SEC Chair and Commissioners Discuss SEC Priorities (with Lofchie Comment)

SEC Chair Mary Jo White and Commissioners Luis Aguilar, Kara Stein, and Daniel Gallagher spoke about SEC priorities for 2015.

Chair White stated that enhancing market structure will be a key focus at the SEC for 2015. She reported that the staff is currently developing recommendations to: (i) enhance the transparency of alternative trading system operations, (ii) expand investor understanding of broker routing decisions, (iii) address the regulatory status of active proprietary traders, and (iv) mitigate market stability concerns through a targeted anti-disruptive trading rule. Another priority Chair White mentioned is to focus on the activities of asset managers; in particular, enhancing data reporting, identifying and managing risks related to diverse portfolio composition, and planning for the impact of market stress events or when an adviser is unable to serve its clients. Finally, Chair White stated that the SEC will focus on implementing Regulation A+ and crowdfunding rules in order to enhance capital formation for smaller issuers.

SEC Commissioner Aguilar stated that one area where he would like to see more "action" is in derivatives rulemaking, explaining that the "significance of this market to the overall capital markets cannot be overstated." While he agreed with Chair White about making progress on Regulation A+ and crowdfunding issues, he argued that amending Regulation D is a more important priority in order to mitigate risks posted to investors involved in general solicitations. Commissioner Aguilar also stated his goal is to bring more enforcement cases, stating that the SEC needs to "be more aggressive" in seeking permanent industry bars as well as officer and director bars. Lastly, Commissioner Aguilar encouraged the SEC to improve its diversity, stating that in his position as Chair of the new Diversity Council he will improve hiring, retention, and promotion of a diverse group of SEC employees.

SEC Commissioner Stein focused her remarks on the impact technology has had on the securities market, bringing both new challenges and opportunities to be taken advantage of by regulators. She said that the SEC should explore ways to better utilize technology that allow data to be more easily provided by companies and analyzed more readily by investors. She also discussed automatic statutory disqualifications or "bad actor bars," clarifying that "bad actor bars, including partial bars or conditional waivers, are not intended to be used as 'punishment.'" She argued that the bars are designed to deter and prevent recidivism and restore trust in the markets.

In his remarks, SEC Commissioner Gallagher criticized the Department of Labor's reproposed Fiduciary Rule (the "Rule"). He explained while reports indicate the Rule will be re-proposed soon, the Department of Labor has not formally consulted the SEC. He noted that it is "curious" to not have formally engaged the Commissioners about the Rule, since it would overlap with the SEC's "comprehensive oversight authority with respect to the investment advisers and broker-dealers who would be impacted by it." Moreover, he called the White House memo, which outlined what will be included in the Rule, "thinly-veiled propaganda designed to generate support for a widely unpopular rulemaking."

Lofchie Comment: It is interesting that Chair White's priorities do not include derivatives regulation. Instead, her focus is on regulation of investment advisers, and particularly planning for the effect of market stress events on investment advisers. Given that advisers act as agents and not as principals, it is not clear why such events should be of primary concern; advisers did not stop operating during the past financial crisis.Commissioner Gallagher's remarks about the White House memo on fiduciary duty also resound; it is not clear why the White House would release a memo on this subject, which is so clearly within the domain of the Department of Labor and the SEC.

See: SEC Chair White's Remarks; Commissioner Aguilar's Remarks; Commissioner Stein's Remarks; Commissioner Gallagher's Remarks.