual paragraph 3681; and 
Q&A numbers 1, 2 and 3 in the December 1994 issue of MSRB Reports (Vol. 
14, No. 5), CCH Manual paragraph 3681.]

(March 22, 1995)

Supervisors

IV.14
    Q: A sales representative at a branch office solicits municipal 
securities business for the dealer. Such activity results in that 
person becoming a ``municipal finance professional'' under [r]Rule G-
37(g)(iv)(B). Would that person's branch manager also be considered a 
municipal finance professional?
    A: Yes. Rule G-37(g)(iv)(C) provides that the definition of 
municipal finance professional includes, among others, any associated 
person who is both a (i) municipal securities principal or a municipal 
securities sales principal and (ii) a supervisor of any associated 
person who solicits municipal securities business (or who is primarily 
engaged in municipal securities representative activities). If a sales 
person is soliciting municipal securities business, then the supervisor 
of that person (i.e., the branch manager) also is included within the 
definition of municipal finance professional. [Prior to the most recent 
revision to this portion of the definition of municipal finance 
professional (which was approved on March 6, 1995 in Securities 
Exchange Act Release No. 34-35446), the definition included any 
``direct supervisor'' of any associated person who solicited municipal 
securities business (or who was primarily engaged in municipal 
securities representative activities). Under both definitions, 
[b]Branch managers are included within the definition of municipal 
finance professional in the circumstances described above. [For 
additional information in this area, please refer to MSRB Reports, Vol. 
14, No. 4 (August 1994) at 28-29, CCH Manual paragraph 3681.]

(March 22, 1995)

Designation Period for Municipal Finance Professionals

IV.15
    Q: Rule G-37(g)(iv) states that each person designated a municipal 
finance professional shall retain this designation for [two] one 
year[s] after the last activity or position which gave rise to the 
designation. If a dealer terminates a municipal finance professional's 
employment, and that person is no longer associated in any way with the 
dealer (including any affiliated entities of the dealer), must the 
dealer continue to designate that person a ``municipal finance 
professional'' for recordkeeping and reporting purposes under [r]Rules 
G-37(g)(iv) and G-8(a)(xvi)?
    A: No. If a municipal finance professional is no longer employed by 
the dealer, and is not an ``associated person'' of the dealer, then the 
dealer is not required to designate that person a municipal finance 
professional and the dealer may cease its recordkeeping and reporting 
obligations with respect to that person.

(August 6, 1996)
IV.16
    Q: If a municipal finance professional is transferred from a firm's 
dealer department to another non-municipal department, such as the 
corporate department, must the dealer continue to designate this person 
a municipal finance professional for recordkeeping and reporting 
purposes?
    A: If a municipal finance professional is transferred to another 
department within the same firm (such as corporate, equities, etc.) and 
remains an ``associated person'' of the dealer, the dealer must 
continue to designate this person a municipal finance professional for 
[two] one year[s] from the date of the last activity or position which 
gave rise to this designation and must continue its recordkeeping and 
reporting obligations under [r]Rules G-37 and G-8. It is incumbent upon 
each dealer to determine whether the person is an associated person 
pursuant to Section 3(a)(18) of the Securities Exchange Act of 1934. If 
so, then in addition to recordkeeping and reporting obligations, 
dealers should be mindful that any contributions made by this 
associated person during the [two] one-year designation period (other 
than contributions that qualify for the rule's $250 de minimis 
exception) will subject the dealer to the rule's ban on municipal 
securities business for two years from the date of such contribution. 
Of course, the ban can only be triggered if the person previously was a 
municipal finance professional.

(August 6, 1996)
IV.17
    Q: A municipal finance professional resigns from a dealer, but 
still remains an associated person of the dealer (e.g., by retaining a 
position in the dealer's holding company). May the dealer cease 
designating this person a municipal finance professional for purposes 
of the recordkeeping and reporting requirements under [r]Rules G-37 and 
G-8? In addition, may this person make contributions to issuer 
officials without causing the dealer to be banned from municipal 
securities business with such issuers?
    A: [As noted above in Q&A number 4, if] If a person is no longer a 
municipal finance professional because he or she has left the dealer's 
employ, but nevertheless remains an associated person of the dealer, 
then the dealer must continue to designate this person a municipal 
finance professional for [two] one year[s] from the last activity or 
position which gave rise to such designation. Moreover, any 
contributions by this associated person (other than those that qualify 
for the de minimis exception under [r]Rule G-37(b)) will subject the 
dealer to the rule's ban on municipal securities business for two years 
from the date of the contribution.

