SEC Commissioner Gallagher Speaks about the SEC's Future Agenda (with Lofchie Comment)

At the 15th Annual A.A. Sommer Jr. Lecture on Corporate, Securities and Financial Law, SEC Commissioner Daniel M. Gallagher spoke about the future of the SEC, stating that it and the U.S. capital markets face an existential threat: "the encroaching imposition of so-called prudential regulation on markets wholly unsuited to that regulatory paradigm." The way that the SEC handles this encroachment, explained Commissioner Gallagher, will determine whether the SEC remains as relevant in the 21st century as it was in the 20th.

Commissioner Gallagher identified two key "guideposts" that will ensure the SEC's continued relevance: (i) the SEC must maintain its focus on basic, everyday regulation, and (ii) the SEC needs to carry out its tripartite mandate in the face of innumerable distractions, especially in the "encroachment of prudential regulators" on the capital markets. Commissioner Gallagher stated that the Dodd-Frank Act and its 100 mandates do not represent the best use of the SEC's time and resources.

Commissioner Gallagher pointed out that sociopolitical issues such as conflict minerals and extractive resources should not be part of the SEC's agenda, stating that these two areas do not contribute to the SEC's mission. Furthermore, Commissioner Gallagher noted that in addition to unnecessarily expanding the purview of the SEC, Dodd-Frank forced the SEC to radically restructure its priorities. He explained, for example, that swaps rulemaking takes up a "wildly disproportionate" amount of the SEC's attention, considering security-based swaps only represent five percent of the swaps market.

Commissioner Gallagher further warned against the dangers that the Financial Stability Board ("FSB") poses to markets, stating that the FSB is an "unaccountable, seemingly ideological, and totally opaque organization that should frighten us all." He explained that "financial stability" is the outcome of the SEC doing its job properly. Ultimately, Commissioner Gallagher stated that the SEC must "affirmatively engage Congress and the Administration and work with them" and become more efficient in its oversight of capital markets.

Lofchie Comment: Regulatory time and energy are limited resources that should not be squandered. Dodd-Frank's diversion of huge amounts of regulators' time and attention, and the more than corresponding time and expenditure of legal and compliance resources by the private sector to "problems" of little significance or relevance is not merely a shame – it is a damaging distraction from issues of genuine urgency and merit. After all these years, the core questions about Dodd-Frank remain: are the solutions to the financial crisis imposed by Dodd-Frank of any actual merit, or, in the case of many of the rules, were they ever relevant to the crisis.