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From Securities Regulation Daily, March 12, 2013

SEC Chair Nominee Vows Action on Dodd-Frank and JOBS Act Rules

By Amanda Maine, J.D.

Mary Jo White, nominated by President Obama to be the next chair of the Securities and Exchange Commission following the departure of Mary Schapiro, assured inquiring senators at her confirmation hearing that, if confirmed, she plans to work tirelessly to lead the SEC in fulfilling its mission of investor protection. White, a former U.S. Attorney for the Southern District of New York who prosecuted the 1993 World Trade Center terrorists and mob boss John Gotti, outlined her priorities should she be confirmed as the new SEC chair to the Senate Banking Committee. White said that her first priority would be to work with her fellow commissioners and SEC staff to finish rulemaking mandated by the Dodd-Frank Act and the JOBS Act. She noted that rulemaking will be informed by "rigorous economic analysis" to identify both benefits and costs associated with any new rules. White also said she intends to prioritize strengthening the SEC's enforcement function, as well as enhancing the SEC's understanding of high-speed, high-tech issues, including high frequency trading, complex trading algorithms, dark pools, and intricate order types.

Senators generally praised and supported White's nomination, noting in particular her reputation as a tough but fair prosecutor during her stint as U.S. Attorney in New York. Senator Chuck Schumer (D-NY), who introduced White to the committee, described her as one of the most well-respected and hardest working lawyers in the country.

Although White was praised by members of the committee, many senators took the opportunity to voice their concern about certain SEC activities and inquire how White would address them as chair of the SEC. Ranking Member Mike Crapo (R-Idaho) and Sen. Pat Toomey (R-Pa) expressed their concerns about the Financial Stability Oversight Council's (FSOC) recommendations for heightened regulation regarding money market mutual funds (MMFs). White acknowledged that while FSOC is a useful forum, MMFs are investment products that are in the SEC's "heartland of expertise" and that she expects the Commission to take the lead on future MMF rulemaking.

Several senators requested that White state her views on what has been characterized as a "too big to jail" attitude at the Department of Justice. Senator Bob Menendez (D-NJ) voiced his concern, driven by constituent letters, about the lack of prosecution of wrongdoers in the financial industry. He requested assurances from White that the size of a financial institution would not be relevant to whether or not the SEC decides to bring charges against it, no matter what the possible negative effects on the economy. Senator Sherrod Brown (D-Ohio) also expressed concern about the SEC taking into account the collateral effects of SEC sanctions on certain parties, such as shareholders and employees of an institution accused of financial misconduct.

White reassured the senators that at the SEC, there is no such thing as "too big to charge," regardless of policies of the agency's counterparts at the Department of Justice. She acknowledged that federal prosecutors do consider collateral effects on other parties, including shareholders, but said that all decisions are made with the public interest in mind. She noted that Senator Brown's concern about penalties being reduced in SEC enforcement actions did not involve whether the parties should be charged in the first place, but that other interests (such as shareholder interests) sometimes come into play when assessing remedies. White stressed that under her watch, the SEC will never hesitate to go after wrongdoers, no matter how large the entity.

Some committee members sought assurances from White that the SEC will follow through on rulemaking mandated under the Dodd-Frank Act and the JOBS Act. Senator Schumer, while giving White effusive praise for her past work, expressed his frustration that the SEC has yet to act on a Dodd-Frank mandate for the SEC to root out conflicts of interest in credit rating agencies. White acknowledged that it is an important issue that she intends to prioritize if she is confirmed as SEC chair.

She also pledged action on the JOBS Act's "Regulation A-plus" provision, which allows relaxed registration and disclosure requirements for IPOs under $50 million, up from the previous offering limit of $5 million. Senator Toomey emphasized that unlike some complex regulations under consideration by the SEC, such as the Volcker rule, expanding the benefits of Regulation A to a larger pool of companies would be very straightforward and should be moved up on the list of priorities. White agreed that the issue should definitely be examined for priority action.

Some senators wanted White to attest that she faces no ethical considerations in assuming the role as chair of the SEC. Senator Brown voiced concern about what he characterized as a "revolving door" from public service to private firm practice and back to public service. He asked for reassurance that the private firm culture which White is exiting both socially and professionally would allow her to perform her duties uncompromised. Committee Chairman Tim Johnson (D-SD) also inquired about possible conflicts of interest regarding both her private sector work and the work of her husband, former SEC Corporation Finance Director John White, who is now in private practice.

White assured the senators that she has been very scrupulous about potential conflict of interest issues. She noted that the Senate has received a letter of compliance from the Senate Ethics Committee clearing her of potential ethical problems regarding her previous work in private practice. She also said that while she will face recusals as SEC chair, they are not out of the ordinary either in scope or in comparison to other commissioners or past SEC chairs. White said that she will be vigilant in managing potential conflicts, and noted that before she took the job for which she has been heavily lauded as U.S. Attorney, she worked in the private sector.


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