August 1, 2011

Crazytown House Bill: “SEC Modernization Act of 2011”

Maybe the debt ceiling standoff is making everyone act a little strange in this town, as noted in this observation from Lynn Turner about the latest from Congress:

This newly proposed legislation – the “SEC Modernization Act of 2011” – raises serious questions in light of the fact members of Congress have proven themselves incapable of any resemblance of managing of the debt issues and their own spending bills. It also reflects badly on Congress which has seriously failed to carry out its own oversight functions and in light of those shortcomings, is “piling on” the SEC in a manner which is likely to increase its costs of operations significantly – and refocus significant attention away from its core mission of protecting over 100 million investors.

In this legislation, the sponsors – who apparently fail to have a basic understanding of the SEC – have nonetheless decided it is they who are best to:

1. Decide the structure for the SEC, rather than leaving it up to the CEO they nominate as Chair of the SEC.

2. Take away the revolving discretionary fund that the SEC has used to direct spending to top priorities and instead direct it should only be spent on information technology, notwithstanding the House is now proposing also to “starve” the SEC of sufficient funding for carrying out its duties.

Some of the sponsors are the same very people who have severely criticized the SEC for its failure to act on tips on the Madoff matter, yet they are also failing to give the SEC the money to do so, cutting off sufficient funding to staff the new office of whistleblowers. So they want to have their cake and eat it to, criticizing the SEC while at the same time, legislating that it cannot possible do what it is being criticized for not doing.

This legislation is duplicative of existing legislation that already requires the SEC to consider cost benefits. And as noted in the recent proxy access decisions of the DC district court, when the SEC has failed to do so to the satisfaction of the court, it is held accountable. Yet at the same time, the GAO has issued a number of reports (see this example) which highlight how the SEC is doing its job and doing it well. Given the vast magnitude of rule making that has been thrust upon the SEC, Chair Schapiro has done a tremendous job working through it, including seeking public comment from all the proposed rules.

When the Congress cannot even figure out how to deal with deficits and spending, one would think they would not have time for such unnecessary and duplicative legislation, that can only serve to impede the protections investors need, as highlighted by the lack of regulation directing contributing to the worst financial crisis in 75 years, which cost, and continues to cost, tens of millions of Americans their jobs. It is very clear the sponsors of this legislation want to return to unregulated markets which created this economic mess in the first place, putting their own jobs and campaign financing necessary to keep their jobs, well ahead of the interests of those on Main Street.

Piling On: Trio of House Reps Ask SEC for Report on Proxy Access Workload

In this letter to the SEC sent on Thursday, a trio of House Representatives seek information about how many Staff hours were spent on proxy access rulemaking over the past decade, including a dollar amount associated with that labor (and an estimate of these items for litigating over the rule) including any amounts spent on outside counsel. To me, it’s funny how the letter mentions that the origins of the rulemaking were politically motivated – when it sure seems that this request after the SEC lost the Business Roundtable/Chamber case is…

Sidenote: The FEI has made this silly music video entitled “Hey There Bob Pozen,” just in time for the 3rd anniversary of the ‘Pozen Committee” report.

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– Broc Romanek