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Question

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

A municipal finance professional (MFP) makes a personal political contribution of $500 to the campaign of an official of an issuer for whom the MFP is eligible to vote. Under MSRB Rule G-37, what is the primary consequence of this contribution?

  1. The member firm is prohibited from engaging in negotiated municipal securities business with that issuer for two years.Answer
  2. B
    The contribution is completely exempt from MSRB rules because the MFP is eligible to vote for the candidate.
  3. C
    The Securities and Exchange Commission automatically revokes the broker-dealer's license.
  4. D
    The MSRB directly assesses a criminal penalty and fine against the representative.

Answer

The member firm is prohibited from engaging in negotiated municipal securities business with that issuer for two years.
Under MSRB Rule G-37, a Municipal Finance Professional (MFP) may make political contributions up to 250perelectiontocandidatesforwhomtheyareeligibletovotewithoutpenalty(thedeminimisexception).IfanMFPcontributesmorethan250 per election to candidates for whom they are eligible to vote without penalty (the de minimis exception). If an MFP contributes more than 250 (in this case, $500), the MFP's broker-dealer is prohibited from engaging in negotiated municipal securities business with that issuer for two years.

Step-by-Step Solution

1
Identify the governing rule and key contribution details
MSRB Rule G-37 regulates political contributions made by Municipal Finance Professionals (MFPs). The MFP made a $500 campaign contribution.
Rule G-37 prevents 'pay-to-play' practices by penalizing political contributions intended to influence municipal business awards.
2
Evaluate the de minimis exemption conditions
The de minimis exception permits contributions up to 250perelectionforcandidatestheMFPiseligibletovotefor.A250 per election for candidates the MFP is eligible to vote for. A 500 contribution exceeds the allowable limit by $250.
Crossing the $250 threshold invalidates the de minimis exception even if the MFP can vote for the candidate.
3
Determine the resulting regulatory restriction
Exceeding the $250 limit results in a two-year ban on negotiated municipal securities business with that issuer for the MFP's firm.
Rule G-37 explicitly mandates a two-year period during which negotiated municipal business with the issuer is prohibited.

Key Concept

MSRB Rule G-37 De Minimis Exception and Two-Year Business Ban
Estimated Time:45s
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Topics

Gifts, Gratuities, Political Contributions, and Outside Business Activities