Sen. Elizabeth Warren (D-Mass.) is fed up with the Securities and Exchange Commission — particularly its chairwoman, Mary Jo White — and the agency’s failure to do its job effectively. That’s why she wrote a letter to President Barack Obama urging him to immediately designate another chairperson.
“Chair White’s comprehensive anti-disclosure agenda runs directly contrary to the SEC’s purpose,” Sen. Warren wrote in the Oct 13 letter. “It hurts investors, undermines administration policy, and willfully misinterprets congressional mandates. You have the authority to designate a new SEC Chair, and I believe Chair White’s anti-disclosure efforts give you ample reason to do so.”
Warren’s concerns primarily centered on White’s actions over the past three years to reduce the disclosure requirements of corporations making political contributions, saying that this flies in the face of the agency’s mandate to protect investors. Warren characterized these actions as “extraordinary, ongoing efforts to undermine the agency’s central mission.”
White House spokesman Eric Schultz said that President Barack Obama continues to believe White “is the right leader” for the job, according to the Associated Press.
The SEC’s website states that its mission is “to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” Warren repeatedly noted in her letter that investors have said more disclosure data would help them make better investments.
“Transparency helps investors separate desirable investments from undesirable ones and evaluate business activities objectively, thus allowing them to allocate their capital more efficiently,” Warren said.
And the SEC has adopted numerous rules intended to improve and streamline disclosures provided to investors in the past few months.
Yet White has refused to implement a political disclosure rule, Warren said, which would provide investors with information about companies’ political activity. White had the authority to establish this rule until a rider in the recent continuing resolution prohibited the SEC from doing so, although future legislation could overturn that prohibition.
But refusing to strengthen and actively reducing disclosure requirements are two very different things.
“By contrast, reducing requirements for public companies to disclose information material to investment decisions undermines efficient markets, encourages fraud, and, in extreme cases, can sow the seeds of future economic meltdowns,” Warren said.
And this is exactly what Warren accuses White of doing.
“From the beginning of her tenure, Chair White has operated from the curious presumption that public companies currently disclose too much information,” Warren said. “That presumption has led her to devote the SEC’s limited discretionary resources to something called the ‘Disclosure Effectiveness Initiative,’ a review geared toward reducing companies’ existing disclosure obligations.”
Warren said that White has ignored the more than 1.2 million comments from investors and organizations, mostly supporting a potential rule regarding disclosure of political spending, as well as the support of 44 senators and three former SEC commissioners who said that inaction “flies in the face of the primary mission of the Commission, which has since 1934 been the protection of investors.”
Instead, Warren said that White has focused on reducing “information overload,” saying that too much disclosure information makes it difficult for investors to determine what is or is not relevant, despite a complete lack of evidence or support from the investor community.
But the SEC disagreed.
“As the Chair has explained previously, the commission’s initiative is intended to make disclosure better and more meaningful for investors, including streamlining, modifying and providing additional disclosure. Others, including investors, support efforts to make disclosure more meaningful,” an SEC spokesperson said about the initiative on July 7.
In addition, Warren said White prioritized a report from the SEC’s Division of Corporation Finance, which suggested that disclosure compliance was too costly and burdensome for companies, and never mentioned the needs of investors.
“Chair White has also refused to say how much time and agency resources have been spent on this voluntary initiative,” Warren said.
In addition, Warren expressed concern over the fact that the SEC still hasn’t finished implementing rules congressionally mandated in the Dodd-Frank Act.
“The commission has taken action to address virtually all of the mandatory rulemaking provisions of the Dodd-Frank Act,” reads a statement from White on the SEC website.
However, the SEC website shows, as Warren points out in her letter, that 19 of the 52 mandatory rules have yet to be finalized.
“Many of those unfinished rules would offer investors additional information to assist them in navigating public markets,” Warren said. “These include a rule to enhance the reporting and dissemination requirements of security-based swap information; a rule to require registrants to disclose “pay versus performance” information; and a rule to increase the transparency of information available “with respect to loan or borrowing of securities.”
Finally, Warren points to the fact that SEC has repeatedly failed to oppose legislation that promotes the interests of businesses over investors, again questioning White’s priorities.
“I have tried both publicly and privately to persuade Chair White to direct the agency’s resources toward pressing matters of compelling interest to investors and the public, and toward completing those rules that Congress has required it to implement,” Warren said. “The only way to return the SEC to its intended purpose is to change its leadership.”
Public Citizen, a nonprofit organization, supports Warren’s call for Obama to remove White.
“After the 2008 financial collapse – enabled in part by SEC deregulatory failures – the Dodd-Frank Wall Street reform legislation envisioned a reinvigorated SEC,” Robert Weissman, president of Public Citizen, said in a statement. “Instead, the agency under Chair White has been lax in moving mandated rules, too weak on enforcement and, stunningly, has moved to reduce mandated disclosures to investors.”