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Question

Difficulty: HardGifts, Gratuities, Political Contributions, and Outside Business Activities

A Municipal Finance Professional (MFP) who resides and is registered to vote in State A contributes $100 to the election campaign of a candidate running for State Treasurer in State B. The MFP is not eligible to vote in State B's elections. What is the regulatory consequence of this contribution under MSRB Rule G-37?

  1. A
    The contribution is permitted without penalty because 100isbelowthe100 is below the 250 de minimis limit under MSRB rules.
  2. The contribution triggers a two-year ban on negotiated municipal securities business between the MFP's broker-dealer and State B.Answer
  3. C
    The contribution is acceptable only if the MFP receives written pre-approval directly from FINRA before sending the funds.
  4. D
    The contribution results in an immediate and permanent statutory disqualification of the MFP from engaging in municipal business.

Answer

The contribution triggers a two-year ban on negotiated municipal securities business between the MFP's broker-dealer and State B.
Under MSRB Rule G-37 (Pay-to-Play Rule), an MFP may contribute up to $250 per election cycle to a candidate without triggering a business prohibition ONLY if the MFP is entitled to vote for that candidate. Because the MFP in this scenario is not eligible to vote in State B, any political contribution—regardless of amount—triggers a two-year ban on negotiated municipal securities business between the MFP's broker-dealer and that issuer.

Step-by-Step Solution

1
Analyze MSRB Rule G-37 de minimis requirements.
MSRB Rule G-37 allows Municipal Finance Professionals (MFPs) to contribute up to $250 per election to a candidate ONLY IF the MFP is entitled to vote for that candidate.
Voting eligibility is a strict condition for the $250 de minimis exception.
2
Evaluate the MFP's voting eligibility in State B.
The MFP lives in State A and cannot vote in State B's elections, so the de minimis exception does not apply.
Without voting eligibility, any monetary contribution violates pay-to-play provisions.
3
Determine the regulatory penalty for a non-exempt political contribution under Rule G-37.
A prohibited contribution results in a two-year ban on negotiated municipal securities business with the issuing entity.
Rule G-37 enforces a mandatory two-year prohibition on negotiated underwriting and municipal advisory business with that issuer.

Key Concept

MSRB Rule G-37 Political Contribution Limits & De Minimis Voting Exception
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Topics

Gifts, Gratuities, Political Contributions, and Outside Business Activities