SEC Acting Chair Michael Piwowar Encourages “Special Study” of Securities Market Reform

A “Special Study” of the securities markets will offer recommendations for financial market regulatory reform. In a speech at the Program in the Law and Economics of Capital Markets at the Columbia University Law and Business Schools, SEC Acting Chair Michael Piwowar called the planned analysis “comprehensive” and “long overdue.”

Columbia University spokespersons disclosed that the Special Study will be conducted in three phases: (i) the commissioning of major papers to provide a “roadmap” for the implementation of the study, (ii) a plan of action for completion of the study, and (iii) the implementation itself, including a comprehensive final report directed at federal financial regulators and the U.S. Congress. The final report has a target completion date of December 2020.

SEC Acting Chair Michael Piwowar applauded the new Special Study, and noted that the 1963 study on which it is based remains “the most comprehensive review of our securities markets that has ever been undertaken.” He urged those who will conduct the new study to approach it with open minds, particularly when identifying entirely new issues and alternatives, and to avoid tethering the project to previous market reform proposals and approaches.

In his remarks, Acting Chair Piwowar questioned the very process of enacting Dodd-Frank:

“[Dodd-Frank] was enacted before any of the official regulatory inquiries into the cause of the financial crisis had been completed. Rather than respond to acute and identifiable causes of concern, Dodd-Frank foisted upon the SEC several special-interest driven mandates that were far outside the scope of our core mission. These overtly politicized obligations have served to distract the SEC from fundamental issues – not the least of which is evaluating how our rules are actually operating.”

He added that the current “pause” in Dodd-Frank-era rulemaking has allowed the SEC to refocus on equity market structure, and that the results of the Special Study will be an “invaluable contribution to potential market structure reforms.”

Lofchie Comment: While the announcement of a study is not necessarily exciting, it is potentially very significant. For the last eight years, the regulation of the securities industry has been, as Chair Piwowar observes, heavily politicized. Interested legislators have taken the view that more regulation is inherently good, and that less regulation is inherently bad, without considering the actual cost or benefits of any particular item of legislation. If the discussion of appropriate regulation can be made less partisan, then the economy will benefit, particularly if a calmer discussion allows for the presentation of a broader range of views.

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