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Academics are poised for a comeback on the SEC after nearly 25 years of dominance by commissioners recruited from law firms and the federal government.
More than half the Securities and Exchange Commission’s 24 members appointed since 1993 left Big Law partnerships, congressional staffs, or other U.S. government and law firm jobs to join the agency, according to a Bloomberg BNA analysis of commissioner backgrounds. The recent nominations of a think-tank scholar and a professor could buck that trend.
Hester Peirce, a senior research fellow at George Mason University’s Mercatus Center, and Robert Jackson, a professor at Columbia Law School, would be the first academics to sit on the commission since 2013, assuming Senate confirmation. Only three commissioners have traded academia for the SEC since the beginning of the Clinton administration.
Peirce, a Republican, was renominated in July after failing to receive a confirmation vote in the last Congress. Jackson was tapped for a Democratic seat in September.
The SEC can benefit from commissioners with different viewpoints and backgrounds, David Tittsworth, a former Investment Adviser Association chief executive, told Bloomberg BNA.
“Ultimately, what all of us want is smart and savvy people of integrity to serve in these positions,” said Tittsworth, now a counsel at Ropes & Gray LLP in Washington.
Although Peirce and Jackson’s academic credentials are fairly unusual for SEC appointees, the nominees’ law degrees place them among the 79 percent of SEC commissioners who completed law school before joining the agency between 1993 and 2017.
Republican Michael Piwowar, an economist by training, is the only non-lawyer on the three-member commission now. Cynthia Glassman, an economist who left the agency in 2006, was the last commissioner without a law degree until Piwowar joined in 2013. Former chairmen William Donaldson and Arthur Levitt and former commissioner Paul Carey round out the five non-lawyer members since 1993.
Current Chairman Jay Clayton, an independent, and Commissioner Kara Stein, a Democrat, are both attorneys but applied their legal skills differently before they arrived at the agency. Clayton was a deal lawyer at Sullivan & Cromwell LLP in New York, while Stein was a senior policy adviser to Sen. Jack Reed (D-R.I.) on securities and banking matters.
“It’s not surprising that the vast majority of commissioners are in fact lawyers given that we are the primary regulator of the federal securities laws,” Piwowar told Bloomberg BNA.
But that doesn’t mean economists and other non-lawyers aren’t valuable members of the commission, he said.
Piwowar said his economics background and research in the field help him at the SEC every day. He was the Republican chief economist for the Senate Banking Committee immediately prior to becoming a commissioner and studied market microstructure as an assistant professor at Iowa State University and as a visiting academic scholar at the agency.
The commissioner said he uses his training to think about how a possible SEC rule might affect the behavior of market participants. He said he also looks at how the agency is going to measure the impact of a potential regulation and what data it will need to make that evaluation.
“As we know, a lot of rules, no matter how well-intended, can have negative consequences,” Piwowar said. “Economists have tools for thinking through a lot of those things.”
Like Piwowar, Peirce and Jackson have spent only part of their careers in academia.
Jackson was a senior adviser at the Treasury Department and an attorney in the executive compensation department of Wachtell, Lipton, Rosen & Katz before joining Columbia’s faculty in 2010.
Peirce worked for Sen. Richard Shelby (R-Ala.) on the Senate Banking Committee and was a staff attorney at the SEC and a counsel to former Commissioner Paul Atkins before moving to Mercatus in 2012. She also was an associate at Wilmer Cutler Pickering Hale and Dorr.
At Mercatus, Peirce earned about $247,000 from January 2016 to mid-2017, according to a 10-page financial disclosure filing submitted to the U.S. Office of Government Ethics. The ethics watchdog has yet to release the same paperwork for Jackson.
Clayton, who turned in a 47-page financial disclosure report, reported making $7.62 million at Sullivan & Cromwell from January 2016 to early 2017. His filing also listed more than 40 clients he represented at the firm, posing possible conflicts that may require recusals.
Peirce doesn’t have any clients in her paperwork, potentially easing ethics concerns about the so-called revolving door between the federal government and the private sector.
Jeff Hauser, executive director of the Center for Economic and Policy Research’s Revolving Door Project, which promotes government transparency and accountability, told Bloomberg BNA the SEC should be independent of the entities it regulates, making academics a good choice.
“I think academia is the logical place to go” to avoid revolving-door worries, he said.
The White House didn’t detail its reasons for selecting Peirce and Jackson.
The two academics, however, probably weren’t nominated as part of a plan to avoid potential conflicts of interest at the commission or to make it more scholarly, Tittsworth said. The same goes for George Washington University Law School professor Lisa Fairfax, a Democrat, who was nominated with Peirce in the last Congress and never received a confirmation vote, he said.
“I don’t think people on Capitol Hill are sitting down and saying, ‘We need more academics this time around,’ ” Tittsworth said.
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