SEC warns banks against political donations
According to a warning from the United States Securities and Exchange Commission, bankers could make illegal donations to state and local politicians who hire them to underwrite bond contracts.
The SEC’s Office of Inspections and Compliance Reviews said on Aug. 31 that banks could break the law by underwriting bond contracts within two years of making donations. The SEC said financial institutions may also have made inadequate disclosures to regulators.
The SEC is urging banks to take greater steps to comply with limits on political donations enacted in 1994 to curb the practice of assigning bonds to campaign contributors. The SEC did not identify the banks or indicate whether any cases had triggered enforcement actions. SEC spokeswoman Judith Burns declined to comment.
“We hope that by describing the practices our reviewers have observed, we will promote compliance by helping companies think about how each of them can most effectively meet their obligations,” said the director of the office of compliance, Carlo di Florio, in a statement.
Donation-related compliance issues were outlined in a so-called SEC risk alert.
The SEC has previously warned banks against violating restrictions on political donations. In March 2010, the agency warned that the rules also applied to senior bank executives after it blamed a vice chairman of JPMorgan Chase & Co. who was a fundraiser for a former state treasurer of California.
The City Securities Regulatory Council, which writes the regulations enforced by the SEC, has also been assessing whether tighter restrictions are needed on political donations by policyholders. On Aug. 15, he proposed mandating greater disclosure of campaign contributions that support new bond deals, citing concerns that banks are using donations to win business.