Former U.S. attorney Mary Jo White is likely to be nominated today as the new chairperson of the SEC, according to multiple news reports. This follows rampant speculation in Washington, D.C. over the past week about White taking the helm at the regulator. I am cautiously optimistic about this prospect and am hoping that her appointment will break the SEC’s partisan deadlock.
If the Obama administration nominates White as expected, then it could prove to be a positive step forward for an industry that has been compelled to adjust to the fits and starts of Dodd-Frank-inspired reforms. The regulatory lurches have hit home for the extremely important reforms of the over-the-counter (OTC) derivatives markets in which the CFTC has been moving faster than the SEC. This has put firms in a tricky situation. Credit default and interest rate derivatives, for instance, have multiple parents and in the brave new world of execution and clearing, they need the coordinated blessings of the SEC and CFTC. Yet there appears to be very little coordination between these key U.S. regulators—to say nothing about coordination with the regulators of other nations and regions. This situation is proving to be extremely frustrating for the global banks and trading firms wishing to move ahead with OTC clearing and execution.
As I’ve said in this column before, the current partisan split of two Democrats and two Republicans among SEC commissioners has effectively sent into limbo official actions on major issues such as the last stages of OTC reform, the problems and concerns over regulating high frequency trading, and even better co-development of regulations that involve the SEC and CFTC.
A spokesperson for the SEC says that the commissioners are not deadlocked and that most votes (approximately 90% of the time) are unanimous. But it’s those key votes (the remaining 10%) that are the problem. The spokesman said the SEC has to take the time it needs to carefully develop regulations and does not want to rush them out the door. In the SEC’s defense, it could also be argued that the CFTC is smaller, which enables it to be more nimble than the SEC. It could also be argued that a new chairperson could make the agency more efficient.
While White made a reputation for herself as a federal prosecutor, it’s not as clear what she will do in the top post at the SEC. Most observers are happy that a woman will be nominated for a major federal government post. Others are also hoping that her approach will become clear during the Senate approval process. Whatever policy slant she brings to the SEC, her appointment should end the deadlocked situation and this would bring some much-needed clarity and relief for the industry.
We also don’t know how White’s past as a tough federal prosecutor taking on the Mafia and terrorists will play out as she takes over the SEC and wrestles with Congress. However, she is likely to bring a new energy to the SEC and could serve as an inspiration for the SEC’s foot soldiers who will be very busy once the bulk of the Dodd-Frank regulations are final. While much of her time is likely to be focused on completing the initiatives of her predecessor Mary L. Schapiro, White will have a great opportunity to put her own stamp on the SEC.