Reporting from Sacramento — California Treasurer Bill Lockyer says his office won't reimburse bond underwriters for membership fees they pay to trade associations, and he's going to try to recover more than $1.1 million in reimbursements over the last five years.
In a letter to 86 brokers that market state bonds, Lockyer wrote Tuesday that he was prohibiting underwriters from claiming fees paid to the California Public Securities Assn. and the Securities Industry and Financial Markets Assn. as reimbursable expenses.
The state association charges members 2 cents per $1,000 in state bonds they sell, up to a maximum of $25,000 per deal, for membership fees. SIFMA, its national counterpart, charges 3 cents per $1,000 in bond sales, Lockyer's office said.
Funding for SIFMA's political action committee is "completely separate from, and unrelated to, the underwriting assessment," said Tim Ryan, SIFMA's president. A spokesman for the state securities trade group could not be reached for comment.
The state and the national financial industry groups lobby for Wall Street banks and contribute to a variety of state and national political campaigns. Both groups employ Sacramento advocates to lobby the Legislature, the governor's office and various state agencies.
"Making taxpayers, in effect, foot the bill for banks' lobbying or campaign activities is not justified under any circumstances," Lockyer said. "It's improper, it will stop now, it will not happen again and we will get our money back."
Last year, for example, SIFMA lobbied against a bill that requires marketing intermediaries, who help investment funds win multibillion-dollar deals with state pension funds, to register as lobbyists with the state.
And the state group spent $250,000 to support Proposition 22, an initiative approved by voters in November to limit the state's ability to grab local government money to balance the budget.
In separate letters, Lockyer suggested that the two associations prohibit their members from passing membership fees on to municipal bond issuers.
Paying fees that support SIFMA operations is an obligation of members, not municipal bond issuers, the group said in a statement.
Lockyer said he recently became aware that the state was reimbursing major brokerages such as Goldman Sachs & Co., regional underwriters such as De La Rosa & Co. and law firms such as Orrick, Herrington & Sutcliffe.
Last week, the Financial Industry Regulatory Authority sent a request to members of the state trade group asking for information about payments made to it and whether the money is used to make political contributions.