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SEC Commissioner Gallagher Discusses Agency Priorities

In a recent speech, SEC Commissioner Daniel Gallagher discussed the need for the agency to set priorities in order to fulfill the SEC’s mandate to “facilitate capital formation, maintain fair, order, and efficient capital markets, and protect investors.”  He noted that fulfilling the SEC’s threefold mission has been complicated by recent Congressional mandates, particularly those contained in Dodd-Frank.  Specifically, he questioned the time the Commission spent promulgating rules regarding disclosure mandates for conflict minerals and resource extraction payments.  He asked, “ . . . [E]xactly which aspects of our conflict minerals and extractive resource rules had anything at all to do with ‘fostering fair and efficient capital markets, promoting capital formation’ or ‘protecting investors?’.”  He concluded that these items “were certainly mandates, but should never have been priorities.”  He also took issue with the Commission’s proposal of another Dodd-Frank requirement – disclosure of the ratio of a CEO’s total compensation to that of a company’s median employee worldwide.

His speech outlined a framework that he suggested should guide the Commission’s priorities.  First, the potential action should fulfill at least some aspect of the Commission’s threefold mission.  In addition, the Commission should weigh the relative priority of that task as compared to other activities.  The action should also address a cause of the financial crisis, or “anticipate and seek to address factors that could lead to a future crisis.”  He also encouraged the Commission to consider what pursuing one course of action could leave undone.  The Commission should also consider whether the agency has the required expertise to complete the task efficiently and effectively.  Finally, the Commission should consider whether the benefits of the action outweigh the costs. 

Using this framework, Commissioner Gallagher suggested that the agency’s rulemaking priorities should include: removing references to credit ratings from SEC rules; a comprehensive market structure review; proxy advisory reform; implement Title IV of the JOBS Act, which is designed to promote capital formation; fixed income regulatory reform; and general disclosure reform.  In addition to items that should be addressed by the SEC, the Commissioner identified disclosure of political contributions as an item that “would certainly not make my list.”

The full text of Commissioner Gallagher’s speech is available here.