US regulators have been recruiting from the financial services industry for top talent just as Congress delays new funding for the rule-making agencies.
A spokesperson for the Securities and Exchange Commission (SEC) has confirmed that it has definitely increased its recruitment from the securities industry over the past two years in an effort to keep pace with the industry and in anticipation of the Dodd-Frank reforms. “We’re bringing on professionals with unique skill sets to complement our staff expertise particularly as the SEC prepares to take on new responsibilities under Dodd-Frank for oversight of derivatives, hedge fund advisers, and credit rating agencies,” the spokesperson said.
According to media reports, the SEC has plans to hire new employees this year and next while the US Commodities Futures Trading Commission (CFTC) also intends to expand its ranks. New members of Congress, however, have yet to decide whether they will authorize the extra funding required for these staff expansions. With all the funding challenges that regulators face, it is unclear what will happen to their hiring sprees.
The intentions of the new Congress will become clear over the next 30 to 60 days, says Joseph Palumbo, a partner with the advisory services of consultancy Ernst & Young. Palumbo focused on the current environment for global exchanges at the annual risk management convention and exhibition of the Global Association of Risk Professionals (GARP) held this week in New York. He reiterated the concerns of the regulators who say they do not have the staff to write new regulations let alone enforce them. “You will see a delay in the implementation of all of this,” Palumbo says. He also says that Congress will take action within six months to a year, not put it off for two years as some observers have been predicting.
As Washington, D.C. sorts out the pending hiring sprees, critics charge that it’s too little, too late.
“I think the government is trying to play catch up,” says John Scarpino, managing director at executive search firm CCX, based in Nyack, N.Y. The effort may not be enough to fix all that needs to be done.
“It’s kind of like you stick your finger in a hole here and something bursts over there,” Scarpino says. “I don’t think the government has enough focus to really know where they need to put their assets and hire the right kind of people. … It will take a lot of money to do that because you need people from Wall Street to make a switch and get involved and come up with regulations that make sense. It would be a tall order.”
The SEC spokesperson declined to comment upon Scarpino’s assessment of the situation.
For the moment, Scarpino says that he has not competed against a regulator in a recruitment situation. But recruitment is done in confidence and there may have been counter-offers from regulators that he was unaware of. “We’re kind of like U-boats in the Atlantic. We don’t really get to see everything. We use our periscopes, shoot and dive,” he says.
Regardless of what Congress does, Marianne C. Brown, president and CEO of Omgeo, who has spoken publicly about the increased presence of the regulators, said there will always be competition from all sectors for the “rock stars” in the market.
“Omgeo works hard to stay ahead of the pack,” Brown says. “However, as regulatory rules are enforced, and both the buy and sell side adjust to the new regime, the need for rock stars will only increase. Omgeo offers a flexible environment so that we can attract and retain the best talent available.”
Of course, given the coming challenges, Omgeo could search for talent from the regulatory communities. “Our relationship with the regulatory community is very strong and we view the process of talent acquisition as generally a ‘win-win’ for all involved,” Brown says. “If we bring someone on with regulatory experience, it’s a great way to strengthen our relationship, and visa versa.”
Perhaps serving as a harbinger of executive moves to come, a leading figure among financial services vendors, Thomas Eady, left the private sector last year to join the SEC as a senior policy advisor. A highpoint of Eady’s private sector career was his 11 years with Tradeweb Markets, where he was a co-founder and managing director for the provider of multi-dealer-to-client electronic trading networks.
Eady says the move was “a great opportunity” for him to do public service after a 25-year career on Wall Street. “The timing couldn’t have been better,” he says. “I joined the SEC last July, starting just two days before the Dodd-Frank Act was signed into law.”
He will have his work cut out for him.
“Dodd-Frank requires fundamental reforms that will have a lasting impact on the swap markets for decades to come,” Eady says. “Everyone in the derivatives markets understands the importance of getting it right and avoiding unintended consequences. By having a seat at the table during the rulemaking process, I hope to help the SEC find the right balance.”
Eady says he highly recommends that Wall Street veterans consider considering making a similar move.
“For people with deep experience on Wall Street, I believe this is really the perfect time to do public service at a place like the SEC,” Eady says. “There is a clear recognition here that the Commission’s rulemaking efforts will only benefit from the insights of advisors with actual market experience.”
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