Recent job postings indicate the Securities and Exchange Commission is looking to beef up and broaden its municipal securities expertise, suggesting a sharper focus on complex muni issues that may manifest in more intense SEC scrutiny of market practices.
A job announcement posted recently on the
The analyst's duties will include conducting "detailed and data-intensive analyses and research of the municipal securities market in response to complex and difficult questions related to municipal securities," according to the job announcement, which indicated the application window opened on Aug. 20 and closed on Sept. 3.
Bringing on a financial analyst "adds more tools that OMS can use to help fulfill its mission," said Ed Fierro, a partner at law firm Bracewell LLP, who earlier in his career served as senior counsel to the director of OMS. Such a hire also could "add fresh perspective from someone with experience," Fierro said.
"SK-14 is not an entry level position," the Bracewell attorney said, referencing the pay scale and grade listed in the job announcement, which also reflected a salary range of $141,511 to $283,417 per year.
"I do not recall ever having a financial analyst in the Office of Municipal Securities," said Mary Simpkins, who
The posting for the OMS job came on the heels of an earlier job
The job postings for those two different areas within the agency come after comments from SEC officials earlier this year indicating a sharper focus on practices that may harm municipal issuers – and ultimately
During a panel on pricing that was part of a joint compliance outreach program held last January, Dave Sanchez, director of the Office of Municipal Securities, referenced comments SEC Chairman Paul Atkins made a day earlier.
"As Chairman Atkins mentioned yesterday in his opening remarks, the issuer protection mandate for regulators in the municipal securities market really equates to taxpayer protection as it is everyday taxpayers and ratepayers that largely bear the cost of inefficient pricing, and this is why it remains a priority for us," Sanchez said.
The regulatory requirements concerning pricing of muni securities have remained largely unchanged for about a decade, the OMS director said during the panel.
In November of 2022, the Municipal Securities Rulemaking Board "published two sets of compliance considerations with respect to new issue pricing, one for broker-dealers and one for municipal advisors to help support compliance efforts by regulated entities with respect to the established legal requirements related to pricing," Sanchez said.
Since then, the SEC's Division of Examinations for the last few years "has continued to identify pricing and method of sale as examination priorities with respect to municipal advisors."
Sanchez said that "when the municipal advisor regime came in a little over a decade ago" – a reference to the SEC's municipal advisor rule that went into effect in 2014 – much of the SEC's early focus "was just on making sure that folks had kind of signed up and suited up, did you fill out your forms correctly, … did you file things correctly."
Now, however, the SEC is moving into "the next phase," where it's looking at whether MAs are "fulfilling the substantive aspects of their responsibilities," Sanchez said, pointing to the duty of loyalty and duty of care MAs owe to their municipal entity clients under MSRB Rule G-42.
"And a big part of that.. is going to be pricing," he said during the panel, adding that when there is inefficient pricing, the cost to the municipal issuer is "very significant."
One particular area of focus Sanchez highlighted during the panel was price movement where bonds sold in negotiated sales trade up significantly in price – resulting in lower yields – upon entering the secondary market. Seeing consistent "run-ups of six to 10 basis points in negotiated sales" indicates that "some of these deals must be happening inefficiently," he said.
Sanchez during the panel also mentioned underwriter activity where immediately after a deal is priced underwriters make it known they want to buy back bonds.
"We have seen that," said panelist Gene Davis, a director in the fixed income specialist group at the Financial Industry Regulatory Authority, adding that FINRA has seen an issue price and "an hour after first trade the dealer is calling back like, 'Hey, I have another side over here that will pay two points up.'"
While there could be "completely reasonable extenuating circumstances" for such activity, if the trading desk that day "knew that they had a buyer over here … at a certain level, why wasn't that buyer in … the book," Davis said.
"And that happens with a reasonable amount of frequency," Sanchez added.
