SIFMA changes spur concern over its commitment to munis

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WASHINGTON — Recently announced streamlining and rumored forthcoming budget cuts and layoffs at the Securities Industry and Financial Markets Association are causing municipal market participants to worry about the group’s ongoing commitment to municipal securities.

Their fears are being stoked by the fact that SIFMA’s most prominent and biggest dues-paying members are the big Wall Street investment banks, for which munis are almost not even on the radar, or their affiliates.

Cheryl Crispen, SIFMA’s executive vice president of communications and marketing, declined to comment on rumored budget and staff cuts or the group’s fee structure. But she said SIFMA’s goal is to increase efficiency and that it has no plans to reduce its coverage of municipal securities issues.

“SIFMA has modified its committee structure to ensure laser-like focus on our core priorities, which include the municipal securities market,” she said.

But some regional and small firms in the muni space are taking a wait-and-see stance.

“It’s a topic of conversation,” said one industry official, who did not want to be identified by name. “Even if SIFMA is saying that they can do the same things with fewer committees and fewer staff there’s skepticism among firms.”

“If they continue to do everything that they’re doing then there won’t be an issue,” the official said. “But there’s skepticism that they won’t be able to continue doing everything that they’re doing and since their agenda is already controlled by the big banks, the concern from the smaller firms is that when they’re trying to figure out what they can no longer do they will gravitate to where all of their money comes from, which is the bigger banks and broker-dealers.”

Concern was initially sparked when SIFMA President and Chief Executive Officer Ken Bentsen sent a note to members last month announcing that the group, on Nov. 1 will “reconstitute” its 95 committees and 167-plus working groups and subcommittees into 35 committees and 21 forums that will be overseen by six subcommittees of the board of directors.

The streamlining was the result of three surveys that global management consulting firm Oliver Wyman conducted of SIFMA members.

“Overall, the results were very positive — SIFMA is meeting the expectations of our members across many functions,” Bentsen told members. “But we also identified areas for improvement. Among those was the need to refine and improve the efficiency of our committee structure to ensure focus on core member priorities.”

“This effort is designed to improve our efficiency and effectiveness — it will not reduce our issue coverage,” Bentsen stressed.

The streamlining comes as SIFMA’s website proclaims the importance of its existing committee structure: “SIFMA’s unique strength is the deep engagement of our members on our committees. Through their work, we engage with policymakers and regulators in comment letters, testimony, studies and more.”

Under its existing committee structure, SIFMA currently has six municipal committees and two roundtables, according to its website, although SIFMA sources said only one of the roundtables ever existed and will continue to exist.

The committees are the municipal: executive committee; steering committee; brokers’ brokers committee; financial products committee; legal advisory committee; and operations committee. There is also a Regional Heads of Fixed-Income Roundtable.

Under the new organization, there will be one municipal committee under a capital markets subcommittee of the board. In addition, there will be two forums under the capital markets subcommittee — one on municipal and corporate operations and one that on municipal legal issues. The roundtable recently met and will continue to meet, a SIFMA spokesperson said.

Some muni market participants think this means the board will exercise more power over what the committees do and they aren’t sure how the forums are going to work.

SIFMA spokespersons said all of the muni issues will still be covered under the new structure and that the board has always been involved in setting priorities. They point out that Bentsen’s note says the committees can form task forces to deal with various issues.

But another muni market source who didn’t want to be named said, “The optics are, ‘We don’t care as much about you anymore.' "

There also has been some concern that the big banks, which have been frustrated by their diminished reputation in Washington because of the financial crisis and other controversies and want to beef up their image, are putting more resources into a group focused on traditional banking, and perhaps putting fewer resources into SIFMA and other broker-dealer groups.

The big new banking group is the Bank Policy Institute, a nonpartisan public policy research and advocacy group representing the nation’s leading banks that was launched in July. The group was formed from the merger of the Financial Services Roundtable and the Clearing House Association.

The merger occurred after the Financial Services Roundtable and Financial Services Forum shed major asset managers and insurers as members to focus on banks.

And some members of the BPI reportedly didn’t want Goldman Sachs Group, Morgan Stanley or Credit Suisse Group to join because of their focus on underwriting and trading securities rather than retail banking, according to an article in Bloomberg.

BPI’s chairman is Bank of America Corp.’s Brian Moynihan. Other key members include JPMorgan Chase & Co.’s Jamie Dimon and Wells Fargo & Co.’s Tim Sloan as well as Citigroup Inc.’s Michael Corbat.

SIFMA, in contrast and by its own account, represents 75% of the U.S. broker-dealer sector by revenue and 50% of the asset management sector by assets under management.

Another source of frustration for some muni firms is that SIFMA is so large and serves so many different members that it sometimes has difficulty taking public positions. For example, while SIFMA called for continued support on tax-exempt bonds when it testified before congressional committees during the tax law debates last year, it was nowhere to be heard when the final tax law changes eliminated advance refundings.

While many muni market groups expressed anger publicly over the loss of advance refundings and vowed to push for the reinstatement of them, SIFMA declined to issue any muni-specific statements, with spokespersons referring The Bond Buyer to Bentsen’s more general statement that the legislation represented “positive steps to achieving [the] goal” of “a more efficient, pro-growth tax code.”

The banks were thrilled that the tax law changes slashed the corporate tax rate to 21% from 35%, but the lower corporate rate made muni bonds far less attractive to banks, insurance companies and others.

“A problem they’ve always had and will always have is that they’re representing so many demographics,” said another source who did not want to be named.

Representatives from several muni firms lavished praise on Leslie Norwood and Michael Decker, the co-heads of munis at SIFMA, for providing them with attention, help and resources.

But some of these individuals also said SIFMA’s positions get watered down sometimes because they have to be so inclusive of their wide range of members.

“SIFMA’s just so big, so global, so macro,” said an official at another firm who requested anonymity.

“The big banks are just getting bigger and bigger. It’s a scary time for smaller firms,” that official said.

Some firms have shifted over to, or also joined, Bond Dealers of America, which has taken steps in recent months to expand their advocacy and influence with lawmakers and regulators.

The group has added some additional staff and recently formed a Fixed Income Market Structure Working Group to advise regulators, lawmakers and market participants on structural changes in the fixed income industry and marketplace.

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