SEC pick signals change of pace

Jan 27, 2013 @ 12:01 am

By Mark Schoeff Jr.

As a federal prosecutor, Mary Jo White stared down terrorists and organized-crime bosses.

If she becomes the next head of the SEC, she will turn her sights on securities law violators, as well as a host of issues affecting financial advisers.

The U.S. attorney for the Southern District of New York from 1993 to 2002 was nominated by President Barack Obama on Thursday to become the next Securities and Exchange Commission chairman.

If approved by the Senate, she will replace Elisse Walter, whom the president designated as SEC chairman after Mary Schapiro stepped down Dec. 14. The confirmation process will take a minimum of several weeks and perhaps a couple of months.

Ms. White, 65, who heads the litigation department of Debevoise & Plimpton LLP, a law firm that has counted Morgan Stanley among its clients, represents a change of pace for the SEC. Traditionally, its leader has spent his or her career as a regulator or politician.

For the first time, the SEC would be headed by a litigator.

Ms. White's ascension might slow down a regulatory agenda that already is far behind schedule in implementing nearly 100 mandatory Dodd-Frank regulations and could push even farther back optional Dodd-Frank rules, such as one that would raise investment advice standards for brokers.


Observers agree that she would need time to get up to speed on regulatory issues. But the fact that Ms. White would come to the job as a blank slate may be an advantage for participants in the battle to advance a rule that would establish a uniform fiduciary duty for retail investment advice.

“As far as I can tell, it's completely an open book,” said David Tittsworth, executive director of the Investment Adviser Association. “It gives us and everybody else an opportunity to speak with her and promote our views on that issue.”

Rather than worrying that a potential fiduciary-duty rule would be further delayed — the SEC hasn't moved forward since Dodd-Frank was signed into law in 2010 — Knut Rostad, president of the Institute for the Fiduciary Standard, said that Ms. White might be able to reinvigorate the debate.

“By definition, she comes from a different realm. That, prima facie, suggests she has a fresh perspective on fiduciary duty and the [Investment Adviser Act of 1940],” said Mr. Rostad, referring to the law mandating that advisers must act in the best interests of their clients.

Brokers now must meet a less stringent suitability standard when selling investment products.

The Financial Planning Coalition — comprising the Certified Financial Planner Board of Standards Inc., the Financial Planning Association and the National Association of Personal Financial Advisors — said that Ms. White's background in pursuing corporate crime bodes well for the investor protection part of the SEC's mandate.

“The years of experience Mary Jo White has in prosecuting white-collar criminals is a testament to her commitment to safeguarding in-vestors and the public,” the FPC said in a statement. “The Financial Planning Coalition looks forward to Ms. White's bringing this same level of "consumer-first' commitment to the SEC.”


Unlike former Bank of America Merrill Lynch executive Sallie Krawcheck, who was thought to be in the running for SEC chairman, Ms. White won't be fluent in investment advice regulations if she is confirmed.

“We don't have a clue where she stands on these issues,” said Barbara Roper, director of investor protection at the Consumer Federation of America.

“It's better than bringing in someone who's opposed to our views,” Ms. Roper said.

One investment adviser is happy that Mr. Obama broke from the usual pattern in making his SEC selection, especially since Ms. White doesn't have any experience with the Financial Industry Regulatory Authority Inc., the broker self-regulatory organization. Ms. Schapiro, though a fiduciary-duty backer, was a former Finra chief executive.

“I am encouraged that she is from outside the industry,” said David Mendels, director of planning at Creative Financial Concepts LLC. “On balance, Mary Schapiro did a good job, but I'm always wary of people who come out of Finra or other parts of the broker-dealer industry, for fear that they may have drunk too much of the Kool-Aid.”

It is a safe bet, given her background as a prosecutor and a defense attorney for Wall Street firms, that enforcement issues will be at the top of Ms. White's agenda.

In remarks last Thursday, Mr. Obama signaled that he expects her to protect financial market consumers.

He highlighted Ms. White's successes in taking down the terrorists who plotted the 1993 attack on the World Trade Center and in convicting mafia kingpin John Gotti.

“It's not enough to change the law; we need cops on the beat to enforce the law,” Mr. Obama said at a White House event.

“You don't want to mess with Mary Jo.”

The SEC Division of Enforcement filed 734 enforcement actions in fiscal 2012, one short of a record 735 in fiscal 2011. Last year, the SEC obtained more than $3 billion in penalties and disgorgements for harmed investors, an 11% increase from the previous year.

Ms. Schapiro said that revamping the division under director Robert Khuzami was one of her achievements as chairman.

But critics, including U.S. District Judge Jed Rakoff of New York's Southern District, contend that the SEC has been too lenient in its settlements with big financial firms involved in the 2008 market collapse.

With Mr. Khuzami set to depart the SEC, Ms. White is seen as someone who could further transform the commission's enforcement efforts.

“She won't be reticent about taking on Wall Street, and that's a good thing,” said Duane Thompson, senior policy analyst at Fi360 Inc., a fiduciary-training firm.

The fact that Ms. White also has defended Wall Street firms and executives, such as former BofA chief executive Kenneth D. Lewis, isn't a drawback, according to Mr. Thompson.

“It offers a balanced perspective because she's seen how the law works on both sides,” he said. Twitter: @markschoeff


What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Oct 17


Best Practices Workshop

For the fifth year, InvestmentNews will host the Best Practices Workshop & Awards, bringing together the industry’s top-performing and most influential firms in one room for a full-day. This exclusive workshop and awards program for the... Learn more

Featured video


What does the adviser of the future need in their toolbox?

Advisers continue to embrace all of the new offerings and products the fintech space has to offer. But what else can help them improve their business?

Video Spotlight

Are Your Clients Prepared For Market Downturns?

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

HighTower faces pressure to let investors cash out

After an IPO planned for last year didn't happen, the company could opt to satisfy its backers with a sale.

Envestnet to buy FolioDynamix

The deal, which is expected to close in the first quarter of 2018, will bring the total assets Envestnet works with to almost $2 trillion.

Jerry Schlichter's fee lawsuits have left an indelible mark on the 401(k) industry

After a decade of litigation, fees are lower and retirement plans are more transparent. But have the lawsuits gone too far?

10 best financial adviser jokes

How many financial advisers does it take to screw in a lightbulb?

With margins crashing, broker-dealers look to merge: report

Increased regulation is straining profit margins among broker-dealers, sending many of them into the arms of their bigger brethren.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print