Commentators have speculated since the appointment of Mary Jo White as SEC Chair that there would be a new emphasis on enforcement. Ms. White’s remarks during her Senate confirmation hearings about unrelenting enforcement bolstered that view. Yet her recent remarks suggest perhaps another focus.
“[W]e are not alone in the global regulatory space . . . “ Ms. White declared in her first formal remarks as SEC Chair. Addressing the Investment Company Institute General Membership Meeting in Washington, D.C. on May 1, 2013 Ms. White focused on what she called “Regulation in a Global Financial System,” In her remarks the new SEC Chair painted a picture of a global market place in which the Commission is but one regulator among many, working carefully and diligently with its international counter-parts to craft regulation that protects all types of investors. Building on this theme Ms. White told the ICI membership that “our duty to the investors, entrepreneurs, and other market participants who rely on us means that we must find common ground with our counterparts abroad, collaborate on everyday matters like enforcement and accounting, and knit together a regulatory network that offers protection, consistency, and stability to market participants . . . “ in the U.S. and abroad because in the end what “happens overseas matters here at home, and matters more every day.”
Building on this theme the new SEC Chair went on to give several examples of this approach:
Dodd-Frank: Last week the Commission proposed new securities based swaps rules for cross-boarder transactions. Echoing a theme from her confirmation hearings where she promised to finish the rule writing tasks under this statute, Ms. White went on to suggest that this proposal is the beginning of finalizing that work: “This proposal is so important not only because it recognizes the global nature of derivates, but because it is a linchpin in our efforts to finalize the new regulatory regime for our portion of the massive, global market that we regulate.”
Money market funds: The mutual fund industry is a “clear example of financial globalization and the scope of the regulatory challenge we face” Ms. White declared, noting that the ICI has acknowledged this point. Turning to one of the more contentious issues before the Commission in recent months – the regulation of money market funds – Ms. White suggested that a new approach may be under development. Previously then Chairman Schapiro was unable to secure the votes to even propose a new regulatory regime for these funds despite months of discussion and study and a staff paper on the issue mandated by Dodd-Frank. Now Ms. White declared that “[a]s the SEC works to develop and propose meaningful money market fund reform, our goal is to preserve the economic benefits of the product while addressing potential redemption pressures and the susceptibility of these funds to runs . . . “ The result of this process will be proposals grounded in sound economic analysis and well informed by public comment that incorporated the diverse views of the Commissioners and which should lead to “a good, investor-oriented result that has been informed by and can be shared with other regulators in the global marketplace.”
Enforcement: Effective enforcement is also a function of collaboration in the global market place. To this end the Commission is now one of 94 signatories to the IOSCO Multilateral MOU which, the Ms. White stated, “creates a seamless web of securities authorities that are empowered to use their respective enforcement tools on each other’s behalf.” One example of this is the cooperation secured from Hong Kong authorities in a large, recent insider trading case that permitted the Commission to rapidly identify a trader. Another is the cross-boarder working group which utilizes “proactive analytic techniques” to “confront the increasing number of foreign-based issuers who seek to turn their isolation into opportunities for fraud.” A key focus here has been issuers from the PRC which have engaged in fraud and other violations. The result has been numerous cases against PRC based issuers involving manipulation, accounting and disclosure issues and auditor misconduct.
FCPA: The fact that wrongful conduct flows both ways across boarders in one reason that international cooperation is imperative, the new SEC Chair declared. “Among the most prominent concerns in this regard is bribery by U.S. companies overseas . . .” Here the SEC’s “first objective” is compliance through education Ms. White declared which is the reason the SEC and the DOJ published their Guide to the FCPA last year. Another key point in this area is cooperation, illustrated by the recent non-prosecution agreement entered into with Ralph Lauren Corporation.
Ms. White concluded by emphasizing what may be the future direction of the Commission, noting that “enhancing our profile as a globally-focused regulator is an ongoing priority at the SEC.” This means that the agency must accommodate “jurisdictional differences while promoting high standards . . . [which will require] weaving international concerns into even the most seemingly domestic rulemaking or policy . . .”