WASHINGTON — The Securities and Exchange Commission surprised municipal market participants Thursday by announcing that the Treasury Department's John J. Cross 3rd will become director of its new Office of Municipal Securities in September.
Cross, 56, has a broad range of experience in the muni market, but is nevertheless a tax lawyer and currently serves as associate tax legislative counsel in the Treasury's Office of Tax Policy.
However, SEC officials and market participants all said Cross is a good choice to head the new office, which the Dodd-Frank Act created and directed to report directly to the SEC chairman.
Cross could not be reached for comment.
The muni office is currently housed within the SEC's trading and markets division, where it has been since the spring of 2001. It had been an independent office reporting to former chairman Arthur Levitt before that but was merged into that division after Levitt left the SEC.
"John's experience makes him perfectly suited to head this office," said SEC chairman Mary Schapiro. "He has a full appreciation for the importance of municipal securities and the expectations of investors in those markets."
"I am thrilled that someone of John's stature and expertise and leadership is going to lead the commission's muni program and I can't wait," said SEC Commissioner Elisse Walter, who spearheaded the commission's report on the muni market released this week that recommends more than a dozen legislative and regulatory changes to improve muni disclosure and price transparency.
Lynnette Kelly, executive director of the Municipal Securities Rulemaking Board, called Cross' selection "a home run."
"He'll be great," she said. "He has such a nice demeanor, he's so well respected and well-liked. He's incredibly smart.
Susan Gaffney, director of the Government Finance Offices Association's federal liaison center, said that while the appointment of Cross is "surprising," it is "welcome."
"His experience in this sector, unparalleled professionalism and his long-standing relationships with all market participants will be beneficial to both the SEC and stakeholders at this critical time," she said, adding, "While it is sad to see him leave Treasury, where he has been a tremendous asset to all of us, it will be wonderful to be able to continue working with him at the SEC."
Paul Maco, a partner at Bracewell and Giuliani who headed the SEC muni office the last time it was independent, said, "John is a very credible representative of the government in the municipal market as a tax lawyer. That credibility, plus the seasoning he has as a regulator and his reputation for straight shooting, should be of great benefit as he moves into a slot that has been empty for a year and brings his energy to fulfilling the expectations that Congress had when it created the Office of Municipal Securities by statute."
John McNally, former president of the National Association of Bond Lawyers and a partner at Hawkins, Delafield & Wood where Cross once worked, said, "John is an excellent attorney with a comprehensive knowledge of the municipal securities market. His initial training was as a bond lawyer and I am confident that, with appropriate personnel, he will make an excellent director of the Office of Municipal Securities."
Chuck Samuels, a partner at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC, said Cross' appointment is "a superb move by the SEC for which it should be commended."
"An influential industry, legal and regulatory player moves to an important new stage," he added.
Michael Decker, managing director and co-head of municipal securities at the Securities Industry and Financial Markets Association, said, "We are pleased with the announcement that John will be leading municipal efforts at the SEC. He brings many years of experience in the municipal market and a deep understanding of the issues facing the market."
Cross has been at the Treasury since mid-2006. Before that, he was a partner at the Hawkins firm for 12 years. He served as counsel to the assistant chief counsel for financial institutions and products at the Internal Revenue Service from 1990 through part of 1993. He started his career as an associate at the firm now called Kutak Rock LLP in Atlanta and later was an associate, then partner, at Smith, Gambrell & Russell, also in Atlanta.
He received his bachelor's degree from Brown University in 1978, a law degree from Vanderbilt University School of Law in 1981, where he was a member of the Vanderbilt Law Review, and a Masters of Laws in Taxation from Georgetown University Law Center in 1988. Cross' wife, Meredith, is director of the corporation finance division at the SEC.
The search for the head of the new muni office has been ongoing since 2010. Sources said the search had boiled down to Cross and Kathleen Connell, former California State Controller from 1995 until 2003. Connell is a former trustee of the California Public Employees' Retirement System, and California State Teachers' Retirement System. She ran for mayor of Los Angeles in 2001. She heads up the Connell Group. She could not be reached for comment.