Mary Jo White's nomination to be the next chairman of the Securities and Exchange Commission sailed through the Senate Banking Committee on Tuesday with the support of all the panel's Republicans. She may get Senate approval as soon as this week through a speeded up voting process called unanimous consent.
Even if the Senate doesn't act before departing on a two-week recess this weekend, Ms. White is likely to be approved in early April. When she walks through the doors of the SEC's Capitol Hill headquarters, here's how she might weigh in on key issues affecting investment advisers:
Private placement advertising rule speeds up
One of the reasons that Ms. White gained the full support of the banking panel Republicans is that she said in her March 12 nomination hearing testimony that she would prioritize rulemaking related to legislation that would ease securities registration for small and emerging companies, known as the Jumpstart Our Business Startups Act.
“The SEC needs to get the rules right, but it also needs to get them done,” Ms. White said. “To complete these legislative mandates expeditiously must be an immediate imperative for the SEC.”
That promise struck a chord with Sen. Mike Crapo, R-Idaho, the top-ranking Republican on the Senate Banking Committee.
“I appreciate the high priority she gives to small business capital formation,” Mr. Crapo said
after the March 19 committee vote on Ms. White's nomination.
Ms. White may want to satisfy GOP calls for the SEC to get moving on JOBS Act implementation, which has been delayed for months even though the bill was signed into law on April 5, 2012.
One of the regulations farthest along is a proposed rule that would allow private funds to advertise to the public. Sales of the investment products would still be restricted to wealthy investors, but the pitches could be sent far and wide.
Consumer groups and state regulators are urging the SEC to strengthen the verification procedures for assuring that only accredited investors buy the products. They want the SEC to scrap the rule and start over. Hill Republicans say that the verification components of the proposed rule are fine and that the SEC needs to complete its work.
Ms. White may want to finalize this one quickly to show that she's re-energizing the agency.
Uniform fiduciary duty and harmonization of adviser and broker rules slows down
Although Mr. Crapo liked what he heard from Ms. White about speeding up the JOBS Act rulemaking, he also was reassured by what she said about the need for the agency to conduct thorough cost-benefit analyses of potential market impact before proposing rules.
“She understands that the SEC cannot rush its regulatory process without understanding fully the risks, burdens and unintended consequences of its proposals,” Mr. Crapo said on March 19.
A week earlier, Ms. White promised Mr. Crapo that the agency would take into consideration the findings of an
economic analysis of raising investment-advice standards for brokers before proposing a rule that would impose uniform fiduciary duty on retail investment advice.
The SEC's 72-page request for information for the cost-benefit analysis has a July 5 deadline for responses. It's likely that compiling the input and compiling an analysis will take several more months. Then the agency will have to decide whether to proceed with a rule and then propose one.
It's likely that a deliberative process on fiduciary duty will suite Ms. White just fine.
Debate over a self-regulatory organization re-emerges
When Ms. White takes over, she'll have to deal with an estimated $66 million sequestration cut to the SEC's approximately $1.3 billion budget. The agency is not providing any details on how this might affect investment-adviser exams.
“It will impact hiring, investments in technology, training and travel, all of which will have an effect on our work, including examinations,” SEC spokesman John Nester wrote in an email.
For an agency that said two years ago that it lacks the resources to examine annually more than about 8% of registered advisers, sequestration is yet another setback.
During her March 12 testimony, Ms. White was not asked her position on a self-regulatory organization for advisers. An SRO bill, which was vehemently opposed by advisers, was introduced last year in Congress and died. An alternative bill that would allow the SEC to charge advisers user fees for exams also died – and is about to be re-introduced in the new Congress.
With the declining SEC budget as a catalyst, Ms. White may ignite the SRO debate all over again – no matter where she comes down on the issue.
We will still have a lot to learn about Ms. White after she starts her new job in April.
