Richard Johns departs SFIG amid concerns over advocacy, compensation

The Structured Finance Industry Group is searching for a replacement for founding executive director Richard Johns, who resigned amid a reported split with the board over compensation and perceived lackluster advocacy results.

In an email issued to SFIG members on June 29, the Washington, D.C.-based trade group’s board of directors announced that Johns had voluntarily stepped down “to pursue other endeavors.”

Johns was the group’s only executive director since its founding in 2013 after several banks bolted from the now-defunct American Securitization Forum. He will be assisting an executive committee with the board on the pursuit of a new director, according to the email, which Asset Securitization Report obtained.

In the interim, an operating committee of SFIG’s senior leadership will take over the executive director's duties, which include organizing widely attended industry confabs as well as SFIG business and working committees to influence regulatory and legislative matters.

The lack of concrete lobbying victories had become an issue with some members in the group, possibly leading to a splintering of support among members and the board for continuing Johns’ tenure, according to a member who previously served on SFIG working committees.

“As a general perspective, the organization does a good job in a lot of areas, including its annual convention,” said the member, speaking to Asset Securitization Report on condition of anonymity. “But one area I’ve been disappointed in with SFIG has actually been in lobbying and advocacy.”

SFIG and other trade groups like the Loan Syndications & Trading Association lobbied heavily in recent years against legislative and regulatory directives affecting the securitization industry that grew out of the 2010 Dodd-Frank Act, including risk-retention, proprietary trading and rising levels of disclosure requirements.

But “if you look at comments that SFIG and other parts of the industry gave on legislation, regulations and so forth, it was a lot of technical fiddles around the edges,” this person said, “rather than getting around to challenging the core premise of all the regulatory imperatives ... that there was something wrong with securitization as a process or as an industry.”

While SFIG submitted comment letters, filed amicus briefs and provided Congressional testimony on regulatory topics such as Dodd-Frank and Basel III, “the basic premise of regulation was never really challenged by SFIG,” said the source. “If you look at one major court victory that came along in the CLO case ... who was the main plaintiff in that? It was the LSTA. It wasn’t SFIG.”

The LSTA successfully sued the Federal Reserve and the Securities and Exchange Commission to overturn a multi-agency rule requiring managers of collateralized loan obligations to hold at least 5% of the economic risk in their deals in order to align their interests with those investors. In February, the D.C. Circuit U.S. Court of Appeals decided that the rule was wrongly applied to CLOs, overturned a lower court ruling that dismissed the LSTA’s claims.

Two SFIG government relations executives departed the group this year, as well: former head Tom McCrocklin left to join Morgan Stanley as executive director of the firm’s government relations team; meanwhile, former director Kristin Eagen left for a Washington position as a director of public policy and government relations at Ally Financial, according to each executive's LinkedIn profile.

During Johns’ tenure, the nonprofit SFIG grew its membership to 350 securitization industry participants including both issuers and investors. It also co-hosted widely attended industry confabs with financial industry conference organizer Information Management Network, including the annual ABS Vegas conference in February that attracted 7,500 attendees after SFIG took over sole planning duties this year.

SFIG revenues grew significantly since 2013, tripling to $7 million by 2016 from its first-year proceeds of $2.3 million, according to the group's latest publicly available 501(c)6 nonprofit filings.

But so did Johns’ compensation package, according to Internal Revenue Service filings. His $235,000 compensation in 2013 nearly doubled in both 2014 ($433,000) and 2015 ($996,000), and rose to $1.26 million in 2016.

According to Debtwire, Johns’ rising salary was a sore point with some board members, who at a board meeting in June introduced agenda items to discuss Johns’ compensation package – along with a succession plan.

SFIG officials and executive committee members declined to comment.

The operating committee taking over Johns’ work includes chief operating officer Covell Adams; head of ABS policy Sairah Burki; head of RMBS and CMBS policy Dan Goodwin; head of investor policy Kristi Leo; and head of government relations Leslie Sack.

In the June 29 email, the board of directors lauded Johns for overseeing “SFIG’s growth and guided the organization’s advocacy, education, and conferences.

“Under his leadership, SFIG’s core mission of supporting a robust and liquid securitization market has become more broadly understood and appreciated in the marketplace,” the letter stated.

In a companion note, Johns expressed his “sincere gratitude” to the 350 SFIG institutional members on “the amazing amount that we have accomplished together,” along with thanks to SFIG staff members who “made this organization, and the entire securitization industry, stronger, smarter and more engaged.”

Before joining the trade group, Johns was managing director and head of global funding and liquidity for Ally Financial.