The Division also branched into new areas. For much of its history the SEC did not regulate municipal securities (though the antifraud rules applied to their purchase and sale). In the 1970s and 1980s it was given some authority over that market due to several well-publicized defaults and near-defaults,(1) but only in the 1990s did municipal securities became a major issue for the staff, driven by Levitt’s and Congress’s opposition to “pay to play” practices in which securities intermediaries gave donations to municipal officials in exchange for their business, and by the highly publicized bankruptcy of Orange County, California following massive purchases of risky financial instruments.(2) In the early 1990s, the Division “brought more than 100 enforcement actions against municipal market participants for deficient disclosure practices.”(3)
Organizational changes also led the Division to greater oversight of all enforcement matters. After the creation of the Division in 1972, the regional offices continued active enforcement programs; indeed, the number of enforcement attorneys in the regional offices outstripped those in the main office.(4) While the offices loosely coordinated with headquarters, in the early 1990s recommendations from the regional offices began to be channeled through the Division Chief Counsel’s office before being submitted to the Commission, in a move that produced some friction between the Division and regional offices but also greater coordination of enforcement efforts and policies.(5)