(August 6, 1996)
IV.18
    Q: In making the determination of which associated persons of a 
dealer meet the definitions of municipal finance professional and non-
MFP executive officer, is it correct to designate all the executives of 
the dealer (e.g., President, Executive Vice Presidents) under the 
category of non-MFP executive officers?
    A: No. In making the determination of whether someone is a 
municipal finance professional or non-MFP executive officer, one must 
review the activities of the individual and not his or her title. Rule 
G-37(g)(iv) defines the term ``municipal finance professional'' as:
    (A) any associated person primarily engaged in municipal securities 
representative activities, as defined in [r]Rule G-3(a)(i), provided, 
however, that sales activities with natural persons shall not be 
considered to be municipal securities representative activities for 
purposes of this subparagraph (A);
    (B) any associated person who solicits municipal securities 
business, as defined in paragraph (vii);
    (C) any associated person who is both (i) a municipal securities 
principal or a municipal securities sales principal and

[[Page 65103]]

(ii) a supervisor of any persons described in subparagraphs (A) or (B);
    (D) any associated person who is a supervisor of any person 
described in subparagraph (C) up through and including, in the case of 
a broker, dealer or municipal securities dealer other than a bank 
dealer, the Chief Executive Officer or similarly situated official and, 
in the case of a bank dealer, the officer or officers designated by the 
board of directors of the bank as responsible for the day-to-day 
conduct of the bank's municipal securities dealer activities, as 
required pursuant to [r]Rule G-1(a); or
    (E) any associated person who is a member of the broker, dealer or 
municipal securities dealer (or, in the case of a bank dealer, the 
separately identifiable department or division of the bank, as defined 
in [r]Rule G-1) executive or management committee or similarly situated 
officials, if any; provided, however, that, if the only associated 
persons meeting the definition of municipal finance professional are 
those described in this subparagraph (E), the broker, dealer or 
municipal securities dealer shall be deemed to have no municipal 
finance professionals.
    Rule G-37(g)(v) defines the term ``non-MFP executive officer'' as: 
an associated person in charge of a principal business unit, division 
or function or any other person who performs similar policy making 
functions for the broker, dealer or municipal securities dealer (or, in 
the case of a bank dealer, the separately identifiable department or 
division of the bank, as defined in [r]Rule G-1), but does not include 
any municipal finance professional, as defined in paragraph (iv) of 
this section (g); provided, however, that, if no associated person of 
the broker, dealer or municipal securities dealer meets the definition 
of municipal finance professional, the broker, dealer or municipal 
securities dealer shall be deemed to have no non-MFP executive 
officers. [emphasis added]
    Dealers should first review the activities of their associated 
persons to determine whether they are municipal finance professionals, 
and then, once that list of individuals has been established, conduct a 
review of the remaining associated persons to determine whether they 
are non-MFP executive officers. Dealers should pay close attention to 
those associated persons who are soliciting municipal securities 
business and, thus, will be considered municipal finance professionals. 
The Board has previously stated that solicitation activities may 
include, but are not limited to, responding to issuer Requests for 
Proposals, making presentations of public finance and/or municipal 
marketing capabilities to issuer officials, and engaging in other 
activities calculated to appeal to issuer officials for municipal 
securities business, or which effectively do so. [(See ``Additional 
Rule G-37 Questions & Answers,'' MSRB Reports, Vol. 14, No. 5 (December 
1994) at 8).]

(September 9, 1997)

Non-MFP Executive Officer

IV.19
    Q: Who is a[n] non-MFP ``executive officer?''
    A: Pursuant to [r]Rule G-37(g)(v), a[n] non-MFP executive officer 
is defined as any associated person in charge of a principal business 
unit, division or function, or any other person who performs similar 
policy making functions for the dealer (or, in the case of a bank 
dealer, the separately identifiable department or division of the bank, 
as defined in [r]Rule G-1), but does not include any municipal finance 
professional.

