By Yin Wilczek
Securities and Exchange Commission Chairman Elisse Walter Jan. 18 said that first on the agency's rulemaking agenda is issuance of a proposal on how it will regulate cross-border derivatives trades and foreign entities engaged in U.S. swap transactions.
The proposal is “the critical lynchpin” and the “most important thing that we need to do as a prelude to adopting” the commission's substantive security-based swap rules, Walter said at a SEC Investor Advisory Committee meeting, in her first public appearance as commission chair.
“My view is, and my fellow commissioners agree, that we have certain big things we must do, that being one of them,” Walter continued. “The rest of our agenda will be set by trying to figure out what we can marry and get done at the same time. We're going to be very pragmatic about it.”
Walter told the Investor Advisory Committee that she could not provide much detail on the SEC's rulemaking agenda, given that she and her colleagues still are discussing what should be the agency's priorities and timetable. “I will say though I am confident that completing the remaining rulemakings and other projects mandated by” Dodd-Frank and the Jumpstart Our Business Startups Act “will be at the top of the list,” she said.
After the departure of former chairman Mary Schapiro in December (227 SLD, 11/27/12), commentators had suggested that the agency would be deadlocked, with a membership of two Democrats--Walter and Luis Aguilar--and two Republicans--Troy Paredes and Gallagher. The partisan divide was particularly problematic during the last year of Schapiro's leadership.
However, Walter downplayed the concerns, telling the committee that she and her “fellow commissioners, as well as commission staff, are eager to find common ground and move forward in a practical and effective manner.”
Investor groups, including the Consumer Federation of America, have voiced concerns over the proposal's lack of investor protections and threatened to sue should it be adopted (195 SLD, 10/10/12). Barbara Roper, CFA's director of Investor Protection and a member of the Investor Advisory Committee, was named in a recent letter by Rep. Patrick McHenry (R-N.C.) as being a factor in Schapiro's refusal at the time to expedite the rulemaking (232 SLD, 12/4/12).
The Investor Advisory Committee, for its part, recommended in October that the SEC include new protections in the proposal, including requiring issuers to file a new Form GS for their generally-solicited private offerings (198 SLD, 10/15/12).
Aguilar, also present at the meeting, observed that Dodd-Frank Section 911--the provision authorizing the establishment of the investor committee--requires the SEC to “promptly” respond to the committee's recommendations and to disclose the actions, if any, it plans to take on the recommendations. “To that end, I do look forward to the commission issuing the required response assessing” the committee's recommendations, he said. “I understand the rulemaking is ongoing, but our obligations under Dodd-Frank are quite clear, and I think it's important quite frankly that we issue an assessment before we finalize the rule so that people can have a chance to react to that.”
Aguilar was the sole commissioner who voted against the general solicitation proposal. He told reporters last month that it should be reproposed to incorporate investor safeguards.
The SEC staff, after conducting a study mandated by Dodd-Frank (16 SLD, 1/25/11), recommended in early 2011 that the SEC pursue the rule.
Gallagher, however, suggested in his Jan. 16 Chamber appearance that at this point, he is not sure if the rulemaking is warranted.
Walter also said the SEC “is going to move forward” on a Dodd-Frank requirement that companies disclose the ratio comparing their chief executive officer's pay to the median annual pay of their employees. “It is a mandate of Congress,” she said, adding that although the Dodd-Frank provision is too prescriptive to allow the SEC much wiggle room, the commission wants to ensure its rule is “workable and practical.”
Moreover, the SEC should strive to fill in gaps in its data, either through the forthcoming consolidated audit trail or through hiring more expertise, Walter continued. Finally, she said the commission should use technology to ensure retail investors receive the necessary disclosures.
By Yin Wilczek
The text of Aguilar's formal remarks is available at http://www.sec.gov/news/speech/2013/spch011813laa.htm.
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