WASHINGTON — The Securities and Exchange Commission has quietly hired the head-hunting firm Korn/Ferry International to find candidates to lead a new municipal securities office that will have a higher stature within the SEC.
News of the search signals that the SEC is moving forward to implement a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act that would elevate the office in importance and require its director to report directly to SEC chairman Mary Schapiro.
Korn/Ferry is looking for candidates outside the commission who have broad-based managerial experience, according to market participants familiar with the matter and a nine-page “confidential” Korn/Ferry document obtained by The Bond Buyer.
The document does not require candidates to be attorneys — something unusual for an agency made up mostly of lawyers. This may be a signal the SEC is looking for a top-level industry official with a broad understanding of munis, sources said.
Currently, the muni office is housed within the SEC’s division of trading and markets and has only two full-time employees — Martha Mahan Haines, its chief, and Mary Simpkins, senior special counsel. Market participants believe it is unlikely Haines will head the new office or that the job will be filled internally.
Specifically, the Korn/Ferry document says that the new director “will serve as senior manager and expert securities compliance examination consultant who will lead the oversight of the municipal securities market.”
The director “must work closely with other offices and divisions within the SEC as well as other regulatory agencies,” including the Financial Industry Regulatory Authority, the Internal Revenue Service, and state regulators, to ensure “a coordinated approach to regulation and monitoring of the municipal securities industry.”
Candidates must possess “significant experience in a large and complex organization” and must have at least one year of “specialized experience” at a top federal pay grade or equivalent private-sector experience, among other requirements.
News of the search comes after Haines told those attending the Securities Industry and Financial Markets Association’s Legal and Compliance Conference in New York Tuesday that there would be a national search for the position.
Sources said it is not unusual for the SEC to hire a headhunter to help broaden the search for candidates and that any individuals Korn/Ferry finds will have to go through the normal process when the SEC begins to accept applications for the position, possibly later this year.
Asked when the SEC is planning to hire the new director, spokesman John Nester declined to comment.
In addition to the reconstituted muni office, the Dodd-Frank law requires the SEC to establish stand-alone offices for credit ratings, investor advocacy, women and minority inclusion, and whistleblowers.
All but the head of the whistleblower office are required to report to the chairman.
Some market participants have questioned how seriously the SEC would approach the new muni position.
It was originally added to a version of financial regulatory reform introduced by Senate Banking Committee chairman Christopher Dodd, D-Conn., in March, largely at the request of Republican staffers who had consulted with former SEC chairman Arthur Levitt.
It was unclear if the SEC fully supported the measure because it had already elevated munis in importance and some saw the idea as superfluous.
Levitt, who was SEC chairman from 1993 to 2001, created a stand-alone muni office in March 1995 that reported to him in the midst of a campaign to reform the market by increasing disclosure and price transparency and by cracking down on conflicts and other abuses.
But in 2000, after the departure of its then-director, Paul Maco, currently a partner at Vinson & Elkins LLP here, the office was merged into the SEC’s division of market regulation, now trading and markets. Since then, the staff of the office has been cut from a one-time high of seven people.
But Schapiro has made munis one of her agency’s top priorities since joining the commission last year.
In addition to establishing a specialized municipal and public pension fund enforcement unit during her tenure, the SEC has launched a series of field hearings, led by commissioner Elisse Walter, that are expected to lead to recommendations for additional regulation, legislation and industry “best practices” documents.