(May 24, 1994)
IV.20
    Q: In a bank with a separately identifiable dealer department, who 
would be considered a[n] non-MFP executive officer?
    A: For most bank dealer departments which deal only in municipal 
securities, there are no individuals who meet the definition of non-MFP 
executive officer within [r]Rule G-37.

(August 18, 1994)

Official of an Issuer

IV.21
    Q: How is the term ``official of an issuer'' defined in [r]Rule G-
37?
    A: Rule G-37(g)(vi) defines the term ``official of an issuer'' [as 
any incumbent, candidate or successful candidate for elective office of 
the issuer, which office is directly or indirectly responsible for, or 
can influence the outcome of, the hiring of a dealer for municipal 
securities business. The definition includes any issuer official or 
candidate (or successful candidate) in a position which has influence 
over the awarding of municipal securities business.] to mean ``any 
person (including any election committee for such person) who was, at 
the time of the contribution, an incumbent, candidate or successful 
candidate: (A) for elective office of the issuer which office is 
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 by the issuer; or (B) for any elective 
office of a state or of any political subdivision, which office has 
authority to appoint any person who is 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 by an issuer. Thus, contributions to certain state-wide 
executive or legislative officials would be included within the 
prohibition on engaging in municipal securities business.

(May 24, 1994)
IV.22
    Q: How can a dealer determine whether an incumbent or candidate for 
a particular elective office will be able to award or influence the 
awarding of municipal securities business? For example, in many states, 
such influence is found in executive branch elected officials, not 
legislative branch officials.
    A: The dealer must review the scope of authority of the particular 
office at issue, whether executive or legislative branch, not the 
individual, to determine whether influence over the awarding of 
municipal securities business is present.

(May 24, 1994)
IV.23
    Q: An incumbent was seeking re-election as an issuer official but 
she lost the election. She is now soliciting money to pay for the debt 
incurred in connection with this election. Would there be a prohibition 
on engaging in municipal securities business with the issuer if a 
dealer or a municipal finance professional provides money for the 
payment of this debt?
    A: No, under certain conditions. If the incumbent is out of office 
at the time she is soliciting money to pay for the election debt, then 
she is no longer considered to be within the definition of ``official 
of an issuer'' and any monies given for the payment of debt incurred in 
connection with the election in this instance is not subject to [r]Rule 
G-37. If the incumbent still holds her issuer official position at the 
time she is soliciting money to pay for the election debt, then, if a 
municipal finance professional contributed $250 to her during the 
general election, the municipal finance professional would not be able 
to make any contributions for the payment of debt without causing a 
prohibition on municipal securities business with the issuer. If a 
municipal finance professional made no contributions to the incumbent 
prior to

[[Page 65104]]

the election, then the municipal finance professional may, if entitled 
to vote for the candidate, contribute up to $250 for the payment of 
debt incurred in connection with the election while the incumbent is 
still in office without causing a prohibition on municipal securities 
business. A dealer may not contribute any monies towards the payment of 
debt while the incumbent is still in office without causing a 
prohibition on municipal securities business with the issuer.

(September 9, 1997)

Dealer-Controlled PAC

IV.24
    Q: What is a ``dealer-controlled'' PAC?
    A: Each dealer must determine whether a PAC is dealer controlled. 
For dealers, other than bank dealers, one may assume that any PAC of 
the dealer would be considered a dealer-controlled PAC for purposes of 
[r]Rule G-37. For bank dealers, it will depend upon whether the dealer 
or anyone from the dealer department has the ability to direct or cause 
the direction of the management or the policies of the PAC.

