SEC Commissioner Piwowar delivered remarks to the U.S. Chamber of Commerce, focusing on a broad range of topics, particularly: (i) priorities for the SEC and (ii) the intrusion of other political interests into the mission of the SEC and (iii) the relationship between the SEC and other regulators, particularly FSOC.
Priorities for the SEC:
Commissioner Piwowar described five areas that should be the focus of the SEC’s efforts to advance its core mission:
- engage in a comprehensive multi-year review of equity market structure which would consider the effects of high-frequency and algorithmic trading on market structure;
- create a pilot program for alternative minimum tick sizes for small capitalization companies;
- make incremental fixed-income market structure changes “for the benefit of investors and issuers,” and develop proposals to improve how fixed-income markets operate, including improved price transparency and disclosure of mark ups on fixed income transactions;
- continue to move forward with initiatives to curb the “unhealthy over-reliance” on proxy advisory firm recommendations, which Piwowar believes “shifts fiduciary duty from the advisers to the proxy advisory firms;” and
- comply with the Executive Order signed by the President in 2012 to conduct ongoing retrospective analyses of existing rules in order “to determine whether any such regulations should be modified, streamlined, expanded, or repealed.”
Other Topics of the Discussion
Commissioner Piwowar did not specify particular rules that the Commissioner viewed as inconsistent with the SEC’s focus on disclosure for the benefit of investors (but it may be reasonably assumed that he was referring to the requirement that the SEC adopt rules on compensation ratios and perhaps also to the rules relating to conflict minerals).
Additionally, the Commissioner worried that the SEC’s authority within its regulatory space was being threatened by other regulators, particularly the Financial Stability Oversight Council, which he described as an organization that “represents an existential threat to the SEC and the other member agencies.” In particular, he singled out for criticism a “study” (his quotes) that FSOC had prepared on the asset management industry.
Lastly, Commissioner Piwowar turned to the issue of money market regulation and mentioned very briefly some of the alternatives being considered by the SEC.
Lofchie Comment: Commissioner Piwowar becomes the second of the SEC Commissioners to severely criticize FSOC. See also Commissioner Gallagher’s remarks on FSOC. One of the primary assertions made by Commissioner Piwowar is that financial regulation has become too much a tool for political ends and that FSOC is far too partisan since its’ constituent organizational representation does not reflect appropriate participation by representatives of the minority party. Politics and partisanship portend a bleak future for financial regulation – one in which financial regulation is motivated by electoral rather than economic considerations.