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Gallagher Calls FSOC Threat to SEC Independence

In a speech last week, SEC Commissioner Daniel Gallagher criticized the existence of the Financial Stability Oversight Council (FSOC), calling it a threat to the independence of the SEC.  He noted that the FSOC is “particularly susceptible to political influence” because its members are composed of individuals that are heads of their agencies (which means they are typically members of the President’s political party).  He also highlighted the inherent tension between the missions of the FSOC and SEC – the FSOC is focused on safety and soundness, whereas the SEC aims to protect investors in capital markets, which are inherently risky.  This tension has a particular impact on the role of the SEC Chairman who must serve both agencies.  As Gallagher quoted, “[n]o one can serve two masters.”  The Commissioner wrapped up his remarks on the FSOC’s role by calling the agency an “institutionalized mechanism for one set of regulators to pressure another in the latter agency’s field of expertise.”