Examkin

Question

Difficulty: Very hardGifts, Gratuities, Political Contributions, and Outside Business Activities

A Municipal Finance Professional (MFP) associated with a broker-dealer makes a $150 political contribution to the election campaign of a candidate running for mayor in a neighboring township where the MFP does not reside and is not eligible to vote. What is the regulatory consequence of this political contribution under MSRB Rule G-37?

  1. A
    The contribution is permitted under the $250 de minimis exception because the amount is under the regulatory threshold.
  2. The contribution triggers a mandatory two-year ban on the broker-dealer engaging in negotiated municipal securities business with that township.Answer
  3. C
    The contribution is permitted provided the MFP receives prior written approval from FINRA and the SEC.
  4. D
    The contribution only requires post-transaction written notification on Form BD and does not restrict the firm's business activities.

Answer

The contribution triggers a mandatory two-year ban on the broker-dealer engaging in negotiated municipal securities business with that township.
Under MSRB Rule G-37, the 250deminimisexceptionforpoliticalcontributionsmadebyaMunicipalFinanceProfessional(MFP)appliesstrictlywhentheMFPisentitledtovoteforthecandidateatthetimeofthecontribution.BecausetheMFPinthisscenariodoesnotresideinthetownshipandisineligibletovoteforthecandidate,thedeminimisexceptioniscompletelyunavailable.Therefore,makinga250 de minimis exception for political contributions made by a Municipal Finance Professional (MFP) applies strictly when the MFP is entitled to vote for the candidate at the time of the contribution. Because the MFP in this scenario does not reside in the township and is ineligible to vote for the candidate, the de minimis exception is completely unavailable. Therefore, making a 150 political contribution violates pay-to-play regulations and automatically triggers a two-year ban on the broker-dealer conducting negotiated municipal securities business with that municipality.

Step-by-Step Solution

1
Analyze the MFP's voting eligibility
The MFP does not reside in the neighboring township and is not eligible to vote for the candidate.
MSRB Rule G-37 de minimis rules hinge strictly on whether the contributor has voting eligibility for the target official.
2
Evaluate the MSRB Rule G-37 de minimis exception criteria
The $250 per election de minimis exception is unavailable because the MFP cannot vote for the candidate.
If an MFP contributes to an official for whom they cannot vote, even $1 is a violation that triggers regulatory penalties.
3
Determine the resulting regulatory penalty
A mandatory two-year ban is imposed on the broker-dealer from engaging in negotiated municipal business with that issuer.
Under pay-to-play provisions, non-exempt political contributions trigger an automatic two-year restriction on negotiated underwritings and municipal advisory services.

Key Concept

MSRB Rule G-37 Political Contribution Limits and Voting Eligibility
Estimated Time:1m 30s
Rate this question

Topics

Gifts, Gratuities, Political Contributions, and Outside Business Activities