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Speaker 1: Securities and Exchange Commission Chair Mary Joe White is the

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Speaker 1: first major Obama administration appointee to announce she's stepping down

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Speaker 1: following the election of Donald Trump. White over saw a

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Speaker 1: record number of enforcement actions and penalties, yet her four

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Speaker 1: year tenure was also marked by controversy and criticism from

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Speaker 1: liberal senators, such as Senator Elizabeth Warren for being too moderate.

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Speaker 1: White testified before the House Financial Services Committee today and

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Speaker 1: said she was proud of the SEC's accomplishments since she

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Speaker 1: became chair. We've achieved record numbers of enforcement actions and

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Speaker 1: examinations each year. We've completed dozens of transformative rulemakings, including

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Speaker 1: fundamental reforms to money market funds, credit rating agencies, and

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Speaker 1: the securitization markets. We've built important new regulatory regimes for

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Speaker 1: capital raising, critical market infrastructure, and municipal advisors. What will

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Speaker 1: Trump's election mean for the SEC? During his campaign, he

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Speaker 1: pledged to dismantle the Dodd Rank Act, which has dominated

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Speaker 1: the SEC's work. My guests are two prominent experts in

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Speaker 1: the securities law area, Professor James Cox of Duke Law

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Speaker 1: School and Professor John Coffee of Columbia Law School. I'd

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Speaker 1: like you both to rate White's performance as SEC chair. Jim,

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Speaker 1: you start, well, I think it's uh, it's it's something

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Speaker 1: of a mixed bag. I I give her high marks

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Speaker 1: on everything that you just cut through quoting on the radio,

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Speaker 1: that is, introducing changes to money market funds, UH with

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Speaker 1: with a big one addressing dressing problems that were carried

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Speaker 1: forward by Don Frank. They had to write a lot

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Speaker 1: of rules. Uh that act came in. UH, as we

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Speaker 1: all know, had long written less of requirements for rules

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Speaker 1: to be written, and and there were rules that were

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Speaker 1: largely a minium were outside the traditional bailey with the

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Speaker 1: security regulations, media and paid disclosures for example, UM and

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Speaker 1: so uh so she hurt martial attaff So I give

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Speaker 1: her a lot of credit for going forward on those.

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Speaker 1: The place where I would give her sort of weak

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Speaker 1: marks is I don't think that she has been a

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Speaker 1: strong supporter of making the accounting industry responsible, and that

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Speaker 1: shows up in a lot of different ways. They had

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Speaker 1: lukewarms and no support for a lot of the initiatives

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Speaker 1: of the public company accounting oversight boards, such as expanding

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Speaker 1: the what goes into the audit reporting letter, UH, naming

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Speaker 1: the accountant and he most clearingly let the reappointment of

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Speaker 1: the chair who was a very effective chair of the

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Speaker 1: p C A O. B Linger for literally many many

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Speaker 1: many months, and back door signaling that she would prefer

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Speaker 1: not to have him reappointed was So it's something of

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Speaker 1: a mixed bag. But on the whole, I think she

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Speaker 1: discharged things well. I wouldn't get too caught up. And

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Speaker 1: final point here in how many prosecutions the SEC carries out,

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Speaker 1: I think those is can be easily inflated, and I

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Speaker 1: also think probably it doesn't penetrate the quality of the

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Speaker 1: prosecutions and what was extracted from. So it's it's it's

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Speaker 1: on uneven, but I would say on the plus side,

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Speaker 1: but not by a wide margin. All right, John, are

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Speaker 1: you are you in line with those grades or higher? Lower? Well,

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Speaker 1: I think I'm similar. I have to start out by saying,

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Speaker 1: no SEC chairman has ever worked harder. She is a workaholic.

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Speaker 1: She works around the clock. She tried to navigate some

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Speaker 1: impossible political tensions because she's caught between some pretty ideological

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Speaker 1: people on the right who are Republicans and some Democrats

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Speaker 1: who are aligned with and somewhat similar to Elizabeth Warren

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Speaker 1: and that's hard to compromise between those positions. In terms

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Speaker 1: of what was new in her administration, the SEC had

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Speaker 1: to begin to come to grips with systemic risk that

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Speaker 1: was never their function in the past, and I think

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Speaker 1: they have done a B level performance. There aren't really

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Speaker 1: strong positions, even on mutual funds. More could have been done.

