Bankers may be donating illegally to state and local politicians who hire them to underwrite bond deals, according to a caution from the U.S. Securities and Exchange Commission.

The SEC Office of Compliance Inspections and Examinations said on Aug. 31 that banks may be breaking the law by underwriting bond deals within two years of the donations. The SEC said financial institutions may also have made inadequate disclosures to regulators.

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The SEC is urging banks to take greater steps to comply with limits on political donations enacted in 1994 to curb the practice of awarding bond deals to campaign contributors. The SEC didn't identify banks or say whether any cases triggered enforcement action. Judith Burns, a spokeswoman for the SEC, declined to comment.

"We hope that by describing practices that our examiners have observed, we will promote compliance by helping firms to consider how each of them can most effectively meet their obligations," compliance office director Carlo di Florio said in a statement.

The compliance issues related to donations were described in a so-called risk alert from the SEC.

The SEC has previously cautioned banks against running afoul of the curbs on political donations. In March 2010, the agency warned that the rules also apply to top bank executives after faulting a JPMorgan Chase & Co. vice chairman who was a fundraiser for a one-time California state treasurer.

The Municipal Securities Rulemaking Board, which writes regulations enforced by the SEC, has also evaluated whether stricter curbs are needed over political giving by underwriters. On Aug. 15, it proposed forcing greater disclosure of contributions to election campaigns that support new bond deals, citing concerns that banks are using donations to win business.