WASHINGTON -- Arthur Levitt Jr., the new chairman of the Securities and Exchange Commission, has a style and approach to regulation that appears to bode well for the municipal securities market.
But his approach could also be the bane of market participants if they don't cooperate with him in finding solutions to the problems nagging the muni market, such as curbing political contributions and improving secondary market disclosure.
In an interview last Tuesday at the headquarters of The Bond Buyer, Levitt revealed far more about the way he will approach regulation of the securities markets than he did about the possible end result. But his comments contained important signals for the municipal market.
Levitt made it clear that he will use the same activist, consensus-building approach that became his trademark when he headed the American Stock Exchange from 1978 to 1989.
The SEC chairman also indicated that he is going to use his well-known style of bouncing ideas off both market participants and federal regulators until he jawbones them into agreement on solutions to the muni market's problems.
Levitt also showed his eagerness to learn more about the market when he spent part of the Bond Buyer interview asking reporters and editors almost as many questions as he answered.
Levitt's consensus-building approach has already resulted in last Monday's meeting at which Wall Street executives agreed to prohibit their muni departments from making contributions to state and local officials who award lucrative negotiated underwriting deals.
The value of the Levitt approach was evident also in the meeting last Wednesday of SEC staff members, representatives of the Municipal Securities Rulemaking Board, issuers, bond lawyers, and underwriters who began compiling a list of ongoing disclosure items that all issuers will have to reveal.
But merely getting the players to talk to each other isn't enough. Levitt's comments last week make it clear he expects results. And if Levitt doesn't get results, the implication was clear that he will take whatever regulatory or legislative steps are needed to solve the problems.
His comments on disclosure provide insight into the man's determination. "I want more disclosure. As to how to get at that, I'm not exactly sure right now. My hope is that the issuers will be persuaded to do that out of concern that if they don't do it on their own we'll find a way to [make] the dealers responsible for doing it for them," Levitt said. "If they don't do what I hope they will do, we will take other action."
Levitt's message is clear: Work with me and we'll find acceptable solutions. Don't work with me, and I'll find solutions you may not like.
