Chamber of Commerce Says SEC Revamps Will Create More Efficient Markets

Jason Rosenstock, an associate in the government affairs practice at international law firm Paul Hastings in Washington, says that by issuing its report, the Chamber of Commerce "is trying to encourage the SEC to administratively make some improvements to stave off what the Chamber likely views as burdensome regulatory changes that Congress would put in place instead."

Indeed, Michael Rosella, chairman of the Investment Management Practice at Paul Hastings in Washington, says given there are "macro changes" to the SEC that are being considered by Congress under financial services reform, the Chamber's study suggests more "micro, day-to-day changes" that the agency should make.

For instance, when it comes to exemptive orders–which are exemptions from statutory requirements that are granted by the Division of Investment Management–"where there are routine applications granted to these sectors of the investment management business, there is a screaming opportunity to do this on a more efficient basis," Rosella says. The best way to do so, he argues, "is not to make the application process more efficient but to codify into regulation the core of what these standard exemptive relief applications have granted." The codification process, he continues, "is a very efficient way for the SEC to say, 'Look, you don't have to get relief [to launch] an ETF if you do the following six things and in the following ways.' That's very efficient. To say you're going to speed up the application process and not codify it, that's fine, too, but you still have to have some person at the SEC, as opposed to the private sector, review the application and make sure the facts haven't been changed and the results are appropriate."

Rosella warns, too, that the asset management industry should take note that SEC examiners, post the Bernie Madoff Ponzi scheme, are being sticklers for detail. "Frankly, we're seeing it already, the level of minutiae and questions raised in the [examination] process gets puffed up because [SEC examiners] don't want to be seen as leaving any stone unturned. Now, that could be good if you're finding bad things, but sometimes you find that a lot of that is not the case."