The U.S. Securities and Exchange Commission will force state and local government bond underwriters to disclose more information about donations to election campaigns supporting new debt sales.
Banks will be required to report the timing of their donations, any work done for campaigns and whether they won the underwriting after supporting a ballot measure that persuaded voters to approve debt. The rules, proposed by the Municipal Securities Rulemaking Board last year, were approved by the SEC on March 28.
The requirements for the $3.7 trillion municipal bond market are aimed at assessing whether public officials are steering underwriting business to banks in return for support on ballot campaigns. That could cost taxpayers if banks recover such donations by charging higher fees.
While underwriters are barred from giving to local government officials who award them work, there is no such ban on donating to campaigns supporting bond issues, such as those proposed by school boards.
Banks are currently required to report contributions to campaigns. Regulators have said that without information on the timing of the contributions and whether banks were later hired, it’s difficult to assess how large a role such donations play.