WASHINGTON — Municipal Securities Rulemaking Board chair Kym Arnone wants the board to finish the municipal advisor rules and take more steps to improve transparency before the end what she says is the hardest job she has ever loved in a nearly 30-year muni career.
She discussed these issues and her career during an interview with The Bond Buyer.
Arnone, a board member since 2012, is a managing director at Barclays Capital. A native New Yorker, she went straight into public finance as an analyst at Bear Stearns after graduating with a finance degree from St. John's University. Arnone said she twice flirted with the idea of becoming a lawyer, but ultimately decided to stay in munis and not attend law school.
"I concluded I was pretty hooked on banking," she said.
Arnone has had a front row seat watching major changes in the market's competitive landscape. She worked at two of the vanished titans of the industry, first at Bear Stearns from 1985-2008 and then at Lehman Brothers from May 2008 until its bankruptcy filing in September that same year. She briefly lived in Florida while working at the first firm.
Arnone's specialties have been New York City debt and tobacco bonds, the latter of which are secured by the payments big tobacco companies have pledged to states as compensation for the negative health effects caused by smoking. She has done tobacco deals totaling many billions over more than a decade.
While many have criticized the now troubled tobacco bond market and the bankers who participated in those deals, Arnone credits her extensive tobacco experience with providing her a better perspective on the industry.
"Because of the tobacco, I'd say my exposure to issuers has been more national than most," she said.
Arnone assumed chairmanship of the MSRB from the departing Dan Heimowitz of RBC Capital Markets on Oct. 1 and inherits the task of guiding the board through the remainder of its work on the MA rules.
The Securities and Exchange Commission, which has oversight of the MSRB, completed its MA registration rule last year and left the MSRB to flesh out the specifics of how muni advisors must comply with their obligations under the Dodd-Frank Act and the SEC's rule. The board has already proposed several rules and has recently sought SEC approval of a rule laying out the supervisory requirements of MA firms.
Arnone said the board's continued priority will be to advance the MA rulemaking and that she would like to see this completed during her chairmanship. But the MSRB is also keeping its eye on other issues in the market.
Arnone said the disclosure of direct bank loans is an issue that bears watching and that issuers can voluntarily disclose those debts. But the MSRB has no authority to compel issuers to disclose anything. The SEC can punish issuers who commit fraud and underwriters who engage in deals with issuers who have faulty disclosure histories, but that is all.
The board is also working on improving transparency, which Arnone noted has been an area of much increased focus. The MSRB is in the midst of initiatives aimed at creating a comprehensive central transparency platform, including the collection of more pre-trade and post-trade data.
Arnone's goal as chair will be to help the 21-member board follow its agenda by being a leader and facilitating dialogue.
"As chair you're only one vote," Arnone said, adding that such a large body can be "a bit unwieldy at times."
"My goal is really to create a consensus and make sure everyone is heard."
Some market participants have been critical of the board's composition over the years. Dodd-Frank mandated that the board be composed of majority public members, but two chairs in a row have been bankers and some public members have had close ties to dealer firms earlier in their careers.
Asked about these concerns, Arnone said that members of the MSRB take their mission seriously, and that she has sometimes had her views on an issue swayed after hearing the thoughts of members from other parts of the industry.
"When I'm in the board room, it's easy to separate it from my day job," she said.
Arnone's term and time on the MSRB will end Sept. 30. When that time comes, she said she will consider her chairmanship a success as long as the board has achieved its agenda. Thursday marked the deadline for comment on the MSRB's strategic priorities, which include MA regulation, the expansion of municipal entity protection, market efficiency, and price transparency.