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SEC chief aims to curb brokers' political donations now


WASHINGTON -- Arthur Levitt Jr., chairman of the Securities and Exchange Commission, is disappointed that state and city officials want to delay limits on political contributions by securities firms.

Their effort to put off restrictions, Mr. Levitt said in a statement, "shows a misunderstanding of the problems and the proposed solutions" involving political contributions and municipal-bond firms.

"Efforts to thwart these actions are counter to our common goal of preserving the integrity and public confidence so vital to the market upon which our towns, cities and states depend," Mr. Levitt said.

Should investors conclude that the market is tainted, Mr. Levitt said, the consequences "would be costly for both investors and issues and could not be tolerated."

The SEC is expected to approve a rule, to take effect April 1, restricting brokers from doing bond business with municipal officials if the brokers have contributed to the municipal officials' political campaigns. Federal regulators are investigating whether securities firms contributed to municipal officials to obtain their bond business. Bond sales in New Jersey, Massachusetts and Louisiana are under scrutiny.

The public may comment on the proposed restrictions once the commission formally considers the plan next year, Mr. Levitt said.

This week, Mr. Levitt received a letter from state and city groups asking that the rule be delayed until they reach a consensus on how to stop improper political contributions.

In a separate letter, the National League of Cities asserted that restrictions on contributions should wait until after next year's congressional elections.

Without the delay, the league said, U.S. representatives and senators will have an unfair fund-raising advantage over mayors and governors who want to unseat them.

Federal rules on political contributions should be implemented "in an equitable manner," the League of Cities said. A limit on contributions, the league contended, should also apply to federal officeholders.

If no action is taken, state and city officials who run for federal office could challenge the contribution limits in court, regulators and lobbyists said.

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