The Securities and Exchange Commission's
Office of Compliance Inspections and Examinations recently issued a National Examination Risk Alert
on MSRB Rules G-37 and G-38. The Alert summarizes the observations of National Examination Program examiners, which have revealed a number of weaknesses regarding the supervision of MSRB pay-to-play prohibitions. Some of these issues include:
- Firms engaging in municipal securities business despite making prohibited contributions;
- Lack of required recordkeeping;
- Failure to file accurate Form G-37s; and
- Failure to establish or implement adequate supervisory procedures.
The Alert goes on to list procedures staff has observed to ensure compliance, including: training, self-certification by covered employees, preclearance of political contributions and outright prohibitions on political contributions.
Depending on its size and culture, as well as the jurisdictions in which it does business, a firm may want to implement some or all of these procedures to promote compliance with the MSRB rules and other applicable political contribution restrictions. Especially in this election year, it is important to be aware and make sure an SEC alert does not turn into an SEC complaint.