Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, July 20, 2010

Schapiro Testifies on SEC's Present Reforms and Future Challenges

SEC Chair Schapiro, in Testimony Concerning Oversight of the U.S. Securities and Exchange Commission: Evaluating Present Reforms and Future Challenges before the United States House of Representatives Committee on Financial Services Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises on July 20, 2010, sets forth a list of accomplishments for the SEC and outlines initiatives taken to improve the agency and regulation.  Given the numerous studies and rulemaking initiatives that the Dodd-Frank Act requires of the SEC, it is hard to see how it will have time to accomplish much else.  As to the impact of Dodd-Frank, Schapiro stated:

Implementation Challenges of Regulatory Reform Legislation

The coming period likely will be dominated by implementing the Dodd-Frank regulatory reform legislation. Dodd-Frank in my view closes a number of regulatory gaps, gives the SEC important tools to better protect investors (including, for example, nationwide service of process in civil actions, a clarification on the scienter standard for Exchange Act aiding and abetting actions, and authority to order penalties in cease-and-desist proceedings), and adds or expands several areas of responsibility, including over-the-counter derivatives, credit rating agencies and private funds.

The Act requires the SEC to promulgate a large number of new rules, create five new offices, and conduct multiple studies, many within one year. The importance and complexity of the rules coupled both with their timing and high volume and the rulewriting agenda currently pending will make the upcoming rulewriting process both logistically challenging and extremely labor intensive.

The Act also requires the Commission to hire an independent consultant to examine SEC internal operations, structure, funding, and the need for comprehensive reform. Agency staff already have begun the initial work necessary to move forward with a formal procurement on the study, and to free up the funds needed to pay for the study we also have submitted a formal reprogramming request to the House and Senate Appropriations Committees for consideration.

In addition, the Act also contains a provision granting the SEC broad authority to reward whistleblowers. SEC staff has begun meeting internally to discuss the rules required by the legislation. The goal will be to establish a robust whistleblower program that incentivizes persons to come forward with information we would not otherwise receive and enhances the effectiveness of our enforcement efforts.

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