(May 24, 1994)

V. Scope of Waiver Provision in Rule G-37(i)

V.1
    Q: If an enforcement agency grants an exemption from a ban on 
municipal securities business pursuant to [r]Rule G-37(i), may this 
exemption be applied retroactively so that any municipal securities 
business engaged in after the ban had gone into effect but prior to the 
date on which the exemption was granted would not be viewed as a 
[r]Rule G-37 violation?
    A: Rule G-37(i) allows the enforcement agencies to exempt a dealer 
from a ban on municipal securities business. It is the Board's view 
that such an exemption is only effective as of the date of the 
exemption. Rule G-37(i) does not contain a provision allowing for the 
retroactive application of the exemption. Thus, a dealer would violate 
[r]Rule G-37 if, prior to the date of the exemption, the dealer engaged 
in municipal securities business with an issuer while subject to a ban 
with this issuer because of a political contribution. As with any 
violation of a Board rule, the enforcement agencies have discretion in 
determining the type and extent of enforcement action appropriate for 
such violation, in light of the specific facts and circumstances. If an 
enforcement agency has granted an exemption to a dealer from the ban on 
municipal securities business, the facts and circumstances considered 
by such agency in granting the exemption could appropriately also be 
considered (together with any other relevant facts and circumstances) 
in determining what, if any, enforcement action should be taken against 
such dealer if it had engaged in municipal securities business after 
the ban on such business became effective but prior to the date on 
which the exemption was granted.

(March 1, 2000)

VI. Recordkeeping and Reporting (Rules G-37(e), G-8 and G-9)

    [Q: Does a dealer have to collect information on political 
contributions for the two years prior to April 25, 1994]
    [A: No. Records do not have to be maintained for contributions made 
or municipal securities business engaged in prior to April 25, 1994.

(May 24, 1994)]
VI.1
    Q: If a dealer has instituted an internal voluntary ban on 
political contributions, is the dealer still subject to the 
recordkeeping requirements?
    A: Yes. The Board amended [r]Rule G-8 and G-9, on recordkeeping and 
record retention, respectively, to require each dealer to maintain 
records of certain information. This recordkeeping is designed to 
assist dealers in determining whether or not they may engage in 
business with a particular issuer, as well as to facilitate compliance 
with, and enforcement of, [r]Rule G-37.

(May 24, 1994)
    [Q: Rule G-8 requires dealers to record all issuers with which the 
dealer has engaged in municipal securities business. The term 
``issuer'' includes the issuer of a separate security as defined in SEC 
Rule 3b-5(a) under the Act. In the context of industrial revenue bond 
issues, for example, the issuer of a separate security is a private 
corporation, not a government entity. Must we record these 
``issuers''?]
    [A: No, such private corporations, which are not an agency or 
instrumentality of a state or any political subdivision, need not be 
recorded.

(May 24, 1994)]
VI.2
    Q: Rule G-8 requires dealers to record all issuers with which the 
dealer has engaged in municipal securities business. The term 
``issuer'' includes the issuer of a separate security as defined in SEC 
Rule 3b-5(a) under the Act. In the context of industrial revenue bond 
issues, for example, the issuer of a separate security is a private 
corporation, not a government entity. Must we record these ``issuers''?
    A: No. Such private corporations, which are not an agency or 
instrumentality of a state or any political subdivision, need not be 
recorded. Of course, dealers are required to record the governmental 
issuer in these situations, for both taxable and tax-exempt municipal 
securities.

(December 7, 1994)
VI.3
    Q: What are the reporting requirements under rule G-37?
    A: [Each dealer is required to file two copies of Form G-37 within 
30 calendar days after the end of each calendar quarter (i.e., by 
January 31, April 30, July 31 and October 31). The Board recently filed 
an amendment to rule G-37 with the SEC to require that the forms be 
submitted by certified or registered mail or some other equally prompt 
means that provides a record of sending. See the rule filing, SR-MSRB-
94-5, for more information about this amendment.] Dealers are required 
to submit Form G-37/G-38 to the MSRB by the last day of the month 
following the end of each calendar quarter. These submission dates 
correspond to January 31, April 30, July 31 and October 31 of each 
year. There is no fixed time frame for submission of Form G-37x. 
However, if a dealer wishes to rely on the Form G-37x exemption from 
the Form G-37/G-38 submission requirement for a particular calendar 
quarter, Form G-37x must be submitted by no later than the submission 
deadline for such quarter.

