SEC's Mary Jo White says agency won't rush rulemakings across finish line before Trump presidency

But chief regulator will continue to carry out current agenda until she steps down when Obama leaves office

Nov 15, 2016 @ 2:07 pm

By Mark Schoeff Jr.

Securities and Exchange Commission Chairwoman Mary Jo White told lawmakers Tuesday that the agency would not rush regulations over the finish line before President-elect Donald Trump is inaugurated in January.

During a nearly three-hour House Financial Services Committee hearing, several members of the panel warned Ms. White not to do “midnight rulemaking” as she heads out the door. On Monday, Ms. White announced she will step down when President Barack Obama leaves office.

“I would strongly urge you to respect the results of last week's election and resist the temptation to finalize any regulations, including Dodd-Frank [rules], in deference to the right of the incoming administration to set its own priorities upon taking office in January,” said Rep. Jeb Hensarling, R-Texas, panel chairman.

Ms. White reassured him and others that the agency would not fill the regulatory pipeline with measures beyond those she highlighted in a speech earlier this year.

“I don't see any last-minute rushes,” Ms. White said. “I intend to carry out the agenda I released in February 2016 as much as I can.”  

Even a limited agenda will be difficult for Ms. White to accomplish because the commission is shorthanded. Two of its five slots are empty because the nominees have not yet received Senate confirmation.

Rules to increase capital margin requirements, limit the use of derivatives in mutual funds and require all funds to distribute shareholder reports electronically are among those the agency could act on before her tenure ends, Ms. White said.

A rule to raise investment advice standards for retail accounts — a measure that would allow the SEC to catch up with a similar Labor Department rule for retirement accounts — will not get any attention prior to the Trump administration.

“I don't think there's consensus to move that forward on the current commission,” Ms. White said.

She did not mention a possible rule that would allow independent examinations of retail investment advisers. In an appearance at an industry conference in September, she said a proposal had been put before the other commissioners, Republican Michael Piwowar and Democrat Kara Stein. But that initiative for third-party exams appears to be stalled.

Ms. White was pushing for private-sector examinations as a way to augment coverage of the 12,200 investment advisers registered with the agency. In her prepared testimony, she revealed that the SEC examined 11% of them in fiscal 2016. Those advisers manage about 35% of the approximately $66.8 trillion in assets the SEC oversees.

She said the biggest challenge she's faced as head of the agency is that it is “significantly under-resourced.”

Mr. Hensarling indicated that the Republican-majority Congress will not give the SEC the $445 million funding increase — to $2.2 billion — that it is requesting for fiscal 2018 because “the SEC's budget has increased by a whopping 325% since the year 2000.”

Ms. White acknowledged the steady budget boosts, but said the agency needs more because of its “extensive responsibilities.”

The SEC has increased adviser exam staff by about 20% this year by shifting personnel from broker exams and by tapping new funds. But it's not enough, Ms. White said.

“It's a big, big investor protection issue,” she told the committee.

Ms. White said she is stepping down because that's been the tradition for SEC chairs when a new presidential administration assumes office.

“The agency today is a stronger and more effective agency” than when she took over in April 2013, Ms. White said.

Although she has been criticized by Republicans and Democrats on the committee over the years, they showered her with praise Tuesday during the hearing that occurred as Congress gathered for its lame-duck session.

“She has indeed epitomized what it means to be an accountable agency to Article I of the Constitution, and she is to be commended for that,” Mr. Hensarling said.


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