Risk & Compliance

Trump’s SEC Pick Jibes with Deregulatory Agenda

Hester Peirce's views on the DOL Fiduciary Rule and the JOBS Act match those of SEC Chairman Jay Clayton.
David KatzJuly 19, 2017

President Trump’s nomination yesterday of Hester Maria Peirce to fill one of two current vacancies on the Securities and Exchange Commission would add a commissioner likely to fit in well with SEC Chairman Jay Clayton’s deregulatory agenda.

Hester Maria PeirceOn at least two key issues, Peirce, whose previous nomination to the post by President Obama reportedly foundered because of objections by Sen. Elizabeth Warren and other Senate Democrats, has expressed views that seem to match Clayton’s. Like him, she appears to feel that the Department of Labor’s Fiduciary Rule may fall under the bailiwick of the SEC and that the commission should make it easier for more companies to raise funds under the Jumpstart our Business Startups Act.

Peirce, a former aide to Senate Banking Committee Chairman Richard Shelby and before that an SEC staff attorney, has written favorably of Clayton’s overall approach to regulatory reform since his being sworn in on May 4. “The Securities and Exchange Commission’s new chairman is searching for better ways to ensure that our public securities markets are an efficient and safe place for investors and companies to meet their complementary goals,” she wrote in Real Clear Markets in June

Commenting on what she sees as Washington’s current “regulatory reform quilting bee,” however, she said, “The end result could be hideous, or it could be an elegant, effective, and efficient amalgamation of these disparate regulatory efforts.”

On June 1, in response to a U.S. Department of Labor statement that its Fiduciary Rule would apply beginning June 9, Clayton issued a request for public comment on “Standards of Conduct for Investment Advisers and Broker-Dealers.” Under the rule, advisers to retirement investors are treated as fiduciaries and have an obligation to give advice that adheres to “impartial conduct standards.”

These fiduciary standards require advisers to adhere to a “best interest standard” when making investment recommendations, charge no more than reasonable compensation for their services, and refrain from making misleading statements.

The rule “may have significant effects on retail investors and entities regulated by the SEC.  It also may have broader effects on our capital markets.  Many of these matters fall within the SEC’s mission of protecting investors; maintaining fair, orderly, and efficient markets; and facilitating capital formation,” Clayton wrote in his request for comment.

The SEC chairman asked if there were specific areas covered by the DOL’s rule that the commission should scrutinize. For example, he asked, are there “ways in which the [SEC] should take into account the Department of Labor’s Fiduciary Rule in any potential actions relating to the standards of conduct for retail investment advice?”

For her part, Peirce has gone further. Currently a senior research fellow at the free-market-oriented Mercatus Center at George Mason University, she has come out in favor of the SEC being the prime regulator of relationships between investors and intermediaries. Writing in U.S. News and World Report, she said: “The Securities and Exchange Commission should be allowed to take the lead in any rulemaking related to investors’ interactions with financial professionals.”

The nominee’s and the chairman’s views also seem to jibe on the JOBS Act. On June 29, the SEC that it would let all companies  submit draft initial public offering registration statements “on a non-public basis” as of July 10. Previously, only emerging growth companies, as defined under the act, could do so.

IPOs, as well as most offerings made in the first year after a company has entered the public reporting system, will now be able to submit drafts of registration to the SEC on a non-public basis.

“By expanding a popular JOBS Act benefit to all companies, we hope that the next American success story will look to our public markets when they need access to affordable capital,” Clayton said in the press release announcing the measure. “We are striving for efficiency in our processes to encourage more companies to consider going public, which can result in more choices for investors, job creation, and a stronger U.S. economy.”

In her U.S. News and World Report column, Peirce offered a similar view. The SEC, “can build on the Jumpstart Our Business Startups Act by looking for additional ways to tailor regulations for small, new public companies,” she wrote.

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