(May 24, 1994)
VI.4
    Q: Under what circumstances must Form G-37/G-38 be filed with the 
Board?
    A: [Form G-37 must be filed with the Board if, during the reporting 
period, (i) political contributions were made by those entities and/or 
persons subject to rule G-37, and/or (ii) the dealer engaged in 
municipal securities business with an issuer, as defined in rule G-
37(g)(vii). Rule G-37 attempts to sever any connection between the 
making of contributions and the awarding of municipal securities 
business. However, the making of contributions and the resulting 
awarding of municipal securities business may not come within a single 
reporting period. Thus, it is important that information on political 
contributions be disclosed even if no municipal securities business was 
engaged in during the reporting period. So too, it is important to 
disclose

[[Page 65105]]

municipal securities business even if no political contributions were 
made during the reporting period. However, a dealer is not required to 
file Form G-37 if no political contributions were made and the dealer 
did not engage in municipal securities business during the reporting 
period.] Form G-37/G-38 must be submitted to the Board for a calendar 
quarter if ANY one of the following occurred: (i) reportable political 
contributions or payments to political parties were made during the 
reporting period, unless the dealer has previously submitted Form G-37x 
and the submission remains effective; (ii) the dealer engaged in 
municipal securities business during the reporting period; or (iii) the 
dealer used consultants during the reporting period (i.e., new or 
continuing relationship with consultants).

(May 24, 1994)
VI.5
    Q: Does a dealer have to complete the section of Form G-37/G-38 
concerning issuers with whom the dealer has engaged in municipal 
securities business if the only municipal securities related business 
engaged in during the reporting period was as a selling group member?
    A: No. Rule G-37 does not define ``municipal securities business'' 
to include selling group member activities.


(May 24, 1994)
VI.6
    Q: Which contributions to officials of issuers and political 
parties of states and political subdivisions must be disclosed to the 
Board on Form G-37/G-38?
    A: Those contributions which are required to be recorded pursuant 
to rule G-8(a)(xvi). These include (i) the contributions, direct or 
indirect, to officials of an issuer and to political parties of states 
and political subdivisions made by the dealer and each PAC controlled 
by the dealer (or controlled by any municipal finance professional of 
such dealer); (ii) the contributions, direct or indirect, to officials 
of an issuer made by each municipal finance professional and non-MFP 
executive officer, however, such records need not reflect any 
contribution made by a municipal finance professional or non-MFP 
executive officer to officials of an issuer for whom such person is 
entitled to vote if the contributions by each such person, in total, 
are not in excess of $250 to any official of an issuer, per election; 
and (iii) the contributions, direct or indirect, to political parties 
of states and political subdivisions made by all municipal finance 
professionals and non-MFP executive officers, however, such records 
need not reflect those contributions made by any municipal finance 
professional or non-MFP executive officer to a political party of a 
state or political subdivision in which such persons are entitled to 
vote if the contributions by each such person, in total, are not in 
excess of $250 per political party, per year.

(May 24, 1994)]
    [Q: The disclosure of the compensation arrangement of any person 
employed by the dealer to obtain or retain municipal securities 
business must be included on Form G-37. Does this include disclosure of 
the compensation arrangements of municipal finance professionals?]
    [A: No. The Board recently filed with the SEC an amendment to the 
rule to clarify this point. See the rule filing, SR-MSRB-94-5, for more 
information about this provision.

(May 24, 1994)]
VI.7
    Q: May non-dealers (e.g., attorneys, independent financial 
advisors) voluntarily submit information on political contributions and 
other activities to the Board?
    A: Yes, as long as the filing procedures are followed.

(May 24, 1994)
VI.8
    Q: Will the Forms G-37 submitted to the Board be available for 
public review?
    A: Yes. The Forms G-37/G-38 and Forms G-37x submitted to the Board 
are posted on the Board's Web site for viewing (http://www.msrb.org). 
In addition, [O]one copy of each Form G-37 will be maintained at the 
Board's Public Access Facility in Alexandria, Virginia. These forms 
will be available to the public for review and photocopying. The Board 
will charge 20 cents per page plus sales tax, if applicable, for 
photocopying.

