In a recent speech marking the 80th anniversary of the SEC, Commissioner Dan Gallagher called for the agency to “regain control of [its] agenda.” Gallagher took aim at Dodd-Frank, noting that the mandates imposed by the law “do not by any measure represent the best use of the Commission’s time and resources.” As an example, Gallagher cited the Commission’s work on swaps rule making where the products under the Commission’s jurisdiction represent 5% of the swaps market but take up “a wildly disproportionate amount of the Commission’s attention.” Gallagher predicted that if the agency focused only on Dodd-Frank rulemaking, “it would still take over half a decade or more to address all of those mandates — by which point the agency would be unrecognizable and potentially irrelevant.”
Gallagher also discussed the agency’s relationship with other regulators, noting his desire that the Federal Reserve and SEC work together, “but that relationship must be a true partnership.” Gallagher decried a prudential approach to the regulation of capital markets, particularly a “one size fits all” approach to requirements. Gallagher noted the importance of informed risk-taking by investors and institutions because eliminating risk severely limits the possibility for return. He stated that those that are disappointed in the “post-recession ‘recovery,’ just wait until we have safe and sound, prudentially-regulated capital markets promising us a guaranteed one half of one percent return.”
As prudential regulators, Gallagher argued that the Financial Stability Oversight Council is “unaccountable, opaque, and prudential regulator-dominated” and the Financial Stability Board is “unaccountable, seemingly ideological, and totally opaque.” Gallagher called the prudential regulators’ “encroachment” into capital markets regulation “an existential threat to those markets.” Gallagher also attacked the prudential regulators’ use of “language to their advantage” and cited the focus on “shadow banking” as an example because the term “is the perfect straw man, reducing any non-bank, and therefore non-prudentially regulated, financial transaction to boogeyman status.”
Gallagher called for the agency to “affirmatively engage” Congress, the Administration, and other regulators to discuss critical policy issues and to attempt to reduce or eliminate “useless or counterproductive” mandates. The text of the speech can be found here.