The Municipal Securities Rulemaking Board made a switch yesterday in the way it will try to stop the flow of political contributions from bond dealers to the local officials and candidates who can award them lucrative underwriting business.
The board, the self-regulatory organization for municipal-bond dealers, decided not to impose an outright ban on contributions made with the intent of winning municipal-bond business.
Instead, it will ban bond dealers from doing business with any state, local government or authority if certain members of their firms have made political contributions to officials involved in selecting underwriters.
The ban on business would last for two years from the date of the contribution and would be in effect even if an employee made a contribution before joining the firm. The ban would cover contributions from a firm, its political action committee and covered employees made after Dec. 31, 1993.
David C. Clapp, chairman of the rule-making board and a partner at Goldman, Sachs & Co., said in an interview that the board made the shift because members thought "the other way of doing this seemed to have some loose ends; this makes it clearer."
Mr. Clapp said that many in the industry had criticized parts of the board's proposed rule, issued Aug. 30, and asked for clarifications.
In a statement released after the board meeting, Mr. Clapp said: "This revised rule responds to these requests. Under the revised rule, a dealer can make political contributions to an issuer or can transact business with the issuer -- but not both."
The new approach seems to answer some of the criticisms of the original proposal. The range of employees to be covered will be narrower so those outside top management and the municipal bond departments may make contributions.
In addition, covered employees will be able to make contributions of $250 or less to officials or candidates whom they are eligible to vote for. Any contributions to a candidate outside a covered employee's state or city of residence, for example, would set off the ban on doing business in that locality.