SEC nominees emphasize disclosure, enforcement

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PHOENIX – Securities and Exchange Commission nominees Hester Peirce and Robert Jackson stressed their support for vigorous enforcement programs and individual accountability during a confirmation hearing before a Senate committee on Tuesday.

The two nominees spoke before the Senate Committee on Banking, Housing, and Urban Affairs along with David Ryder, a nominee to head the U.S. Mint. While neither Peirce, a senior research fellow at the Mercatus Center at George Mason University or Jackson, a corporate law professor at Columbia Law School mentioned munis specifically, both expressed sentiments consistent with trends in the SEC’s approach to the municipal market.

If confirmed, Peirce and Jackson would bring the SEC back to its full strength of five members when they take their seats alongside Commissioners Kara Stein, Michael Piwowar, and chairman Jay Clayton.

“We need to make sure that our capital markets function properly,” Peirce said in her opening statement, in order to maximize the power of “individuals, institutions, and innovation.”

When asked by committee chairman Sen. Mike Crapo, R-Idaho, to spell out her SEC priorities for the next year, Peirce said she is interested in looking at the oversight of self-regulatory organizations, specifically mentioning the Financial Industry Regulatory Authority, which she has publicly criticized in the past.

Peirce, a Republican, also said she wanted to look at the structure of the fixed-income markets but didn’t elaborate on that point.

Jackson, a Trump-nominated Democrat, told the panel that “safe markets are at the core of the American dream.” Jackson is short on muni market experience and those close to him previously interviewed by The Bond Buyer have said he has not expressed specific views on munis. But Jackson told the senators he was a strong advocate for disclosure, a major theme in current muni rulemaking.

When asked by Crapo to expound on his priorities for the SEC, Jackson was quick to answer. “I think we should be thinking of enforcement,” he said, particularly singling out insider training. Jackson said he has questioned whether the SEC has been “the cop on the beat” that the public needs.

Both nominees said they are in favor of holding individual wrongdoers to account in SEC enforcement actions. The SEC for years was reluctant to impose monetary penalties against muni issuers or their officials in municipal enforcement , not wanting to penalize taxpayers for the wrongs of a select few. Commission as happened and SEC enforcement attorneys have said they expect to recommend more penalties against individuals going forward.

The tone of the hearing was largely jovial, with most Senators seeming to express approval with what they heard. But there were a few bumpy moments.

Sen. John Kennedy, R-La., asked Peirce and Jackson whether they had ever purchased stocks or bonds and whether they read the investor prospectus when they did so. Both admitted that they did not always read the disclosure materials available when investing. Kennedy said he wonders about the value of the documents when it comes to protecting retail investors because they are written in unclear language and most people don’t read them.

Peirce also drew the ire of Sen. Elizabeth Warren, D-Mass., when she hesitated to say unequivocally that the SEC should prioritize unfinished Dodd-Frank rulemaking over other agenda items. Warren said the SEC should be doing what the law tells it to do, and thanked Jackson for saying that he agrees the SEC should prioritize that rulemaking.

Both nominees will need to be confirmed by the full Senate and sworn in by President Trump before taking their seats at the commission.

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