Talk:Tower Amendment

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NEW YORK (Dow Jones)--Concerns over "pay to play" schemes involving some of the nation's largest pension funds are trickling down to another potential conflict - campaign contributions that brokers make to help promote certain municipal bond measures.

The Municipal Securities Rulemaking Board is requesting comment on whether broker dealers' contributions to bond ballot campaigns, in which the public votes to finance everything from new schools to road improvements, can potentially amount to a pay-to-play practice or may, at least, be perceived that way. The MSRB, a self-regulator for broker dealers and banks involved in the business of municipal securities, is considering requiring broker dealers to disclose when they make such a contribution.

"Essentially, the MSRB is trying to show it's on top of the 'pay to play' issue by trying to force disclosure of conflicts of interest," says Joseph Mendola, chief compliance officer for Magna Securities Corp. in New York and a candidate for New York City Comptroller.

Current MSRB rules on contributions don't address bond ballot campaigns at all - just contributions to individuals' political campaigns. Broker dealers and the financial professionals they employ aren't barred from making political contributions to individuals. But they can't do business with an issuer - the municipality floating the bond - within two years after making contributions over $250 to an official of that municipality. Broker dealers must also disclose those contributions to public officials on an MSRB form.

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