Cummings Presses SEC for More Details on Waivers to Big Banks

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By Rob Tricchinelli

Sept. 16 — Rep. Elijah Cummings (D-Md.) wants more details on the waivers granted by the Securities and Exchange Commission to five large banks in May, which allowed them to avoid automatic disqualifications under federal securities laws despite pleading guilty to felony charges of currency manipulation.

The SEC granted waivers to Citigroup Inc., JPMorgan Chase & Co., Barclays Plc, UBS AG and the Royal Bank of Scotland Plc.

In a Sept. 16 letter, Cummings asked SEC Chairman Mary Jo White a lengthy list of questions about the waiver-granting process, including how the agency accounted for prior wrongdoing by the banks. He gave the agency until Oct. 14 to respond.

“These waivers are of particular concern given the fact that all five banks have a history of receiving fines and penalties for prior criminal and civil misconduct,” Cummings, the ranking Democrat on the House Oversight Committee, wrote.

Waivers

The five banks were given waivers from an automatic disqualification that would have stripped them of their “well-known seasoned issuer” status, which allows issuers to use shelf registrations on their offerings rather than seek more exacting approval from the SEC.

Barclays and USB were further given waivers related to their use of a Rule 506 exemption under Regulation D of the 1933 Securities Act, which allows companies to raise unlimited amounts of money by selling unregistered securities to a limited pool of investors.

Cummings's letter said that since 2008, at least 30 waivers have been given to the five banks by the SEC.

“Permitting repeat offenders to continue business as usual poses a severe risk to investors and the American economy,” Cummings said. “It undermines the public's confidence in the ability and willingness of regulators to protect against illegal, improper, and abusive contact.”

Stein

The waiver issue has divided the commission, with Commissioners Kara Stein and Luis Aguilar dissenting several times from granting them in enforcement actions.

Commissioner Michael Piwowar also dissented from granting a waiver to Citigroup related to an August settlement on charges that the bank lied in soliciting bond investors. 

Stein has been the most vocal critic of the waiver policy. When waivers were granted to these five banks, Stein said the waiver policy “has effectively rendered criminal convictions of financial institutions largely symbolic.”

“Allowing these institutions to continue business as usual, after multiple and serious regulatory and criminal violations, poses risks to investors and the American public that are being ignored,” she added.

Cummings asked how the waivers might be rescinded, whether they would affect the granting of future waivers and what public disclosures are involved, among other questions. 

To contact the reporter on this story: Rob Tricchinelli in Washington at rtricchinelli@bna.com

To contact the editor responsible for this story: Susan Jenkins at mailto:%20sjenkins@bna.com

For Cummings's letter, visit http://democrats.oversight.house.gov/sites/democrats.oversight.house.gov/files/documents/2015-09-16%20EEC%20to%20SEC_0.pdf