Wednesday, September 14, 2016

Chamber’s CCMC outlines to-do list for next administration

By Anne Sherry, J.D.

Regulatory reform, a uniform fiduciary standard, and creation of a presidential oversight commission are some of the items on the Chamber of Commerce’s wish list for the next administration. The Center for Capital Markets Competitiveness released a 72-page agenda of reforms aimed at promoting financial stability and driving economic growth. The CCMC agenda also argues that the SEC should be reorganized, put a system in place for issuing conditional orders, and improve clarity around policy interpretations.

Principal recommendations. The policy agenda would rework many of the agencies or programs that came out of Dodd-Frank. This includes reconstituting the Financial Stability Board through a treaty; reforming the Financial Stability Oversight Council to shed more light on the SIFI designation process; and restructuring the Consumer Protection Bureau into a commission subject to congressional oversight. CCMC also recommends creation of a Presidential Commission on Financial Regulatory Restructuring; a bicameral congressional committee to study fintech; and a Financial Reporting Forum to identify and address emerging issues.

More broadly, CCMC would have the next administration place the regulatory processes of the Fed and other banking regulators on par with other agencies, modernize rule-writing by requiring economic analysis and examination of existing regulations, and reform the shareholder proposal process and thresholds. “The SEC has abdicated its duty to determine if shareholder proposals will interfere with company ordinary business operations and if shareholder proposals on similar topics conflict with one another,” the agenda asserts. If the SEC refuses to reverse the Whole Foods and Trinity decisions, Congress should pass legislation giving these decisions back to the states.

A reorganized SEC. Calling the agency’s structure “complicated, confusing, and inefficient,” CCFC recommends that the SEC reorganize and streamline into a smaller number of divisions. Two dozen divisions and offices report directly to the chairman, not including 11 additional regional offices that report to the chairman to some purposes. “One person cannot be responsible for supervising an agency of 4,000 with a budget of more than $1 billion and simultaneously vote as one member of a collegial body on every enforcement action, rule proposal and rule adoption, and disciplinary opinion,” CCMC asserts.

Policy interpretations. The Center would also apply this streamlining approach to the SEC’s interpretation and application of its rules. The use of a disparate array of policy communications (interpretive releases, exemptive orders, no-action letters, FAQs, speeches, and settlements) is a burden on regulated persons, according to CCMC. The group would reform the use of no-action letters and expand the use of exemptive rules. It also urges the SEC to avoid regulation by enforcement, examination, and speech. Where industry best practices should be codified, this should happen through the rulemaking process. Finally, the chairman and commissioners should play a greater role in the interpretation and application of regulatory policy, which may require amendment to the Sunshine Act.

Conditional approval for new investment products. The Chamber of Commerce once again urges the SEC to create an optional alternative process to conditionally approve a new investment company product or exchange-traded product. The Investment Company Act provides broad statutory authority to exempt investment products, but the application and approval process can be expensive and time-consuming. A conditional approval process could address this issue, as long as the applicant had sufficient time to justify its upfront costs and the SEC retained sufficient authority to take regulatory action, if necessary.

SEC enforcement reform. CCMC recommends that the SEC formally adopt a policy of using administrative proceedings only in certain circumstances. The agency should also create a process for challenging the choice of forum prior to institution of the proceeding. A review of the Rules of Practice is also in order, CCMC asserts, for example to provide adequate opportunities for pretrial discovery and depositions.

With respect to Wells submissions, the Enforcement Division should create a consistent process, provide adequate access to its investigative files, and afford reasonable advance notice of an enforcement action to any party that has made a Wells submission or request advance notice.

CCMC also recommends steps to reassess and clarify the SEC’s policy of requiring admissions; examining alternative case resolution methods; improving Commission oversight of enforcement; increasing transparency and dialogue; and submitting litigation releases and press releases to personnel outside of the Enforcement Division for review.