MSRB defends its oversight efforts

The Municipal Securities Rulemaking Board defended its oversight of the municipal-bond industry amid a federal investigation of bid rigging and price fixing. A report in yesterday’s New York Times outlined an investigation helmed by the Department of Justice, the Internal Revenue Service and the Securities and Exchange Commission in which they gathered evidence that banks and other financial services firms were rigging bids, making campaign contributions to influential officials and loading extra costs on municipalities. That same investigation resulted in New Mexico Gov. Bill Richardson’s withdrawal of his nomination as commerce secretary after one of his political advisers came under scrutiny for helping JPMorgan Chase & Co. of New York win public-finance business. A consortium of state attorneys general also participated in the investigation, which had been going on for several years, according to the Times. The MSRB pointed to one of its rules that “severely” limits muni banking and underwriting professionals from making state and local political contributions. “Since our inception, the MSRB has sought to ensure the highest levels of investor protection and a marketplace that operates both fairly and efficiently through our regulation of municipal brokers and dealers, with special attention to eliminating both the fact and appearance of impropriety,” it said in a statement.