SEC Chair Mary Jo White is Leaving and it is the Beginning of the End for Compliance

SEC Chair Mary Jo White is Leaving and it is the Beginning of the End for Compliance


 The Compliance Exchange  November 15, 2016  compliancex  

By Jack J. Kelly

Securities and Exchange Commission (SEC) Chairwoman, Mary Jo White, announced that she will step-down from her post upon President-elect, Donald Trump, taking office.

Before becoming the head of the SEC, Mary Jo White was a former highly regarded federal prosecutor in New York and later a securities attorney and partner at a top New York law firm representing, in part, major banks and Wall Street firms. She was responsible for 2,850 enforcement actions, obtained $13.4 billion in sanctions, charged over 3,300 companies and 2,700 individuals, modernized the agency’s technology infrastructure, pushed for companies to admit guilt when settling, and helped achieve approval of many post-financial crisis reforms required by the 2010 Dodd-Frank Wall Street Reform and Financial Protection Act.

White became unpopular with and incurred the wrath of progressive Democrats, particularly Massachusetts Democratic Senator Elizabeth Warren (D-Mass.). Senator Warren issued a report arguing that U.S. companies get away with crimes that regular people don’t because of weak enforcement and asserted that the SEC “is particularly feeble, often failing to use the full range of its enforcement toolbox.”

Ms Warren is going to be even angrier now.

May Jo White’s retreat will commence the start of Regulatory Executives’ exodus. This will be immediately followed by the best and brightest of the rank and file staff fleeing Washington, DC.

In addition to White, many other regulators are expected to follow Ms. White out the door in coming weeks. They recognize that the regulatory landscape will quickly change with a radical shift away from powerful regulators with strong Presidential support to a weakened area on life support.

Trump’s ascendancy to the presidency is a game-changer for the SEC and all other regulatory agencies.

His selections to fill the seats of departing regulatory executives will set the tone for regulations. If his choices lean towards individuals that are not ardent proponents of regulations and tilt towards giving business greater reign, everything will change. The person at the top sets the tone.

We may also see agency budgets slashed. If the SEC and other regulatory agencies are deprived of needed funds, it will be impossible for them to effectively do their jobs. Bright, motivated agency employees will become disheartened with the lack of support, power, advancement and leave to join the private sector. We will be left with complacent bureaucrats who are too lazy to leave or viewed as undesirables in the private sector. We will have a weak, toothless, decaying regulatory system. Corporate executives will quickly notice the shift. They will be too happy to cut expenditures on Compliance, regulatory, audit, risk and related personnel and related costs to save money.

The SEC is normally governed by five commissioners, including three from the president’s party and two from the other political side. With White’s departure, the SEC will be left with only two remaining commissioners, Democrat Kara Stein and Republican Michael Piwowar, who often vehemently disagree with each other.

Piwowar, the sole Republican commissioner, will be designated by incoming President Donald Trump to serve as acting chairman until a permanent chairman is selected.

Trump has already clearly indicated that he wants to start the process of deregulation, including dismantling the Dodd-Frank Act. He appointed Paul Atkins, an industry veteran, who has called Dodd-Frank a “calamity”, to lead the agency’s transition. Atkins “is a guy in general who wants to let companies do their thing and not get in the way very much,” Ian Katz, a financial policy analyst with the research firm Capital Alpha Partners, said. “You would see a lighter touch on enforcement and a lighter hand on corporate governance issue broadly.” Atkins served as an SEC commissioner for six years during the President George W. Bush administration.

Anthony Scaramucci, a hedge fund manager and supporter of. Trump’s candidacy, is advising the financial transition team. “As the head of the S.E.C., you’ve got to get back into reffing the game properly and end the demonization of Wall Street,” Mr. Scaramucci said in an interview last week.

In addition to replacing White, Trump will be able to fill the other openings on the five-member commission. He most likely will ignore the 20-year-old tradition of allowing the opposing political party to pick its own representative on the commission, and choose people who agree with his “hands-off” approach.

Also, Thomas Curry, the head of the Office of the Comptroller of the Currency, another important Wall Street regulator, has his contract expiring and will probably leave. A change at the top of the OCC and SEC should give the Trump administration wide latitude to change the way Wall Street is regulated.

Trump will soon announce the Secretary of Treasury. So far it seems that Steven Mnuchin, a former Goldman Sachs Partner, investment banker, hedge fund manager, and film producer will be offered the position. The Trump Treasury Department might rein in the Financial Stability Oversight Council, a collection of regulators who examine financial risks and designate companies as systemically important. The Treasury secretary is chairman of the council and could effectively defang it, according to Ian Katz, a policy analyst at Capital Alpha who predicted that the council might essentially become “a quarterly kaffeeklatsch.”

Timothy Massad, the chairman of the Commodity Futures Trading Commission, is expected to leave by early 2017. An even bigger change could occur at the banking regulators — the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency. Martin J. Gruenberg and Thomas Curry, the leaders of the F.D.I.C. and O.C.C., will probably leave office next year when their terms expire, or possibly even sooner.

Daniel Tarullo, the Federal Reserve governor who oversees many of the central bank’s regulatory efforts, is not expected to serve out his term through early 2022. He could leave early next year, which would deliver a blow to proponents of Wall Street regulation.

The departures, followed by weaker replacements, will significantly alter and rollback all the changes made since the financial crisis. If this happens, I will wager a bet with anyone that we will see another financial debacle in the near future.


Melvin Woliner

Compliance Officer at DriveWealth

8 年

With the incoming administration, the inevitable shuffling will occur. However, it may be premature to slam down the gavel, pronouncing the demise of compliance. Strong and effective regulation is needed in the marketplace. We cannot afford a repeat performance of 2008.

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Steve Lief

Information Technologies

8 年

Bring back Glass-Steagall

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Diane Novak

Risk Management Executive | EVP, Chief Risk Officer | Chief Ethics Officer

8 年

Huge change at the SEC. Wow!

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While we’re planning the wake, we can start to examine other ways consumers can obtain assurance outside of the existing regulatory framework. The last financial crisis may have had its roots in monetary policy, poor enforcement or dreadful incentives but not from a paucity of regulation. Compliance professionals may take this opportunity to reach out to the intended benefactors of regulation, pension plans and retail investors, with assurance services designed to fit their needs. Before we sign our future away to the caprices of federal bureaucracy there is a possibility that the future of consumer regulation lies outside of Washington DC or Brussels.

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