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House Committee Hearing on SEC Reform

On September 15, 2011, Mutual Fund Directors Forum staff attended the House Financial Services Committee hearing on SEC reform entitled: "Fixing the Watchdog: Legislative Proposals to Improve and Enhance the Securities and Exchange Commission."  The hearing covered two pieces of legislation designed to improve accountability and oversight of the SEC.  

The first piece of legislation proposed by House Financial Services Committee Chairman Spencer Bachus (R-AL) would overhaul the structure of the SEC.  SEC Chairman Mary Schapiro expressed her concern that the proposal statutorily mandates a specific SEC organizational structure.  In her opinion, this could hurt the agency's ability to respond to future changes in the capital markets because the SEC would need further Congressional action to make any organizational changes.  Chairman Bachus made clear at the hearing that the current version of the proposed legislation is a discussion draft and is meant to be a starting point for exploring various options for reform.  

The second piece of legislation was introduced by Capital Markets and Government Sponsored Enterprises Subcommittee Chairman Scott Garrett (R-NJ) and would impose additional requirements on the SEC's cost-benefit analyses of rules and orders, including mandating that the SEC Office of the Chief Economist participate in the cost-benefit analysis process and specifying eleven new factors for the SEC to consider during its analysis.  Chairman Schapiro testified that the requirements under the bill were extensive and onerous.  In addition, she raised concerns that requiring cost-benefit analyses for orders could have detrimental effects including delaying enforcement orders, exemptive orders and orders accelerating registration statements.

In addition, Committee Chairman Spencer Bachus indicated at the hearing that he would support an increase in SEC funding as part of the reform process.  In the past, House Republicans have resisted an increase to the SEC's budget.

Copies of the legislative proposals and written testimony of the witnesses may be found here.