White’s oversight views sought at key hearing
Other topics are expected to be funding for exams, standards
When Mary Jo White appears before the Senate Banking Committee on March 12 for her confirmation hearing, some lawmakers will press her about her work as a high-profile defense lawyer for Wall Street’s biggest firms and players.
But state securities regulators and others want committee members to help them uncover her views on Securities and Exchange Commission oversight of advisers.
Ever since a 2011 SEC study revealed that the commission has the resources to examine only about 8% of registered investment advisers a year, a debate has centered on whether Congress should allow the SEC to assess user fees on advisers to fund exams or authorize a self-regulatory organization for advisers.
USER FEES
“For us, the most important question we would pose to Mary Jo is, where does she stand on funding for the [SEC] Office of Compliance Inspections and Examinations?” Heath Abshure, Arkansas’ securities commissioner and president of the North American Securities Administrators Association Inc., said last week.
“Where is Mary Jo going to stand on funding for exams of investment advisers? Is she going to support the idea of user fees or is she going to support an SRO?” Mr. Abshure asked.
NASAA and financial advisers in general back the user fee approach.
Legislation that would have authorized user fees and an SRO measure died in Congress last year. Neither has been reintroduced in the new Congress that was seated in January.
Another adviser controversy Ms. White will step into involves a potential rule that would raise investment advice standards for brokers and possibly harmonize rules governing advisers and brokers. The Dodd-Frank financial reform law gave the SEC authority to promulgate such a rule, but the commission hasn’t decided whether to propose one.
“Questioning should get at what her view is of investor protection in the broader sense, and then narrow it down going from there,” said Knut Rostad, president of the Institute for the Fiduciary Standard.
He is hopeful that Ms. White will prove to be a champion for a uniform-fiduciary-duty regulation.
If confirmed, Ms. White will have to tackle these topics — as well as deal with the SEC’s expanded jurisdiction, limited budget and the pressure of fulfilling scores of Dodd-Frank mandates — at a time when the SEC is more divided politically than ever, according to observers.
“Mary Jo is bright, talented and creative,” said former SEC Chairman Harvey L. Pitt. “If anyone can solve these issues, she can.”
Mr. Pitt, chief executive of Kalorama Partners LLC and SEC chairman from 2001 to 2003, said that he hopes Ms. White’s qualifications will trump any worries about potential conflicts of interest.
“Senators have to perform their oversight function, but the country, in my view, is incredibly lucky when it gets somebody as experienced, as effective, as ethical as a Mary Jo White to agree to government service,” he said on the sidelines of an Investment Adviser Association conference last week.
She was nominated in January by President Barack Obama to serve as the next SEC chairman and would replace Elisse B. Walter, whom he designated chairman when Mary Schapiro resigned in December.
If the banking panel approves Ms. White’s nomination, it will go to the Senate floor for a final vote.
PROSECUTION BACKGROUND
As the U.S. attorney for the Southern District of New York from 1993 to 2002, she led the effort to prosecute terrorists, a mafia kingpin and high-profile white-collar cases.
After leaving that position, she became chairwoman of the litigation department of Debevoise & Plimpton LLC, where she represented leading Wall Street firms.
“It’s not a disqualifying factor, but there needs to be some discussion of that,” said Kurt Schacht, managing director of the CFA Institute.
The more important point is that Ms. White is well-versed in how to put corporate criminals in jail and how they defend themselves, he said.
Ms. White’s ascension to the chairmanship would mark a first. Traditionally, the commission’s chief has spent his or her career as a regulator or politician.
If confirmed by the Senate, Ms. White will start the job as a prosecutor fluent in cracking down on financial market malfeasance.
Clues about how she might address the regulatory side of the job may emerge at the hearing. Her background is virtually a clean slate on those issues.
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