Scope of Waiver Provision in Rule G-37(i)

Q: If an enforcement agency grants an exemption from a ban on municipal securities business pursuant to rule G-37(i), may this exemption be applied retroactively so that any municipal securities business engaged in after the ban had gone into effect but prior to the date on which the exemption was granted would not be viewed as a rule G-37 violation?

A: Rule G-37(i) allows the enforcement agencies to exempt a dealer from a ban on municipal securities business.  It is the Board’s view that such an exemption is only effective as of the date of the exemption.  Rule G-37(i) does not contain a provision allowing for the retroactive application of the exemption.  Thus, a dealer would violate rule G-37 if, prior to the date of the exemption, the dealer engaged in municipal securities business with an issuer while subject to a ban with this issuer because of a political contribution.  As with any violation of a Board rule, the enforcement agencies have discretion in determining the type and extent of enforcement action appropriate for such violation, in light of the specific facts and circumstances.  If an enforcement agency has granted an exemption to a dealer from the ban on municipal securities business, the facts and circumstances considered by such agency in granting the exemption could appropriately also be considered (together with any other relevant facts and circumstances) in determining what, if any, enforcement action should be taken against such dealer if it had engaged in municipal securities business after the ban on such business became effective but prior to the date on which the exemption was granted.

March 1, 2000