Securities Law

SEC's Walter Wants More Transparency, No Economic Analysis Legislation

Securities and Exchange Commission member Elisse Walter said Monday that, despite great progress made in recent years on the regulation of fixed-income securities markets, secondary market disclosure must improve. She also said the SEC should not be forced into doing additional cost-benefit analyses of rules.

Speaking at the Financial Industry Regulatory Authority’s annual conference in Washington, the former SEC chairman told attendees that she is proud of her work to bring the municipal bond market to the fore after years of neglect. After a landmark 2009 speech in which she called for improved disclosure in the muni market and the release of an SEC report last July making a dozen recommendations for muni reforms, much remains to be done, she said.

“I think there are lots of things that could be done voluntarily,” Walter said, asserting that fixed-income markets need more pre-trade transparency as well as better secondary market disclosure. She suggested that more information which could be useful to market participants, such as an issuer’s budgetary information, could be posted to the MSRB’s EMMA website. Walter said that although the municipal market’s transparency is far greater than it once was, regulators still need to examine policy closely.

“We need to take a very hard look at the fixed-income markets,” she said.

Walter also became the latest government official to speak out against the legislation that would require the SEC to perform comprehensive cost-benefit analyses on its rules.

A bill sponsored by Rep. Scott Garrett, R- N.J., passed by a heavily partisan vote of 235-151 on Friday. It would require the SEC’s chief economist to produce a report on the economic impacts of new regulation, and would also mandate that the commission perform comprehensive reviews of all regulations within a year and every five years thereafter to determine which rules had outlived their usefulness.

The bill is not expected to go anywhere in the Democrat-controlled Senate, but Walter joined both the White House and SEC chairman Mary Jo White in opposing Garrett’s SEC Regulatory Accountability Act.

“I don’t like his bill,” Walter said.

She said she is a strong believer in economic analysis, which the SEC is already directed to do under its current guidelines. Beyond that, she said, the legal system keeps a close eye on the commission.

“Economic analysis is really the essence of informed rulemaking,” she said. “We’re held to a very, very high standard by the [U.S. district Court for the] DC Circuit as it is.”

In response to an attendee’s observation that many investors do not understand the relationship between interest rates and yields, Walter said efforts should be underway to communicate with investors well before the Federal Reserve Board decides to allow interest rates to rise, possibly as soon as 2015.

“Investor education, and investor education now,” Walter said. “Before rates go up.”



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