WASHINGTON — Securities and Exchange Commission chairman Mary Schapiro is expected to preside over a one-day hearing on the municipal securities market near Birmingham, Ala., in two weeks, sources said.
The SEC is expected to convene the panel, the third in what was once billed as a nationwide series of five muni hearings, on July 29 at Homewood’s city hall in a Birmingham suburb. The session will bring SEC officials and staff to the heart of Jefferson County, where a court-appointed receiver is managing the county’s sewer system, as well as its defaulted warrants and swaps.
In November 2009, the SEC entered into an agreement with JPMorgan Securities Inc. settling securities fraud and other charges involving the county’s $3.14 billion of troubled variable- and auction-rate sewer warrants and related interest-rate swaps. The county since 2008 has been unable to restructure the debt and has since defaulted on the sewer warrants.
Birmingham is in the congressional district of Rep. Spencer Bachus, R-Ala., who chairs the House Financial Services Committee.
Commissioner Elisse Walter, who is spearheading an agency-wide review of the muni market, is also expected to preside over the field hearing.
Spokesman John Nester declined to comment, saying the SEC is still finalizing the agenda and panelists. But sources said the hearing will cover such topics as distressed communities, small issuers, derivatives, and the secondary market.
Witnesses expected to testify at the hearing include J. Foster Clark, a partner at Balch & Bingham LLP in Birmingham and a former president of the National Association of Bond Lawyers. Clark will talk about distressed communities, as will James Spiotto, a partner at Chapman and Cutler LLP in Chicago. In addition, Mary-Margaret Collier, the director of Tennessee’s office of state and local finance, will speak about derivatives.
Ernesto Lanza, the deputy executive director and general counsel of the Municipal Securities Rulemaking Board, will talk about the secondary market.
The SEC’s hearings, first announced by Schapiro in May 2010, are examining a wide range of issues that affect investors in the municipal securities market. At the conclusion of the hearings, the SEC is to release a staff report about the state of the muni market, with recommendations for further action by the commission, including possible legislation, rulemaking, and changes in industry practices.
Last September, Walter presided over a one-day hearing in San Francisco. The SEC held a second field hearing in Washington in December. Three other hearings had been slated for Chicago, Tallahassee and Austin,, but budgetary cuts and uncertainties forced the remaining sessions into an extended hiatus.
In recent months, Walter and SEC staff have met with a wide range of municipal market participants in person and by phone and have solicited comments by e-mail. According to documents posted on the SEC’s website, Walter and SEC staffers have conferred with representatives from the National Federation of Municipal Analysts, the Securities Industry and Financial Markets Association, NABL, and the Governmental Accounting Standards Board.
On Thursday, the SEC’s website said: “Plans for additional field hearings have been suspended due to the budgetary constraints under which the commission is operating.” It added: “Protecting investors in the municipal securities market is a core function of the commission and the staff is continuing its efforts to gather information about the market and develop recommendations.”