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Speaker 1: Now she's a former prosecutor, and as a former prosecutor,

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Speaker 1: it's no surprise that she brought a lot of enforcement

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Speaker 1: actions a record in the last fiscal year five. But

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Speaker 1: she introduced a policy called broken Windows, which says that

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Speaker 1: the SEC will bring even minor technical actions in order

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Speaker 1: to create a culture of law compliance. Whether that broken

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Speaker 1: windows policy really works with respects to Wall Street, or

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Speaker 1: whether you should instead focus on the major firms that

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Speaker 1: have real cloud that can be debated. And I think

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Speaker 1: a lot of these smaller actions for late filing are

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Speaker 1: fairly technical and from the equivalent of footfalls in Tennis.

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Speaker 1: Uh So, I don't know that she's had the really

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Speaker 1: important enforcement cases she said one or two, and I

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Speaker 1: don't know that in the area systemic risk, she really

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Speaker 1: put in place a system that was fully full and complete,

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Speaker 1: although frankly it's likely to be greatly downsized and even

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Speaker 1: gutted in the upcoming Trump administration. Well, that was my

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Speaker 1: next question, Jim. Is Trump's election a game changer for

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Speaker 1: the SEC. He's promised to dismantle Dodd Frank, But beyond that,

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Speaker 1: what can we expect? Well, I think they could. They're

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Speaker 1: going to have their plate very full with an initiative

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Speaker 1: that Chairman White started. Than that is, UH, rethinking all

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Speaker 1: the disclosure guidelines that apply to proxy statements, public offerings

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Speaker 1: of securities UM and annual reports and quarterly reports. Uh.

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Speaker 1: That is ongoing. They're getting lots and lots of feedback

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Speaker 1: on the question of is there too much disclosure? What

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Speaker 1: kind of disclosure should we have? And the important question

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Speaker 1: is can we start scaling disclosure so that smaller companies

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Speaker 1: have lighter burdens than larger companies and those can be justified.

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Speaker 1: That is the process that's going to consume a awful

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Speaker 1: lot of activity. Uh. The other the other area where

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Speaker 1: I think that you're likely to see pushback and changes

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Speaker 1: will be uh you know, it's going back and re

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Speaker 1: examining the various rules were put in uh for a

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Speaker 1: broker dealers. Uh. That is, we have yet to see

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Speaker 1: whether the SEC will adopt the benefit of the investor

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Speaker 1: standard that Department Labor has developed as the fiduciary obligation

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Speaker 1: of that applies to broker dealers. We do have the

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Speaker 1: Labor rule that applies with retired respective retirement funds. My

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Speaker 1: guess is that there's will be a total wholesale reexamination

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Speaker 1: that rule, which has been very much opposed by the

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Speaker 1: brokerage industry, and so it's going to be the result

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Speaker 1: that that provision, which is actually mandated by Dodd Frank,

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Speaker 1: will be one of the provisions to go UM. And

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Speaker 1: then in the area of enforcement, my guess is that

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Speaker 1: Republicans and Democrats are pretty have an approach enforcement with

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Speaker 1: a fair degree of equanimity. Uh and mainly because we

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Speaker 1: find that it's not truly the big companies that become

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Speaker 1: under a gun of at least SEC standard fraud actions,

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Speaker 1: like I said earlier, totally avoided the very strong lobbying

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Speaker 1: incedustry of the accounting industry, and so I don't think

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Speaker 1: we're going to see much change there. So enforcement will

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Speaker 1: be something out there, but I think that benign neglect

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Speaker 1: in some areas, and then UM using the initiatives have

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Speaker 1: started by White to rethink and scale down substantially the

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Speaker 1: disclosure burdens. We're talking about SEC commission Chair Mary Joe

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Speaker 1: White stepping down after four years on the job, and

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Speaker 1: I've been talking with Professor James Cox of Duke Law

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Speaker 1: School and Professor John Coffee of Columbia Law School, both

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Speaker 1: experts in the area. John, do you expect to see

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Speaker 1: a significant rollback of White's aggressive regulation of Wall Street? Oh? Definitely,

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Speaker 1: but it won't all won't primarily be at the SEC.

