Clarke to Replace Stack

WASHINGTON - The Municipal Securities Rulemaking Board has elected Peter Clarke, managing director at JPMorgan in New York, to replace Ronald Stack as its chairman, beginning Oct 1.

MSRB officials told reporters yesterday during a conference call that the board, at its meeting in San Francisco late last week, elected a new chairman and vice chairman for one-year terms and approved five new board members for three-year terms beginning Oct. 1.

Stack is expected to soon leave Barclays Capital as managing director and head of public finance to head the northeast group in Wells Fargo & Co.'s public finance department. He said the board would not name the new officers and members until later in the summer.

Peter Clarke
But market participants said yesterday that the new chairman will be Clarke, who has served on the board since Oct. 1, 2007, is its current vice chairman, and heads municipal underwriting and syndication at JPMorgan where he has worked since 1977. He previously served on the board from 1990 though 1993, according to an MSRB release issued last year after he was elected vice chairman of the board. Clarke could not be reached for comment.

Separately, Stack said the board has tapped Donald O'Brien, senior municipal underwriter at Morgan Keegan & Co. in New York, to fill the final 14 months of a bank-dealer seat vacated by Stephen Wool, who left KeyBanc Capital Markets in Chicago for the securities firm Janney Montgomery Scott LLC. O'Brien was tapped in part because he could "hit the ground running," Stack said, noting that he formerly served on the board. Last summer, O'Brien resigned before his term was up after he left a job as head of syndication at Morgan Stanley.

The 15-member MSRB is made up of five securities firm officials, five bank-dealer officials, and five members of the public - all of whom serve three-year staggered terms.

Stack also said the board plans to soon submit to the Securities and Exchange Commission proposed rule changes that would speed up the timetable for syndicate managers to disburse profits to other members of a syndicate, despite opposition from a key industry trade group.

The board also will soon seek public comment on draft rule changes to clarify the priority of retail customer orders for new bond issues and the related record-keeping responsibilities of dealers, he said. The draft rule changes will be accompanied by interpretive guidance that highlights the fair-practice requirements for retail orders, which issuers have increasingly solicited during the financial crisis.

Speaking to reporters during the conference call, Stack said the retail order-related rule changes are "not drastic" and will not lead to "a sea change."

"It's basically just a clarification of the priority of orders so that there's no misunderstanding or any problem in the marketplace as to what [dealers] are to do," he said.

MSRB general counsel Ernesto Lanza said the last time the board issued guidance on the priority of orders during new issuance, retail order periods were not widely used. That guidance, which was released by the board on Dec. 22, 1987, merely said that "customer" orders should generally receive priority "over similar dealer or certain dealer-related account orders."

Meanwhile, the proposal to shorten the amount of time firms have to settle syndication accounts, which entails changes to the board's Rule G-11 on new-issue syndicate practices and G-12 on uniform practices, are designed to limit the credit exposure of syndicate members to a Lehman Brothers-like bankruptcy.

Under the changes, syndicate accounts would need to be settled within 30 days, instead of the current 60 days, after an issuer delivers securities to the syndicate. Dealers also would have to settle so-called secondary market trading accounts within 30 days, instead of 60 days, after all securities have been delivered to the account members.

The changes were proposed after Lehman's bankruptcy filing left some members of muni bond syndicates managed by the firm without having received underwriting fees for those deals.

The proposed changes are to be sent to the Securities and Exchange Commission within the next two weeks, which must publish them for another round of public comments before they can be approved, MSRB officials said.

When the rule changes were originally drafted in May, the Securities Industry and Financial Markets Association raised concerns about them, warning that 30 days was too aggressive a timetable to settle syndicate accounts.

A SIFMA spokeswoman declined to comment on the MSRB's announcement that it would nevertheless propose them to the SEC as originally drafted.

During yesterday's conference call, Stack noted that the G-11 and G-12 changes stem from a review of all of the board's "G" rules, which cover dealer conduct.

He added that the board voted at its meeting last week to extend that review through September 2010. It began last October.

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