Stein, Piwowar not prone to partisanship, observers say; plenty of big issues left hanging
The two senior Senate aides nominated by President Barack Obama to join the Securities and Exchange Commission could reduce the political partisanship that has bogged down the SEC in the past.
But it is too soon to say how the evolving makeup of the SEC will shape its work on key issues such as fiduciary duty and adviser oversight.
Kara Stein, a key aide to Sen. Jack Reed, D-R.I., and Michael Piwowar, the chief Republican economist on the Senate Banking Committee, were nominated last week to replace Elisse B. Walter as a Democratic commissioner and Troy Paredes as a Republican commissioner.
Ms. Stein and Mr. Piwowar should have no trouble getting Senate confirmation due to their experience as staff members, said Mark A. Calabria, a former Republican Banking Committee aide who worked with both of them.
The pair also could bridge some divides at the five-member SEC, which sometimes has voted along party lines, Mr. Calabria said. The SEC also is adjusting to a new chairman, Mary Jo White, who was sworn in last month.
“You are going to have a Republican and a Democrat on the commission who know each other and have a working relationship,” said Mr. Calabria, now director of financial regulation studies at the Cato Institute.
Ms. Stein is legal counsel and senior policy adviser to Mr. Reed and has served as staff director of the securities subcommittee of the Senate Banking Committee.
“She's very knowledgeable on investor protection issues, has serious policy positions [and] good political sense,” said Neil Simon, vice president of government relations for the Investment Adviser Association.
Mr. Reed serves on the Banking Committee, which oversees the SEC, and has been a leading proponent of increased funding for the commission.
Mr. Piwowar is “highly intelligent, very astute and has a keen appreciation for a solid foundation for any rule making, which is getting a lot of attention these days,” Mr. Simon said.
“I don't think either of them behaves in a highly partisan manner,” he said. “I fully expect them to be able to work effectively together.”
The president's picks are “probably a safe and smart choice because oftentimes the Senate Banking Committee staff is a pipeline to the SEC,” said Duane Thompson, a senior analyst at Fi360 Inc.
The nominees appear to be “a very good pairing for investors,” said Barbara Roper, director of investor protection for the Consumer Federation of America.
Ms. Roper, who has worked with Ms. Stein over the years, said that the Democratic nominee has guided Mr. Reed's examination of high-frequency traders and other market regulation questions.
The SEC is under pressure to finish a long list of rules mandated by the 2010 Dodd-Frank law, on which both Ms. Stein and Mr. Piwowar worked as Senate staff members.
For financial advisers, the development of a uniform fiduciary standard is clearly the biggest issue before the SEC.
In March, the SEC asked for comments about the costs and benefits of implementing such a standard.
“Mike [Piwowar], as an economist, will be looking for a very clear and sound cost-benefit analysis before he would be inclined to favor” a fiduciary standard, Mr. Simon said.
“Kara [Stein] has a long history of being oriented toward investor protection,” Mr. Simon said. “I suspect she looks on [a fiduciary standard] favorably.”
“Where they stand on issues like a fiduciary standard or money market reform is hard to say,” Mr. Thompson said.
The nominees “are not going to say much until after they're approved by the Senate,” he said.
The issue of a self-regulatory organization for advisers is up to Congress, which has shown less enthusiasm for the idea since encountering opposition from advisers.
The registered investment advisory industry generally would like to see increased funding for the SEC to pay for more adviser exams, a position that Ms. Stein is expected to support.
This story was supplemented with reporting from Bloomberg News.