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Speaker 1: I think their bodies, like the Consumer Financial Protection Bureau,

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Speaker 1: which is set up in the shadow of Elizabeth Warren

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Speaker 1: who urged its creation, that will be basically sidelined and

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Speaker 1: relegated to insignificance. I think also the Financial Stability Oversight

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Speaker 1: Council is likely to become a much less powerful body

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Speaker 1: and only an occasional lunch meeting group of all the

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Speaker 1: financial regulators at the SEC. Well, we have to expect

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Speaker 1: that the SEC is several months of complete chaos because

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Speaker 1: of this early resignation by Mary Joe White. As of

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Speaker 1: the inauguration, the SEC will only have two remaining commissioners,

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Speaker 1: one Republican one Democratic. They don't agree on almost anything,

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Speaker 1: and so the agency will be paralyzed. In due course,

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Speaker 1: the President will appoint an SEC chairman, it will be confirmed,

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Speaker 1: but that may take six months to even a year,

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Speaker 1: and we're going to see an agency that isn't going

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Speaker 1: to be able to do anything in that interim period. Jim,

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Speaker 1: is the SEC a relatively a political agency? Has it

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Speaker 1: become and has it become more political in recent years

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Speaker 1: with Mary Joe White having to engage in a lot

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Speaker 1: of you know, criticism from different senators and request to

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Speaker 1: step down. Well, I think a couple of things going

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Speaker 1: on there chairman of various agencies. We're always getting beat

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Speaker 1: up on the hill uh and made good press uh.

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Speaker 1: And so I don't think we would read much of

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Speaker 1: the question is do we see more divided votes and

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Speaker 1: more outspoken remarks from the minority party who are commissioner

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Speaker 1: who have commissions, who sit on the commission versus the majority. Now,

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Speaker 1: as you're aware, there's five commissioners the SEC and party

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Speaker 1: balancing in the statute requires that no more than three

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Speaker 1: of them can be the same party. Now in the

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Speaker 1: old days, that is prior to what would happen is

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Speaker 1: much like what happened with Reagan was here. Once Reagan

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Speaker 1: got his three Republican appointments, and and he had to

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Speaker 1: figure out, well, I got a vacancy coming up. We're

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Speaker 1: going at the point of Democrat, not so point of libertarian.

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Speaker 1: And so that's the libertarians not registered as a Republican.

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Speaker 1: And so therefore you had the ability to go out

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Speaker 1: and find individuals who are the opposite party from the

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Speaker 1: White House, but nevertheless shared many of the same pro

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Speaker 1: or non regulatory views about regulation. That all change when

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Speaker 1: the Republicans gained the control of Congress and a deal

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Speaker 1: was struck. And so that now what happens is that

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Speaker 1: at least two members of the Agency Commissioners will be

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Speaker 1: appointed from the party that is not occupying the White House,

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Speaker 1: and that's the deal. The result of that result of

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Speaker 1: that is it become a more fractious body. So it's

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Speaker 1: not the fractions are not to be seen necessarily in

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Speaker 1: the Congress, because we've always found Congressman, you know, running

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Speaker 1: towards the prom to try and get the headline news reports,

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Speaker 1: beating upon an administrative head But the real fraction is

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Speaker 1: happening in these three to two votes that are going

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Speaker 1: on among the commissioners. Uh so, that's that that's a

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Speaker 1: distinct problem. And at the same time, we also have

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Speaker 1: found in the last five years many more of the

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Speaker 1: division heads come from outside the agencies. Otherwise, in the

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Speaker 1: grand days of the SEC, you promoted from within to

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Speaker 1: a division head individuals who came out of the regulatory

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Speaker 1: culture of the SEC. Now we find individuals who are

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Speaker 1: going up coming from the outside, heading up in forest

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Speaker 1: trading and markets, investment management, these various divisions, and they

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Speaker 1: bring up the perspective they have from counseling very regulated.

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Speaker 1: So that that's my read on the political structure of

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Speaker 1: the SEC these days. I want to thank both of

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Speaker 1: you for being on Bloomberg Law. It's always great to

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Speaker 1: have you both on as Professor James Cox of Law

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Speaker 1: School and Professor John Coffee of Columbia Law School. Mary

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Speaker 1: Joe White has not said what her next move will be,

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Speaker 1: but she has said in the past that her dream

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Speaker 1: job would be to be the first female baseball commissioner,

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Speaker 1: So we will see where she goes after the SEC.

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Speaker 1: Coming up on Bloomberg Law, we've already be talking about Chrysler,

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Speaker 1: the first US carmaker to be sued over fraudulent edge

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Speaker 1: and claims. Dodge truck owners say they were rigged to

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Speaker 1: hide the emissions that were as much as fourteen times

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Speaker 1: higher than allowed by law. An echo of the v

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Speaker 1: W situation that we have seen evolving. I'm June Grosso.

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Speaker 1: This is Bloomberg