MSRB and FINRA Propose Pay-to-Play Regulations

The MSRB and FINRA proposed rules and amendments that would prohibit finance professionals from obtaining business through political contributions (pay to play). The MSRB proposed a change to existing Rule G-37 (Political Contributions and Prohibitions on Municipal Securities Business) that would allow the rule to apply to municipal advisors and to solicitors associated with dealers or municipal advisors. The MSRB also advanced related amendments to MSRB Rules G-8 (Books and Records to Be Made by Brokers, Dealers and Municipal Securities Dealers) and G-9 (Preservation of Records), as well as to Forms G-37 and G-37x.

FINRA proposed new Rules 2030 (Engaging in Distribution and Solicitation Activities with Government Entities) and 4580 (Books and Records Requirements for Government Distribution and Solicitation Activities) to establish pay-to-play rules. In tandem with other related rules, the pay-to-play rules would regulate the activities of member firms that engaged in distribution or solicitation activities for compensation with government entities on behalf of investment advisers. Specifically, the proposed rules would impose a two-year time out for engaging in distribution or solicitation activities for compensation with a government entity on behalf of an investment adviser after the covered member or its covered associates made a contribution to an official of the government entity.