The Other Appointments
A critical component of the Senate’s job — confirming presidential appointees — has garnered tremendous attention lately due to the vacancy on the Supreme Court. This one appointment, though, is overshadowing some other very important vacancies. One example is the Securities and Exchange Commission (SEC). In October and December last year, two SEC commissioners left their posts, leaving only three panelists to sit on the five-seat commission.
On March 15th, the Senate Banking Committee held a confirmation hearing to fill these vacancies. The two nominees are Lisa Fairfax, a Democrat and professor at George Washington University Law School, and Hester Peirce, a Republican and senior fellow at the George Mason University Mercatus Center. The SEC sets a three-person cap on commissioners of a particular party. Given that one other Democrat (Kara Stein) and the presidentially appointed Independent Chair (Mary Jo White) are already on the commission, President Obama is required to appoint at least one Republican, which is why Peirce was nominated.
The SEC is not the only regulatory agency badly in need of Senate confirmations. Sixteen nominees, including two Federal Reserve Board governor candidates, are currently stalled in the Senate Banking Committee. Plus, two vacancies on the five-seat Commodity Futures Trading Commission went without nominees from August 2015 until early March.
Fully staffing the SEC is of particular importance. For one, the SEC is badly in need of expanded enforcement resources. Plus, there are several hot ticket items currently on its plate. What the SEC takes up in the coming months is up to Commission Chair Mary Jo White. Yet, should the Senate confirm these two candidates the commission will be fully staffed and more likely to grant these issues the full debate and consideration they deserve.
The first is the SEC and Financial Accounting Standards Board’s review of material information — also known as “materiality.” Today, the materiality debate centers around whether or not companies are providing shareholders with too much information or not enough. As with many debates inside the SEC, the tradeoff here is between protecting investors and easing reporting requirements for public companies.
The second item involves the SEC’s enforcement arm. Since the financial crisis, the SEC has prosecuted Wall Street’s worst actors and claimed billions in settlements from companies. Often times, the settling company is disqualified from the category of activity in which the wrongdoing occurred. But those companies may also apply to the SEC for waivers to continue that type of activity. An important question before the SEC is whether or not waivers are helping enforcement. Supporters of waivers argue that they allow capital markets to continue working efficiently. Others believe waivers should be granted less often, because they can encourage the repetition of bad behavior.
The final item involves political spending. More than 1.2 million investors have called on the SEC to advance a rule requiring companies to disclose their contributions to campaigns, PACs and Super PACs. Since Citizen’s United, some have pointed to the SEC’s disclosure authority as a way to weed out dark money in politics.
Given the urgency of these issues before the SEC and the continued vacancies at other financial regulators, the Senate Banking Committee — and the full Senate — should as swiftly as possible evaluate and take votes on nominees, setting politics aside. And when more vacancies arise, the president should swiftly appoint nominees, regardless of the political season.
Tanner Daniel is a financial services policy advisor to the economic program at the centrist think tank Third Way.