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Securities Board delays controversial rule on campaign finance.

The Municipal Rulemaking Securities Board (MSRB) last week met in closed session and announced it would delay the effective date of its proposed, controversial rule to impose political campaign contributions on state and local officials from January 1, 1994 to April 1, or April Fool's Day, 1994. The MSRB also apparently reached a decision to alter its proposed rule banning the ability of municipal officials to solicit gifts or contributions for charity, hosting meetings or educational forms, or conventions.

The MSRB did not make clear when it would publicly issue its proposed rules, but did make clear they would directly impact any state or municipal candidate running for local, state, or federal office in campaigns this year. The rules would not apply to any federal officials.

The action came as more and more municipal, county, and state officials raised questions about the three-pronged efforts to impose federal mandates on the ability of state and local officials to issue tax-exempt municipal bonds in the aftermath of resolutions adopted by NLC and the National Association of Counties. Questions have focused on still another federal rule which would not apply to federal officials, but would set discriminatory rules prejudicing the ability of any state or local official to run for federal office against an incumbent.

Congress, the Securities and Exchange Commission (SEC), and the MSRB are considering legislation and regulatory changes to:

* repeal the current law provision, the Tower amendment, barring federal regulators from mandating state and municipal officials from filing disclosure documents with the SEC and MSRB;

* bar municipal securities dealers who make political campaign contributions to state and local, but not federal, officials from doing business for two years with the state or local government served by the official;

* bar municipal securities dealers who make any gift or contribution to help finance a charity (such as children's hospital, a special olympics, a homeless shelter or food bank) or event (state municipal league convention, international sporting event, or other) at the request of any state or local officials from doing business for two years with the state or local government served by the official; and

* impose new financial and non-financial disclosure requirements on local governments, both for municipal securities already outstanding and for any new issuances.

At NLC's Congress of Cities in Orlando this month, delegates voted to adopt 24 a resolution, proposed by the Board of Directors, as well as the National Black City Local Elected Officials (NBCLEO) and the Hispanic Elected Local Officials (HELO), urging the Clinton administration and Congress to reject the proposals by the Municipal Securities Rulemaking Board (MSRB) and the Securities and Exchange Commission (SEC) to interfere with and impose new unfunded mandates and restrictions on the ability and authority of cities to issue tax-exempt municipal bonds.

The resolution expressed special concern about the adverse impact of the proposed new rules on the ability of city leaders to create public-private partnerships to raise funds to sponsor conventions, meetings, educational and training activities; and it urges that any rules restricting or barring campaign contributions apply equally to federal officials.

Subsequently, the National Association of Counties adopted a similar resolution.

Municipal officials have raised a myriad of legal, market, process, and political issues about the proposed rules and the rush to impose them on state and local governments after close consultation with Wall Street executives, but virtually no effort to work with state and municipal officials.

Proposals to impose restrictions on political campaign contributions to state and local, but not federal, officials raise Constitutional and federalism issues and questions. The MSRB rule, for instance, would basically bar any state or municipal official running for federal office against an incumbent Representative or Senator or President from receiving any campaign contributions from securities dealer firms. No such restriction would be imposed upon federal officials, who annually receive hundreds of thousands of dollars in campaign contributions from the industry.

The rule, thus, would impose severe and discriminatory hardships on any state or local official who sought to run for federal office against an incumbent. The proposal has also raised serious questions about the access of women and minorities to the market.
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Title Annotation:Municipal Securities Rulemaking Board
Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:Dec 20, 1993
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