The SEC settled a pay-to-play enforcement proceeding with Neil M.M. Morrison, a former vice president in the investment banking division of Goldman, Sachs & Co., a broker-dealer and registered municipal securities dealer. The SEC alleged that Mr. Morrison's actions resulted in violations of the Municipal Securities Rulemaking Board's (MSRB) rules by both Morrison and Goldman Sachs. Starting in July 2008, Morrison was employed by Goldman Sachs to solicit municipal underwriting business from, among others, the Massachusetts Treasurer's Office. During the period November 2008 to October 2010, however, Morrison allegedly was also substantially engaged in the political campaigns of Timothy P. Cahill, the then-Treasurer of Massachusetts, including Cahill's November 2010 Massachusetts gubernatorial campaign. According to the SEC, Morrison participated extensively in Cahill's gubernatorial campaign and did so at times from his Goldman Sachs office, during his Goldman Sachs work hours and using Goldman Sachs resources, such as phones, e-mail and office space. The SEC found that Morrison's campaign work gave him complete access to Cahill and his staff, who often provided him with information about the office's internal deliberations involving underwriter selection.

The SEC determined that Morrison's campaign activities during his Goldman Sachs work hours and use of Goldman Sachs resources constituted valuable undisclosed "in-kind" campaign contributions to Cahill attributable to Goldman Sachs. In addition, the SEC found that Morrison circumvented the pay-to-play rules by making an indirect contribution to the Cahill campaign through another person in violation of MSRB Rule G-37. Moreover, Morrison allegedly solicited campaign contributions for Cahill when Goldman Sachs was engaged in or seeking to engage in municipal underwriting business with the Treasurer's Office in willful violation of MSRB Rule G-37.

Two-Year Ban on Municipal Securities Business Violated.

Under Rule G-37, Morrison's indirect contribution and each "in-kind" contribution attributable to Goldman Sachs triggered a two-year ban on municipal securities business with issuers associated with Cahill as Treasurer of Massachusetts and as a candidate for Governor of Massachusetts. Despite the prohibitions contained in Rule G-37, within two years after the campaign contributions, Goldman Sachs, with Morrison's knowledge, participated as senior manager, co-senior manager, or co-manager for a total of 30 negotiated underwritings totaling approximately $9 billion. For its roles in the underwritings, Goldman Sachs received $7,558,942 in fees. The SEC found that Goldman Sachs' engagement in municipal securities business with these issuers violated MSRB Rule G-37(b).

Disclosures.

Morrison's contributions were not disclosed on MSRB Forms G-37, and no records of the contributions were made and kept in violation of MSRB Rules G-37(e), G-8 and G-9. The SEC found that Morrison caused Goldman Sachs to violate MSRB Rules G-37(b) and (e), G-8 and G-9. In addition, the SEC found that Morrison did not disclose the contributions or campaign work or the conflicts of interest raised by this conduct in the bond offering documents. By failing to disclose the campaign work, cash and in-kind contributions and the resulting conflict of interest to the purchasers of municipal securities, Morrison willfully violated MSRB Rule G-17, which requires broker-dealers to deal fairly and not engage in any deceptive, dishonest, or unfair practice.

Bar From Securities Industry.

Without admitting or denying any of the findings, Morrison agreed to cease and desist from violations of the MSRB rules and to pay a $100,000 fine. The SEC also barred Morrison from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.

Source: In the Matter of Neil M.M. Morrison, Investment Company Act Release No. 30540 (May 23, 2013).