New SEC members have different styles

It took Michael Piwowar only 34 days to make his presence felt at the Securities and Exchange Commission.

Sworn in as a new member of the SEC on Aug. 15, he didn’t waste any time at his first open meeting last month, making it known that he was upset with the process for considering a municipal-adviser rule.

Mr. Piwowar said that he wasn’t given sufficient time to review the more than 800-page proposal.

He supported the rule but was frustrated at the pace of the SEC’s deliberations. In his first five weeks, Mr. Piwowar also had to vote on a 500-page credit risk retention rule.

In an unusual move for an SEC meeting, he went after SEC Chairman Mary Jo White, who he said denied his repeated requests for additional time to digest the details.

“Chair White, I hope we can work together in the future to find ways to satisfy your personal desire to get stuff done and our shared obligation to get stuff done right,” Mr. Piwowar said.

Mr. Piwowar’s truculence surprised observers who had expected that his arrival, and that of another new commissioner, Kara Stein, sworn in Aug. 9, would bring together a previously divided SEC.

“His initial statement suggested that might not be the case,” said Barbara Roper, director of investor protection at the Consumer Federation of America, who met Mr. Piwowar when he was a congressional aide. “I found him to be bright, reasonable [and] quite approachable. I was expecting him to be far less sort of rigidly ideological — and that was not the message he was sending with his first statement. He wanted to make a splash.”

Mr. Piwowar, a Republican, and Ms. Stein, a Democrat, came to the SEC from Capitol Hill, where they worked as aides for their respective political parties on the Senate Banking Committee — and with bipartisan comity.

A former colleague of Mr. Piwowar’s said that experience will help him at the SEC.

“He’s a tremendous consensus builder,” said Craig McCann, president of Securities Litigation & Consulting Group Inc. “He’s someone who will be able to work with all four of the other commissioners.”

STEIN’S STYLE DIFFERS
In her initial statements, Ms. Stein was low-key. She voted for the municipal-adviser rule despite voicing disappointment that it lacked a self-certification provision. She backed proposing the pay ratio rule but stressed that “additional data, alternative approaches and viewpoints” are needed.

Ms. Stein, 49, earned her undergraduate and law degrees from Yale. Among her positions prior to spending 14 years as a congressional aide, Ms. Stein was a lawyer with Wilmer Cutler Pickering Hale & Dorr and an assistant professor at the University of Dayton School of Law.

Mr. Piwowar, 45, earned an undergraduate degree in foreign service and international politics, a doctorate degree in finance from Pennsylvania State University and a master’s in business administration from Georgetown University. In addition to working previously on the SEC staff and on Capitol Hill, he served as a senior economist on the White House Council of Economic Advisers. His one-year appointment on the council spanned the George W. Bush and Barack Obama administrations.

At the same September meeting, Mr. Piwowar blasted another rule the SEC proposed.

The regulation would require public companies to disclose the ratio between their chief executive’s salary and their employees’ median wage.

“I object to the commission even considering it,” Mr. Piwowar said. “Shame on us for putting special interests ahead of investors.”

His sharp edge at the September meeting is a sign that he takes his job seriously, said Mr. McCann, who hired Mr. Piwowar at his firm after Mr. Piwowar had served on the SEC staff as an economist.

Scott Kimpel, a partner at Hunton & Williams, said Ms. White is putting an emphasis on listening to the other commissioners and building good relationships at the agency.

“I don’t think that people should extrapolate from that incident that the commission will be dysfunctional,” said Mr. Kimpel, a former counsel to Troy Paredes, the SEC commissioner Mr. Piwowar replaced.

Mr. Piwowar’s statement may signal that the SEC will be more transparent in its deliberations.

“I don’t know if that’s because of Chairman White or because of Mike,” Mr. Kimpel said. “It’s good to have some open, honest debate.”

CLASHES NOT CATACLYSMIC
It’s not critical that Ms. White and Mr. Piwowar get along. He can’t unilaterally block the agency’s agenda. Three of its five members must approve rules. Squabbling, however, is bad for public perception of the commission and could make its rules vulnerable to being overturned in federal court.

“If you’re constantly pushing through split votes, particularly if they’re along party lines, it sends the message that partisan politics dominates, when generally, that’s not true,” Mr. Kimpel said. “The courts have taken note of statements by dissenting commissioners on recent controversial rules and cited them in their own opinions about why the underlying rule was faulty.”

Analysts said it is too early to tell what stances Ms. Stein and Mr. Piwowar will take on issues. Ms. Stein declined to be interviewed. Mr. Piwowar did not respond to an interview request.

Some clues can be found in their previous jobs, however. Mr. Piwowar was the chief Republican economist on the Senate Banking Committee.

He will bring to the SEC the same focus on cost-benefit analysis that GOP lawmakers and previous Republican commissioners — Mr. Paredes and Kathleen Casey — have demonstrated. Critics contend that sometimes an emphasis on cost-benefit analysis is intended to slow regulation.

Mr. Paredes and Ms. Casey dissented on a 2011 SEC report on raising investment advice standards for brokers; they said it failed to address potential economic impact.

“[Mr. Piwowar] was passionate about doing high-quality economic analysis when I was working with him,” said Stewart Mayhew, a principal at Cornerstone Research and a former SEC deputy chief economist. “I would not be surprised if Commissioner Piwowar has a similar view [to Mr. Paredes and Ms. Casey] with respect to economic evidence.”

FIDUCIARY DUTY

Mr. Piwowar arrives at the commission just as it is undertaking a cost-benefit study of a potential uniform fiduciary standard for retail investment advice. The Dodd-Frank Act authorizes the SEC to propose a rule. The agency will use the study to help determine whether to proceed.

He’ll delve carefully into the results, predicts Hester Peirce, a senior research fellow at the Mercatus Center at George Mason University.

“He’s someone, like most economists, who wants to see what the data say,” Ms. Peirce said. “One of the things he’ll be interested in knowing is what the effect of the change will be on different investors. [For instance], access [to advice] depends on where you live.”

Mr. McCann does not know where Mr. Piwowar comes down on fiduciary duty, but he said Mr. Piwowar is not inclined to tell the market how to behave.

“He will be against new conduct rules but in favor of disclosure that gives more transparency to in-vestors,” Mr. McCann said.

Ms. Stein was the staff director of the Senate Banking Subcommittee on Securities, Insurance and Investment when Sen. Jack Reed, D-R.I., was chairman of the panel. Mr. Reed is a strong proponent of investor protection and a champion for increased SEC funding.

Observers anticipate that Ms. Stein has similar views.

“It’s more likely she’s a supporter of a fiduciary standard that doesn’t distinguish between the type of customer or the advice relationship,” Mr. Kimpel said.

She’s organized her staff in a unique way, according to Mr. Kimpel. She divided it into counsels for investor protection, capital formation and market efficiency — the three pillars of the SEC’s mission — rather than centering it on the various SEC divisions.

“She’s looking at it differently than someone who’s a classic SEC insider,” Mr. Kimpel said. “It suggests she is bringing a fresh perspective.”

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