THE SHORT ANSWER
MSRB Rule G-37, the pay-to-play rule, prohibits a municipal advisor from engaging in municipal advisory business with a municipal entity for two years after the firm, one of its municipal advisor professionals, or a political action committee they control makes a contribution to an official of that entity with municipal advisor selection influence. The rule also bars firms from soliciting or coordinating contributions and from circumventing it.
The MSRB's pay-to-play rule prohibits a municipal advisor from engaging in municipal advisory business with a municipal entity for two years after the firm, one of its municipal advisor professionals, or a political action committee they control makes a contribution to an official of that entity with municipal advisor selection influence.
It reaches the firm and the individual municipal advisor professionals whose contributions can trigger the ban, and it comes with its own quarterly filing requirement, with the related records kept under MSRB Rule G-9(h).
The registration framework and the conduct duties are covered in the guide to what a municipal advisor does and on the standards-of-conduct rule page; this page stays on what the pay-to-play rule itself prohibits.
What contribution limits does the pay-to-play rule set?
The rule's dollar figure is a $250 per-election exclusion under (b)(ii)(A): a contribution does not trigger the ban when it is made by a municipal advisor professional who is entitled to vote for that official and whose contribution, plus any others that person made to that official, totals no more than $250 per election.
Because the exclusion turns on voting eligibility, $250 is not a free allowance for everyone.
Other exclusions cover contributions made before a person became a solicitor, and contributions made more than six months before a person became a municipal advisor professional in certain principal or executive roles.
The rule also polices conduct around contributions: a firm must not solicit or coordinate contributions, under (c), and it must not engage in practices to circumvent the rule, under (d).
| Exclusion from the two-year ban | What it requires |
|---|---|
| $250 per election, (b)(ii)(A) | The contributor is a municipal advisor professional entitled to vote for that official, and the contribution plus any others to that official total no more than $250 per election |
| Pre-solicitor contributions | Made before the person became a solicitor |
| Earlier principal or executive contributions | Made more than six months before the person became a municipal advisor professional in certain principal or executive roles |
What is the two-year ban?
Under (b)(i)(B), no municipal advisor, excluding a municipal advisor third-party solicitor, shall engage in municipal advisory business with a municipal entity within two years after a contribution to an official of that entity with municipal advisor selection influence.
Three sources of contributions trigger the ban: the firm itself, its municipal advisor professionals, or a political action committee they control.
Cross-bans apply to firms that are both dealers and municipal advisors, under (b)(i)(D).
An orderly transition period lets an advisor act consistently with its fiduciary duty, and the two-year ban is extended by the length of that period, under (b)(i)(E).
| Contribution source | Result |
|---|---|
| The firm | Two years without municipal advisory business with that entity |
| One of the firm's municipal advisor professionals | The same two-year ban, subject to the exclusions described above |
| A political action committee they control | The same two-year ban |
Does the pay-to-play rule apply to municipal advisors?
Yes: the MSRB extended the rule to municipal advisors effective August 17, 2016, through amendments deemed approved on February 13, 2016 and described in MSRB Notice 2016-06.
Regulated entities file the rule's quarterly political contribution form with the MSRB, due by the last day of the month after each quarter: January 31, April 30, July 31 and October 31, under (e)(i).
The recordkeeping rule sits behind the filing: under MSRB Rule G-9(h), municipal advisors preserve the books and records described in Rule G-8(h) for at least five years, and political contribution and client complaint records for at least six years.
What those categories cover across an advisor's files is laid out on the municipal advisor recordkeeping page.
The coverage question reaches beyond firms labeled as advisors: GFOA notes that under the SEC's Municipal Advisor Rule, brokers may be considered municipal advisors if they provide advice on investments of bond proceeds to governments.
GFOA adds that governments may receive broker-dealer advice through an RFP process or when they have retained an independent registered municipal advisor, the exemption described on the IRMA exemption page.
Why does the pay-to-play rule matter when an issuer selects an advisor?
A triggering contribution leaves the contributing firm unable to engage in municipal advisory business with that entity for two years, extended by any orderly transition period, so the rule reaches the point where an issuer selects a municipal advisor.
In reinvestment work, the issuer may also be choosing who structures, competitively bids and documents investments of bond proceeds, the role described on the Bidding Agent page.
mGIC is an independent, SEC-registered municipal advisor that sells no proprietary investment product and does not act as principal in the reinvestment alternatives it evaluates, and as one it has a duty of care to act in the issuer's best interest.
Robert Rasmussen has served as mGIC's Managing Director since 2002 and has primary responsibility for its Bidding Agent and reinvestment advisory work, and more on the firm is on the about mGIC page.
How issuers evaluate that selection is its own question, covered on the choosing a reinvestment advisor page.
For a free, no-obligation reinvestment review of a construction fund, reserve fund or escrow investment, you can work with an SEC-registered advisor through the contact page.
Questions about how the pay-to-play rules apply to a particular firm, official or engagement belong to counsel for the firm and, on the issuer side, bond counsel.
Frequently asked questions
When did MSRB Rule G-37 start to apply to municipal advisors?
The MSRB extended the rule to municipal advisors effective August 17, 2016. The amendments were deemed approved on February 13, 2016. MSRB Notice 2016-06 was published February 17, 2016.
How often is Form G-37 filed?
Quarterly. The form is due by the last day of the month after each quarter: January 31, April 30, July 31 and October 31.
What happens to an engagement already underway when a triggering contribution is made?
The rule provides an orderly transition period that lets the advisor act consistently with its fiduciary duty. The two-year ban is extended by the length of that period.
Does the $250 exclusion cover every contributor?
No. It applies to a municipal advisor professional who is entitled to vote for that official, and only when the contribution plus any others to that official total no more than $250 per election.
Do the same restrictions apply to a firm that is both a dealer and a municipal advisor?
Yes. Under (b)(i)(D), cross-bans apply to firms that are both dealers and municipal advisors.
How long must a municipal advisor keep political contribution records?
At least six years under MSRB Rule G-9(h). The baseline period for the books and records described in Rule G-8(h) is at least five years, and client complaint records are kept for at least six years as well.
Sources
This page is general educational information about municipal finance and federal and state rules as of the date shown. It is not legal, tax or investment advice, and it is not a recommendation about any particular investment. Product availability, legality and suitability depend on the issuer, jurisdiction, governing documents and transaction-specific facts. Final legal and tax determinations remain with the issuer's bond counsel, tax counsel and other advisors.
