SEC's Waivers Should Have Conditions To Bolster Deterrent Effect, Stein Says

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By Rob Tricchinelli

May 6 — The Securities and Exchange Commission should more frequently apply conditions to waivers from automatic disqualifications that would apply to large firms that commit wrongdoing, Commissioner Kara Stein said May 6.

Conditional waivers “might have actually more deterrent value at the end of the day than a large penalty,” Stein said during a panel discussion at an Institute for New Economic Thinking seminar in Washington. “A large penalty sometimes for a large firm is sort of a speed bump.”

Waivers have divided the commission. Stein and Commissioner Luis Aguilar have dissented from granting them, while Commissioner Daniel Gallagher said that waivers aren't an enforcement tool.

Chairman Mary Jo White said in March that the waivers are separate from enforcement and shouldn't become “an unjustified mechanism for deterring misconduct”.

Bank of America

In a November settlement with the SEC over allegedly selling mortgage securities without properly disclosing risks, for example, Bank of America received a waiver from an automatic bar provided it brought on an independent consultant and took other steps to prevent future misconduct.

At that time, Stein called the conditional waiver a “breakthrough.”

“We should look at each waiver individually. It should be based on the facts at hand,” she said May 6. “It should not be seen as an automatic waiver. It’s an automatic disqualification and you have to show good cause for the commission granting your waiver.”

Stein also objected May 4 to a “well-known seasoned issuer” waiver for Deutsche Bank AG following the bank's conviction for London Interbank Offered Rate manipulation.

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To contact the editor responsible for this story: Phyllis Diamond at

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