Payments to a California group that has spent $1.85 million on state ballot campaigns since 2000 are the focus of a Financial Industry Regulatory Authority probe, according to a letter received by at least some members.
Sent to participants in the California Public Securities Association, which raises money for ballot measures dealing with such issues as education and transportation, the Jan. 18 letter seeks information on such items as payments, any reimbursements received, the use of intermediaries and compliance policies. The group lobbies state officials for the municipal-bond industry.
“It came as a complete surprise,” said Robert Muh, chief executive officer of San Francisco-based Sutter Securities Inc., a member of the group. “I don’t know any basis for why they’re asking these questions,” he said yesterday by telephone.
The association has provided funds to groups backing or fighting ballot initiatives, funneling the cash through an issues fund, the secretary of state’s website indicates. Last year, the group gave $250,000 to support a measure that bars California from raiding funds for local transit, government and transportation, campaign-finance records show. California is the biggest issuer in the $2.86 trillion U.S. municipal-bond market.
The regulator’s letter asks how much was given to political action committees. Recipients are rushing to provide information ranging from meeting minutes and annual membership fees, dating back to January 2006, as they must respond by Feb. 1. The document also asks firms whether they received refunds of payments, including from municipalities.
‘Sorting it Out’
“We’re still sorting it out,” said James Cervantes, the chairman of the San Francisco-based association.
Nancy Condon, a spokeswoman for Finra, as the Washington- based securities regulator is known, declined to comment.
The association will help members complete the Finra request, Cervantes said. He said he planned to talk to Finra officials about the probe’s objectives.
The letter says the agency’s enforcement division is investigating to determine whether violations of federal securities laws have occurred. Signed by Gina M. Petrocelli, principal counsel at Finra, the document says that the inquiry doesn’t mean that the regulator has found any wrongdoing.
Payment Information Sought
The request seeks the date, amount and purpose for payments to the group or its political committees, and whether it was for a membership fee, related to the company’s underwriting of a particular bond issue or was intended for some other use.
Representatives from Los Angeles-based De La Rosa & Co., an investment bank, and Greencoast Capital Partners LLC, both members of the industry group, acknowledged getting the letter.
“We’re really not going to make any comment on anything the regulatory bodies want to look at,” Art Raitano, De La Rosa’s chief financial officer, said yesterday by telephone.
Calls to some of the more than 30 members of the lobbying group, such as Minneapolis-based Piper Jaffray Cos., weren’t returned immediately. The association’s members include law firms and public-finance consultants.
The industry association was started in 1982 and collected $514,129 in dues and spent $307,500 on lobbying in 2008, according to the latest data available from public reports filed with the U.S. Internal Revenue Service. Last year, the group also gave $150,000 to help a losing bid to defeat a proposition to require a two-thirds vote by the Legislature to raise fees.
Tom Dresslar, a spokesman for California Treasurer Bill Lockyer, declined to comment on the letter, which he said hadn’t been examined by Lockyer’s aides.
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