Sen. Elizabeth Warren, D-Mass. has claimed one head — that of former
Wells Fargo CEO John Stumpf, who resigned in the wake of the false account scandal —and now seems to be seeking another, that of SEC Chairwoman Mary Jo White.
Ms. Warren should back off. Her charges against Ms. White — that she is ignoring investor protection and seeking to reduce the amount of information available to investors — are, to use a polite word, bogus.
In fact, Ms. Warren's charges could be motivated by political calculation rather than concern about investor protection or information. She apparently is angry at Ms. White because the Securities and Exchange Commission chief has not pushed through a rule requiring public companies to reveal to shareholders their political contributions.
COUNTER TO CITIZENS UNITED
If she could force Ms. White out and have President Barack Obama (or perhaps the next president) select a new chairperson, one more amenable to a corporate disclosure rule, she could effectively neutralize the Supreme Court's Citizens United decision, which allows for such corporate contributions.
The expectation is that such a rule would deter executives from making corporate political contributions because of the prospect of those contributions being revealed to political activists who might target the companies and its executives. This might hurt the Republican Party, believed to get more corporate support than the Democratic Party.
(Related read: Why financial advisers hate Elizabeth Warren)
It is hard to see how such a rule would help investors make better stock selections and earn better returns, since it is difficult to see a significant connection between a company's political contributions and its stock performance.
In fact, such a rule might initially hurt stocks as activists target companies whose contributions they disagreed with.
As for Ms. Warren's charge that Ms. White is ignoring investor protection, it is totally ridiculous. In fiscal 2016, ended Sept. 30, the SEC filed 868 enforcement actions, up from 807 in fiscal 2015 and 755 in fiscal 2014. All three of these numbers are higher than any year before Ms. White's tenure began.
Further, the SEC brought enforcement actions against significant financial companies in 2016, including Merrill Lynch for misusing customer cash, fining the company $415 million; and
J. P. Morgan for failing to disclose conflicts of interest, costing the company $267 million.
Under Ms. White the SEC also went after
Barclays Capital and
Credit Suisse Securities for “violating the federal securities laws while operating alternative trading systems.”
Barclays paid a penalty of $35 million and
Credit Suisse paid $54 million in penalties for its violations.
(Related read: Finra orders Barclays Capital to pay $13.75M over mutual fund sales)
The SEC also initiated 78 insider-trading cases and brought enforcement actions against private-equity firms such as The
Blackstone Group, Fenway Partners and W. L. Ross & Co.
TWO BIG AUDIT FIRMS
The agency sanctioned three
AIG affiliates for steering mutual fund clients toward more expensive share classes and charged
Morgan Stanley Investment Management with stock “parking.”
It also has gone after two major audit firms for failing to comply with professional standards, including violating auditor independence rules.
This is hardly a record of ignoring investor protection, as Ms. Warren charges. Rather, it shows Ms. White has focused on issues more germane to investor protection and well-being than the disclosure of corporate political contributions.
Not only are Ms. Warren's charges false, her effort to get rid of Ms. White could hardly come at a worse time, as the SEC has only three commissioners at present, not the required five. If Ms. White were forced out, the SEC could not issue new regulations until she was replaced — likely to be a time-consuming process.
(Related read: SEC hits troubled Texas REIT with Wells notice)
The agency is also short-staffed, which means the increase in enforcement actions suggests Ms. White has used her resources well.
Ms. Warren's assault on Ms. White represents an effort to politicize the SEC, established as an independent, nonpartisan agency. It must be resisted for the long-term benefit of investors and all who serve them.
