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Regulation and Compliance > Federal Regulation > SEC

Mary Jo White Fears Demise of SEC’s Independence

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Just three days before she’s set to leave the SEC, Chair Mary Jo White suggested that the independence of the agency is threatened.

In a wide-ranging speech before the Economic Club of New York Tuesday, White said the SEC “is more susceptible than ever to the erosion of its expertise and authority by the partisan tides.”

White said the SEC needs to be independent in order “to meet its broad range of critical responsibilities” and further “its critical mission …  to protect investors and preserve U.S. capital markets as fair, orderly and efficient engines of economic growth.”

That independence, in turn, depends on “commissioners equipped and motivated to act expertly and with only our mission in mind” and others, including members of Congress willing “to offer an unwavering defense” of that independence, said White.

But she said recent “trends” are making it harder for the SEC to pursue its mission and “have even raised the question of whether or not the independence of the SEC can be preserved at all.”

The outgoing SEC chair went on to list some of those trends:

For one, “increasingly specific statutory mandates … lots of them,” which frustrate the SEC’s “ability to exercise its expert discretion effectively,” including “highly detailed requirements set forth in the Dodd-Frank and JOBS Acts.”

For another, congressional proposals to “remake the SEC’s rulemaking process.” Without naming the bill, White referred to the SEC Regulatory Accountability Act, H.R. 78, which the House passed last week and which would prohibit the SEC from adopting new rules if “a reasoned determination” of the intended benefits don’t justify the costs.

The bill “would impose conflicting, burdensome and needlessly detailed requirements regarding economic matters in Commission rulemaking that would provide no benefit to investors beyond the exhaustive economic analysis we already undertake” and would prevent the SEC from responding in a timely manner to “market development or risks that could lead to a market crisis,” said White.

She leveled similar criticism of the CHOICE Act, which would exempt banks from abiding by myriad Dodd-Frank regulations in exchange for higher capital requirements and weaken the Consumer Financial Protection Bureau. White warned that the CHOICE Act, which she expects will be reintroduced in Congress, would “similarly undermine SEC rulemaking” and “cripple our enforcement capabilities.” She called on her audience to challenge these efforts that could undermine the SEC’s independence.

White said such trends not only stymie SEC rulemaking efforts but also “tend to increase polarization within the Commission,” making it harder to achieve consensus.

“If the ability and resolve of commissioners to act independently diminishes, so too will the opportunity for solutions that, while politically unpopular, best serve investments and markets,” said White.

In the Q&A that followed her speech, White said that she knows her chosen replacement, Wall Street lawyer Jay Clayton, is “quite impressed by him” and has already “informally” sat down with him.

Her advice to the chair: “Be true to yourself and the SEC’s mission … listen carefully to senior staff … and decide who you’ll be relying on for certain areas.”

Asked about a 2011 report by a New York City bar association committee that Clayton headed at the time that criticized the government’s enforcement of the Foreign Corrupt Practices Act as “causing lasting harm to the competitiveness of U.S. regulated companies and the U.S. capital markets,” White said, “He’ll learn.” She added that the financial and economic landscape has changed since 2011.

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