SEC nominees back ending 'no admit no deny' settlements

Would-be commissioners say White's approach makes sense

Jun 27, 2013 @ 3:08 pm

By Mark Schoeff Jr.

Two Securities and Exchange Commission hopefuls told lawmakers today that they support ending enforcement settlements that allow targets to avoid admitting or denying the charges.

In a Senate Banking Committee hearing on their nominations, Kara Stein and Michael Piwowar said the SEC should be more flexible in its settlement model. Currently, the SEC allows parties to settle without admitting to the charges — a practice that has drawn criticism from judges as well as investor advocates.

SEC Chairman Mary Jo White recently announced a push to change SEC policy and force financial firms to acknowledge guilt in some instances, saying that in cases in which investors were substantially harmed, the SEC would require “public accountability.”

“The SEC should use all of the tools it has at its disposal,” Ms. Stein said today in response to a question from Sen. Elizabeth Warren, D-Mass. “Nothing should be on autopilot.”

Mr. Piwowar emphasized that each enforcement action may require a different approach.

“In some cases, they're appropriate,” Mr. Piwowar said of guilt admissions. “In some cases, they're not. They have to be dealt with on a case-by-case basis.”

Ms. Stein and Mr. Piwowar were intimately familiar with their surroundings. Ms. Stein is an aide to Sen. Jack Reed, D-R.I., and has worked on the Senate Banking Committee for 15 years. She was staff director for the Subcommittee on Securities, Insurance and Investments when Mr. Reed chaired that panel, which deals with policies affecting investment advisers and brokers. Mr. Piwowar is the Republican chief economist on the Senate Banking Committee. He also has served as a visiting scholar and financial economist at the SEC.

Sen. Mike Crapo, R-Idaho, ranking member of the committee, said that Mr. Piwowar “appreciates the value of economic analysis in SEC rule making.”

Mr. Crapo and other Republicans have been pushing the SEC to conduct robust economic-impact studies before proposing regulations, including a potential rule that would establish a uniform fiduciary duty for retail investment advice.

The nominees' Capitol Hill experience should help ensure their Senate confirmation. The committee is expected to vote as early as next month. If approved, they would then head to the Senate floor for a vote by the full chamber.

Ms. Stein would replace Democratic SEC Commissioner Elisse Walter, while Mr. Piwowar would replace Republican commissioner Troy Paredes.

The two SEC candidates were among five nominees for administration positions who appeared before the committee.

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