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Securities Law

White Not Seen Delaying, Thwarting Muni Issues

FEB 6, 2013 11:37am ET
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Municipal market insiders say muni-related items working though the Securities and Exchange Commission will likely remain on track if Mary Jo White, a securities litigator and former U.S. prosecutor, becomes the SEC's new chairman.

Some muni group members have recently voiced concerns that if White is confirmed, she will have to get up to speed on the municipal advisor definition and the SEC's muni report's recommendations, further delaying work on those issues.

They also wonder if White would make changes to the SEC's office of municipal securities or its staff. The office is headed by former U.S. Treasury Department official John Cross, who joined the SEC in September at the request of Elise Walter, the current SEC chairman. Walter, who was named chair after the December departure of Mary Schapiro, can stay on the commission through the end of the year. Her term expired last June but she can remain at the SEC until the end of the congressional session.

However, several market sources who are familiar with municipal market issues but declined to be identified, say White, nominated by President Obama on Jan. 24 as Walter's successor, might even spur the SEC to move faster on completing items like the so-called Volcker Rule and the municipal advisor definition. She may also be inclined to retain officials who are intimately familiar with those muni items, they said.

Sources describe White, former U.S. Attorney for the Southern District of New York, as a no-nonsense leader with a get-it-done management style who could breach political divides within the SEC and push the agency to complete a myriad of still-unfinished rules mandated the Dodd-Frank Act.

"She's not really partisan. She's there to get the job done," said one source. "From a management perspective, I think she would [help] get things moving forward."

The SEC has adopted final rules implementing only about one-third of the 100 mandates required of it by the Dodd-Frank Act, which was passed two-and-a-half years ago, SEC Commissioner Daniel Gallagher said recently.

Outstanding muni-related items include the Volcker Rule, which would restrict banks from proprietary trading munis issued by state and local agencies and authorities, and the final definition of municipal advisor, which is needed for the Municipal Securities Rulemaking Board to propose a slew of rules and rule changes for advisors mandated by the Dodd-Frank Act.

Cross has predicted that the MA definition would be finalized early this year.

The SEC also recommended in its July report on the municipal market a number of measures to improve pre- and post-trade transparency, as well as congressional authority to regulate the timing and content of issuers' disclosures.

The SEC has not announced any actions on the recommendations, though Rep. Spencer Bachus, R-Ala., said recently that lawmakers have discussed the report with the SEC.

A confirmation hearing for White, currently a white-collar criminal defense lawyer who heads Debevoise & Plimpton LLP's litigation department, has not been scheduled. But her experience and reputation as a leading litigator and prosecutor led sources to predict she will be confirmed with minimal controversy.

Some market insiders say it is possible the muni advisor definition could be finalized before White, if confirmed, starts her new job.

Either way, White, who sources have noted does not have significant experience with munis, may chose not to meddle in the MA definition and may defer muni issues to Walter, Cross or muni staff officials.

"[The] fact that she doesn't know the area" might mean she will have "no effect at all" on the definition, one source said.

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A recent phenomenon is the emergence of bonds with shorter call protection as funding alternatives for municipalities. However, the shorter call protection also dampens the potential upside for investors, which in turn reduces the price they are willing to pay.

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