NAPA, Calif.--An executive at a prominent black-owned municipal bond firm expressed concern last week that the Municipal Securities Rulemaking Board does not include minority representation from either the industry or issuer sides of the market.

Napoleon Brandford, vice chairman of Grigsby Brandford & Co., made the MSRB charge during a speech that also focused on racial and other divisions affecting the municipal bond industry and the way business is awarded.

He spoke Thursday at a conference sponsored here by his firm. More than 100 market participants, including issuers and investors, attended to discuss the state of the industry.

Mr. Brandford said the composition of the MSRB includes no minority representation, even though the industry has more minority-owned firms than ever.

Over the last decade, the number of minority- and women-owned firms in the industry has grown rapidly, partly because many major issuers have attempted to fulfill goals requiring that a certain portion of bond business be allocated to such firms.

"As I look around this auditorium, I see many extremely qualified individuals ... who have been passed over on several occasions" for serving on the MSRB, Mr. Brandford said.

Specifically, Mr. Brandford mentioned Frank Borges, Connecticut's treasurer; Robert Booker, chief financial officer of the Los Angeles Unified School District; Les Porter, deputy executive director of the Los Angeles County Transportation Commission; Jean Wright, Seattle's financial manager; and himself.

But Christopher Taylor, executive director of the MSRB, said Friday in an interview from his office in Washington, D.C., that many qualified market participants have not served on the board. He added that it would be wrong to conclude that one group is being singled out intentionally.

"I wish I had room for everybody," Mr. Taylor said, noting that the 15-member board by law requires equal representation for securities firms, bank dealers, and public members.

Those representational requirements, plus the fact that board members serve three-year terms, mean that a relatively limited number of slots has been available since the MSRB was created in 1975, Mr. Taylor said.

As a result, he stressed that many qualified market participants have been "passed over," including some who have waited years to serve on the board and others who have yet to gain a spot.

From time to time, he said, "we've been criticized for not having a corporate trustee, a bond lawyer--the list goes on and on" as the board tries to incorporate as much balance as possible and still find the best-qualified people, Mr. Taylor said.

Many people are in the pool of candidates, he added, so whether they are "black, white, or green, hopefully their time will come."

Mr. Taylor also asserted that firms of all sizes and backgrounds can provide input to the self-regulatory body, regardless of whether they have representation on the board.

In other comments at the conference, Mr. Brandford said the nature of the industry fosters numerous divisions, pitting national firms against regional and minority-owned firms; East Coast against West Coast firms; minority-owned firms and color against white, women-owned firms; and black-owned firms against Hispanic-owned firms. He noted that internal rivalries also develop between sales and trading and public finance departments, and also between senior managers and co-managers.

The securities industry is "divided and noninclusionary, with entrenched traditions and perceptions on how business is conducted and who to conduct business with," Mr. Brandford said.

But Mr. Brandford encourage issuers to study those issues. In particular, he focused on what he alleged is a "bias against non-New York-based firms" by major issuers in the East, naming issuers such as Massachusetts, Detroit, and the New York State Metropolitan Transportation Authority.

He said issuers should hold hearings, especially to ensure that cities such as Dallas, Houston, Los Angeles, San Francisco, Denver, and Seattle are able "to retain their prominence as major financial centers."

George Greanias, controller of Houston, said he has heard similar complaints from firms in Texas.

Terming it the "free trade issue," Mr. Greanias said local firms ask to be considered first for bond deals because "they claim discrimination in other communities, so they want preferential treatment in our community."

Such claims are a "tough political argument to overcome," Mr. Greanias said, noting that the market needs to address the problem if regional and minority-and women-owned firms are going to grow.

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