New Republican SEC Commissioner Michael Piwowar is likely to continue the emphasis on cost-benefit analyses of agency rules, an effort that was elevated by his predecesor, Troy Paredes. A potential uniform fiduciary standard of care for retail investment advice has proceeded slowly because of such a regulatory impact study.
An emphasis on the costs and benefits of regulations at the Securities and Exchange Commission is likely to grow stronger as it welcomes two new members.
The Senate unanimously confirmed Democrat Kara Stein and Republican Michael Piwowar on Thursday night to serve as SEC commissioners. Both former Senate Banking Committee aides, Ms. Stein replaces Elisse Walter and Mr. Piwowar takes over for Troy Paredes. The Senate also confirmed new SEC Chairman Mary Jo White for a full five-year term, until June 2019.
Mr. Piwowar represents a different perspective for the commission, which is often comprised of lawyers. He was the Senate banking panel's chief Republican economist. Following the tradition of executive branch nominees, he revealed little about his policy preferences during the confirmation process.
But it's probably safe to say that his ascension to the five-member SEC underscores Republican insistence that the agency rigorously review the potential market impact of rules before it promulgates them.
In bolstering its economic analysis division, the SEC has responded not only to political pressure but also to the fact that federal courts have consistently shot down rules that judges said lacked sufficient cost-benefit justification.
“Piwowar's work as the chief economist for the Senate Banking Committee Republican staff will greatly benefit the commission, particularly in light of the importance of economic analysis in SEC rulemaking,” Paul Schott Stevens, president and chief executive of the Investment Company Institute, said in a statement that also praised Ms. Stein.
Mr. Piwowar will likely pick up right where Mr. Paredes left off. Mr. Paredes devoted most of a valedictory event at the U.S. Chamber of Commerce yesterday — his fifth anniversary and last day as an SEC commissioner — to extolling the virtues of cost-benefit analyses.
He said that undertaking such a process allows the SEC to better evaluate the tradeoffs between tighter regulation and unfettered markets.
During his tenure, Mr. Paredes was a vocal proponent of cost-benefit analysis. His and former Commissioner Kathleen Casey's dissent to a 2011 SEC study of fiduciary duty spurred the agency to conduct the regulatory impact analysis of a potential rule that is now underway.
The comment period for the request for data for the study closed on July 5, and the agency is now wading through more than 150 responses. Mr. Paredes argued that kind of feedback will lead to a good decision on whether to propose a rule to raise investment-advice standards for brokers.
“For me, one of the concerns with it is whether or not the costs could increase to such a degree that retail investors may find themselves without access to an intermediary, to a broker-dealer, because either it's too costly or because minimum balances were to go up,” Mr. Paredes said at the Chamber event. “Those are legitimate questions that need to be asked and wrestled with to make sure that we don't end up unintentionally hurting the very investors that we're striving to benefit.”
In the coming months, we'll see whether Mr. Piwowar makes a similar argument.
