Briefing: SEC bears the brunt of Finreg
The financial reform bill that President Obama is slated to sign into law tomorrow will affect no agency more than the SEC. The agency is required to issue 95 new rules and complete 17 new studies. That's the most of any federal organization, followed by the Commodity Futures Trading Commission and the new systemic risk council.
It's a lot of work for the agency, but also a testament to the work SEC Chairman Mary Schapiro and her team have done to reverse public perceptions of the regulator. Not long ago, there was talk about shutting the SEC down.
In scheduled testimony today before the House Financial Services Committee, Schapiro says the agency is planning to hire 800 new employees to help do all that work. And she has high praise for the bill:
Dodd-Frank in my view closes a number of regulatory gaps, gives the SEC important tools to better protect investors (including, for example, nationwide service of process in civil actions, a clarification on the scienter standard for Exchange Act aiding and abetting actions, and authority to order penalties in cease-and-desist proceedings), and adds or expands several areas of responsibility, including over-the- counter derivatives, credit rating agencies and private funds.
But she says doing all of this will require Herculean efforts.
The importance and complexity of the rules coupled both with their timing and high volume and the rulewriting agenda currently pending will make the upcoming rulewriting process both logistically challenging and extremely labor intensive.
The law firm Davis Polk has done an amazing summary of the Finreg bill that sheds a lot of light on how it affects the SEC. Here are some key points:
- The SEC will be a member of the new systemic risk council.
- The SEC will have oversight of derivatives linked to stocks and bonds.
- The SEC will oversee hedge funds and private equity funds.
- The SEC will study whether it must impose a new duty on brokerage companies to only sell products in their customers' best interests.
- The SEC will have to compensate whistleblowers who provide original and compelling information.
- The SEC will work with banking agencies to ensure that financial firms that pool assets and sell them to the secondary market hold on to 5 percent of whatever they sell.
- The SEC will ensure that shareholders can vote to nominate and elect directors of corporate boards and to offer a nonbinding view of executive compensation.
July 20, 2010; 8:30 AM ET
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