President Obama’s recent naming of Mary Jo White to be Chairman of the SEC has been greeted with praise from almost all quarters. But because she is best known for her highly successful tenure as a federal prosecutor, in response to the news of her current appointment, some have raised questions about, as the New York Times put it, her “command of Wall Street arcana” because “[r]egulatory chiefs are often market experts or academics.”
A review of the career paths of SEC Chairmen over the years shows that while several had previously spent much of their professional lives studying, regulating or actively participating in the financial markets, a number of the SEC’s notable Chairmen were practicing lawyers or had other diverse experience. The first SEC Chairman, Joseph P. Kennedy, was no academic, and many would claim that his real market expertise lay in devising some of the unsavory practices that led to the creation of the SEC in the first place. His successors have had a variety of backgrounds: from members of Congress (Hamer H. Budge and Christopher Cox); to lawyers in private practice (including four of the chairmen appointed by President Truman); to spies (William H. Casey); to White House aides (Richard C. Breeden).
Of course, Mary Jo White’s practical experience in the workings of the financial markets is also drawn from her distinguished post-prosecutorial career at the highest levels of private legal practice, representing individuals and financial institutions in some of the most complex and sensitive government investigations, many of which involved the securities laws. Along the way she has also served as a Director of the Nasdaq Stock Exchange, and on its Executive, Audit and Policy Committee. Wall Street arcana seem unlikely to pose much of a problem for her.
But as it says right on the SEC’s website: “[f]irst and foremost, the SEC is a law enforcement agency.” This seems to reflect the prevailing view of the Commission in recent years, and especially since the 2008 financial crisis. The public and the media understandably focus on the SEC’s role as market cop, rather than its critical but less visible roles in rulemaking, oversight of corporate disclosure and the like.
As a former prosecutor and defense lawyer who actually understands both how to investigate cases and how they play out in the courtroom, Mary Jo White will bring a level of judgment and expertise in evaluating enforcement proceedings that few can claim to match. For while the SEC’s Enforcement Division has the primary responsibility to investigate and develop individual cases, the Chairman can and should play a critical role in determining enforcement priorities and in driving the Commission’s ultimate decisions on whether to proceed with a case and on what terms to resolve it once it is brought. It is difficult to think of anyone better suited for those tasks than Mary Jo White, or anyone better able to then stand up to the critics who inevitably seem to assail the SEC on both sides.
For as those experienced in enforcement are well aware, it is far easier to grandstand and cry out for scalps than it is to actually make and win enforcement cases. Some high profile SEC courtroom losses in recent years, from the rejection of the SEC’s claims of insider trading of credit default swaps (CDS) by former Deutsche Bank salesman Jon-Paul Rorech and Millenium Partners’ trader Renato Negrin, to the similar result in the SEC’s case against former Citigroup collateralized debt obligation (CDO) structurer Brian Stoker, vividly illustrate this point. Mary Jo White has the experience to identify the cases worth investigating, and the judgment to evaluate the results of those investigations – to know when a provable fraud has occurred and, perhaps more important, when it has not.
The most critical requisites for the leader of an agency that sees its primary mission as law enforcement are independence and dedication to doing what is right, whatever way the political or popular wind is blowing at the moment. Those of us who had the privilege to serve in the United States Attorney’s Office under Mary Jo White’s leadership know first hand that beyond her razor sharp mind and legendary work ethic, her foremost attributes are judgment, integrity and insistence on doing what is right. And particularly now, those attributes are why she is the right choice for SEC Chairman.