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March 13, 2013

SEC Chair Nominee White’s Confirmation Hearing: The Testimony

Scott Kimpel of Hunton & Williams gives us this news: Yesterday, the Senate Banking Committee held its confirmation hearing of Mary Jo White to be the next SEC Chair. In her written testimony, Ms. White noted her frequent interaction with – and strong admiration of – the SEC during her tenure as US Attorney for the Southern District of New York. She touched on several themes:

- The Commission has a tripartite mission (protect investors; maintain fair, orderly and efficient capital markets; facilitate capital formation), but the three component parts should not be viewed as in conflict with each other.
- Our markets are continuously evolving, and the Commission must remain vigilant to monitor the markets .
- She pledged to complete, “in as timely and smart a way as possible,” the rulemaking requirements of the Dodd-Frank Act and the JOBS Act.
- Ms. White noted the importance of rigorous economic analysis in rulemaking and promised to continue the efforts of the Commission to ensure that the agency performs robust analysis in connection with rulemaking without undermining its ability to protect investors.
- The Commission’s enforcement program will continue to be a priority, promising to be “bold and unrelenting” and twice committing to be “aggressive” in pursuing wrongdoers.
- Noting the unique issues raised by computerized and algorithmic trading, she pledged to ensure the SEC stays abreast of issues concerning high-speed trading and alternative trading venues such as dark pools and continues to build the capability to “see around the corner and anticipate issues.”
- She also left open other areas of possible focus, but made passing reference to a number of contemporary topics such as further reform of money market mutual funds, uniform fiduciary standard for broker-dealers and investment advisers, increased attention on credit rating agencies and making public company disclosures “more meaningful and understandable.”

How Contentious Was Mary Jo White’s Hearing?

And here’s more news from Scott Kimpel: During her opening remarks to the Committee, Ms. White repeated many of these themes, often reading directly from her written testimony. Flanked by her husband, John White, and Tim Henseler, the SEC’s Acting Director of the Office of Legislative & Intergovernmental Affairs, Ms. White did not face harsh questioning and appeared to have the support of most, if not all, the Committee members in attendance. (As an aside, the SEC’s OLIA has been heavily involved in preparing Ms. White for her confirmation, a service they perform for all nominated commissioners. In advance of a confirmation hearing, OLIA typically seeks to obtain the actual questions to be asked at the hearing, or at least a general direction for them, from Congressional staff, who usually oblige.)

Senators from both sides of the aisle were complimentary of Ms. White and praised her career both in government and private practice. The Senators visited a number of issues with Ms. White:

- As to her potential conflicts of interest given her and her husband’s broad legal practices, Ms. White assured the Committee that she would appropriately manage actual and potential conflicts of interest with the help of the SEC’s ethics counsel. As a practical matter, her partnership at Debevoise will impact her ability to participate in certain enforcement cases where the firm or her prior clients (clients she devoted substantial attention to, not all clients of the firm) are across the table from the SEC. But she should not face significant limitations on her ability to participate in rulemakings. Nor, as Ms. White noted, is her recusal list “out of the ordinary” in size when compared to other commissioner nominees.
- On the topic of rulemakings, Ms. White repeatedly pledged to act quickly to clear the log jam of backlogged Dodd-Frank and JOBS Act rulemakings, giving due care to thoughtful cost-benefit analysis in the process.
- Though she was hesitant to commit to any particular timetables or details for specific rulemakings, several Senators obtained soft assurances that Ms. White would pay special attention to initiatives concerning further reform of money market funds, a uniform fiduciary standard for broker-dealers and investment advisers, executive compensation disclosure under Dodd-Frank, the Volcker rule, conflicts of interest for credit rating agencies, crowdfunding and so-called Regulation A+ under the JOBS Act, and the possibility of a pilot program for smaller public companies seeking to trade at minimum increments larger than one penny to permit broader bid-ask spreads as a means for creating greater interest in emerging growth stocks.
- As to enforcement, Ms. White reiterated that a strong program would also be a priority, that she would “proceed quite vigorously” and that no institution is “too big to charge”.
- On questioning about the so-called revolving door between government and the private sector, Ms. White reconfirmed that she does not necessarily embrace the policy views of her private clients, and will be an advocate for the retail investor.

Ms. White appears to have broad support in the Senate and she is not expected to face any difficulty in being confirmed if her nomination moves from the Committee to the full Senate. No definitive timing as to when the Committee might vote on her nomination or when full Senate confirmation might then occur has been announced.

Elisse Walter, the current SEC chairman, has not announced her plans if Ms. White is confirmed. Chairman Walter’s term ended in June 2012 and she may holdover until December 2013. Commissioner Paredes is the next Commissioner whose term expires, in June 2013. He likewise has not announced next plans, but several candidates are rumored to be in the running for his seat (a Republican one) as well as Ms. Walter’s (a Democratic one).

Broc’s aside: I’m not surprised that Mary Jo didn’t get badgered over Wall Street ties despite a slew of media articles in the days leading up to the hearing about the topic, such as this NY Times article and this blog. This Washington Post article called it right. By the way, did you see that outgoing SEC Chair Mary Schapiro has joined GE’s board…

How Did the Consumer Financial Protection Bureau Hearing Go?

And here’s more news from Scott Kimpel: The Committee simultaneously held its confirmation hearing yesterday on Richard Cordray to be Director of the Consumer Financial Protection Bureau. Mr. Cordray faced some more difficult questioning and the entire Bureau is the subject of a complicated debate about its mission and structure. But again, Senators from both sides of the aisle were personally complimentary of Mr. Cordray. It is unclear if Mr. Cordray’s parallel nomination will have any impact on the timing of Ms. White’s confirmation.

Broc’s aside: Here is a Huffington Post blog entitled “Elizabeth Warren Blasts Senate Republicans For Holding Up CFPB Nomination.”

March-April Issue: Deal Lawyers Print Newsletter

This March-April issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:

- Checklist: Deal Confidentiality Pledges & Reminders
- Be Careful What You Wish For: When Drafting Indemnification Clauses, You May Get Exactly (and Only) What You Ask For
- Divisional Acquisitions: A Clean Break?
- “Short Slate” Rules: A Recap
- Crown Jewels: Restoring the Luster to Creative Deal Lock-Ups?

If you’re not yet a subscriber, try a 2013 no-risk trial to get a non-blurred version of this issue on a complimentary basis.

- Broc Romanek