(May 24, 1994)
    [Q: Will the Board answer telephone inquiries as to whether a 
report has been filed?]
    [A: Yes. The Board will maintain a database of reports filed by 
each dealer (as well as any other party voluntarily submitting 
information on political contributions), so that any member of the 
public may telephone the Board's offices to inquire whether a certain 
dealer (or other party) has submitted a report pursuant to rule G-37. 
In order to further enhance public access to this information, the 
Board will provide a list of companies that offer document retrieval 
and mailing services.

(May 24, 1994)]
VI.9
    Q: May a holding company submit to the Board one Form G-37/G-38 
reflecting information for various dealers within the control of the 
holding company?
    A: No. A separate Form G-37/G-38 must be submitted for each dealer.

(February 16, 1996)
VI.10
    Q: Rule G-37(e) requires, among other things, that dealers submit 
information to the Board on Form G-37/G-38 about the municipal 
securities business in which they engaged. Is information about the 
municipal securities business engaged in required to be submitted by 
all syndicate and selling group members, or is it only the 
responsibility of the manager(s) to submit such information on behalf 
of the syndicate?
    A: All manager(s) and syndicate members (excluding selling group 
members) must separately report the municipal securities business in 
which they engaged.

(September 9, 1997)
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the SEC, the MSRB included statements concerning 
the purpose of and basis for the proposed rule change and discussed any 
comments it received on the proposed rule change. The texts of these 
statements may be examined at the places specified in Item IV below. 
The MSRB has prepared summaries, set forth in Section A, B, and C 
below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Since the adoption of Rule G-37, on political contributions and 
prohibitions on municipal securities business, the MSRB has received 
numerous inquiries concerning the application of the rule. In order to 
assist the municipal securities industry in understanding and complying 
with the provisions of the rule, the MSRB has published a series of 
interpretive notices that set forth, in Q & A format, general guidance 
on Rule G-37.

[[Page 65106]]

    On May 8, 2003, amendments to Rule G-37 became effective concerning 
revisions to the definition of municipal finance professional and the 
exemption process.\3\ The proposed rule change revises certain of the 
Rule G-37 Qs & As to reflect the new rule language as contained in the 
amendments, primarily concerning the definition of municipal finance 
professional. The proposed rule change also revises certain Rule G-37 
Qs & As to reflect subsequent changes to the rule since the time the 
particular Qs & As were adopted. In addition, the MSRB has been 
publishing the Rule G-37 Qs & As in chronological order. The proposed 
rule change rearranges the order of the Qs & As by grouping them by 
subject matter. This should make their presentation more helpful to 
users of the Qs & As.
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    \3\ Release No. 34-47814 (May 8, 2003), 68 FR 25917 (May 14, 
2003).
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2. Basis
    The MSRB believes the proposed rule change is consistent with 
Section 15B(b)(2)(C) of the Act, which provides that the Board's rules 
shall:

be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade * * * 
to remove impediments to and perfect the mechanism of a free and 
open market in municipal securities, and, in general, to protect 
investors and the public interest.

    The MSRB believes that the proposed rule change is consistent with 
the Act in that it provides guidance to brokers, dealers and municipal 
securities dealers in complying with existing MSRB rules.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The MSRB does not believe that the proposed rule change will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act since it would apply equally to all brokers, 
dealers and municipal securities dealers.

C. Self-Regulatory Organization's Statement of Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Board has designated this proposed rule change as constituting 
a stated policy, practice, or interpretation with respect to the 
meaning, administration, or enforcement of an existing Board rule under 
Section 19(b)(3)(A) of the Act,\4\ which renders the proposed rule 
change effective upon receipt of this filing by the Commission.
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    \4\ 15 U.S.C. 78s(b)(3)(A).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
Copies of the submissions, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. Copies of the filing will also be 
available for inspection and copying at the Board's principal offices. 
All submissions should refer to File No. SR-MSRB-2003-08 and should be 
submitted by December 9, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 03-28763 Filed 11-17-03; 8:45 am]
BILLING CODE 8010-01-P