Two men share securities regulation news

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

From Securities Regulation Daily, October 4, 2013

White Urges Courts and Congress to respect SEC’s independence and expertise

By Jacquelyn Lumb

SEC Chair Mary Jo White talked about the importance of independence last evening at the annual A.A. Sommer, Jr. Corporate Securities and Financial Law Lecture at Fordham Law School. White responded to a New York Times article that said the SEC and other independent agencies have become less independent and less powerful since the President now allows senior senators to select appointments for commissioner. In White’s view, political appointees, regardless of who has chosen them, become independent actors who are duty-bound to uphold the Constitution, the laws of the U.S. and the mission of their agencies. Once appointed, politics are to be left at the door, she said.

White cited a number of examples over the past decades in which SEC chairs have stood their ground in the face of political and industry pressure. She said the independence of the SEC should not only be defended by those from within, but also should be respected by the industry, other agencies, Congress and the courts. The agency’s expertise should be respected by those who seek changes in social policy or who seek political change through the SEC’s powers of mandatory disclosure, she added.

Information overload. White agrees with those who have raised concerns about information overload. She said the SEC needs to exercise its independent judgment and expertise when deciding whether and how to impose new disclosure requirements.

White referred to instances where Congress has directed the SEC, or the SEC has been asked by interest groups, to issue rules requiring disclosure that does not fit within the SEC’s core mission. She noted that some of the more recent disclosure directives from Congress have been quite prescriptive and have not allowed the SEC to exercise its independent expertise and judgment in deciding whether to require the specified mandated disclosures.

The Dodd-Frank Act, for example, required the SEC to adopt mandatory disclosure with respect to issues that appeared to be aimed at pressuring companies to change their behavior rather than to disclose financial information that helps inform investment decisions. White said the goals of the mandates were laudable, but she questions, as a policy matter, the use the federal securities laws and the SEC’s powers of mandatory disclosure to accomplish those goals.

Congress. White also recognizes that when Congress and the President enact a statute that mandates such a rule, the SEC has no right to refuse it. The SEC cannot ignore a Congressional mandate on the basis that it does not comport with the SEC’s mission as the SEC sees it. The SEC has to write the rule to comport with its view of its mission and try to mitigate the costs, while carrying out Congress’ mandate. In White’s view, the SEC should be proactive in urging that Congress respect the SEC’s disclosure authority in furthering its vital mission to the capital markets and investors.

The courts. White also urged the courts to defer to the SEC’s independence and expertise. Under the law, the courts are expected to defer to an agency’s interpretation of a law if a statute is silent or ambiguous on a particular point. In reviewing an agency’s rulemaking, White said the courts should defer to the agency’s reasoned judgments, particularly within the areas of the agency’s expertise. These issues come up more frequently than she would like in the SEC’s rulemaking, she advised.

These issues also come up in connection with enforcement settlements. White mentioned the SEC’s new protocol requiring, in certain cases, admissions from defendants in connection with a settlement agreement. Admissions may be called for in cases that involve particularly egregious conduct or widespread harm to investors, she said. This allows the SEC to send a strong message of deterrence.

However, the use of the no admit/no deny paradigm is a discretionary enforcement and charging judgment, according to White. The SEC must use its experience and know-how in deciding when an added degree of accountability is in the public’s best interest.

White recognizes that courts can review a settlement, but the review of a consent judgment has a narrow focus—to make sure that the settlement is not ambiguous, that it does not affirmatively harm third parties and that it does not impose an undue burden on the court’s resources. The core decision about whether to seek an admission is for the SEC to make, based on its best, independent judgment of what should be required, she said.

MainStory: TopStory SECNewsSpeeches DoddFrankAct Enforcement

Securities Regulation Daily

Introducing Wolters Kluwer Securities Regulation Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.

A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.