Regulation of Political Contributions (“Pay to Play” Rule)

MSRB Rule G-37 seeks to prevent fraud and promote an open and transparent market for municipal securities that protects investors and the public. Often referred to as the “pay to play” rule, it has two main components. First, it prohibits municipal securities dealers from engaging in municipal securities business with government issuers if certain political contributions have been made. Second, it requires municipal securities dealers to disclose specific information related to political contributions.

The “pay to play” rule was put into place to prevent underwriting firms from winning business via campaign donations to elected officials. The rule prohibits dealers and their associated professionals from conducting any securities business with an issuer within two years of making a political contribution to elected officials of that issuer. The elected official must be someone who has the authority to influence whether municipal securities business is directed toward the dealer. The rule applies when the contribution was made by any of the following:

• The broker, dealer, or municipal securities dealer

• Any municipal finance professional (MFP) associated with such broker, dealer, o