SEC commissioner’s departure raises potential of tied regulator

May 14, 2018
Michael Piwowar will leave the SEC on July 7, shortly after his term ends

The SEC faces potential standoffs on party political lines following the announcement that Michael Piwowar will be stepping down from the regulator.

Piwowar has served as an SEC commissioner since August 2013, when he was appointed by then-President Barack Obama. He served as the acting chair of the commission between January and May of last year, prior to the appointment of Jay Clayton.

Piwowar’s term at the SEC officially ends on June 5, 2018, and he will step down by July 7, 2018, or earlier if a successor is appointed.

Piwowar is a Republican member of the SEC and his departure will raise the prospect of a tied commission along party lines – with Clayton and Hester Peirce serving as Republican representatives and Kara Stein and Robert Jackson serving as Democratic commissioners.

This situation is not uncommon, says Howard Kramer, partner at Murphy McGonigle and SEC senior special counsel between 1991-1993, but it does raise an interesting dynamic for the commission moving forward.

‘It does create the potential for initiatives to get held up because a 2-2 vote won’t get a rule proposal approved. At that point, it gives more influence to the Democratic appointees because together they can hold up rule-making. A way to deal with that is to try and reach more consensus and compromise so that when a proposal reaches the vote stage, it is less likely to result in a deadlock,’ Kramer tells IR Magazine.

It remains to be seen whether this causes any holdup in chair Clayton’s agenda and, therefore, how quickly President Donald Trump’s administration will move to fill the seat vacated by Piwowar. Peirce and Jackson were both nominated in September and confirmed by the Senate in December, just under a year into Trump’s presidency.

It is not uncommon for the SEC to be understaffed. Prior to Clayton’s appointment as commissioner the SEC was down to just two commissioners, in Piwowar and Stein.

Looking out for the ‘forgotten investor’

Piwowar has called into question several aspects of the Dodd-Frank Act during his tenure, specifically related to executive compensation regulations, according to the Wall Street Journal.

As acting commissioner he began a dialogue around making the US public markets more attractive to issuers, given that the number of US-listed companies has halved since its peak in 1997. He has criticized the Sarbanes-Oxley Act and the Jumpstart Our Business Startups (JOBS) Act, saying they have a stifling effect on the public markets.

The drive to make US public markets more tenable has been continued under SEC commissioner Clayton’s leadership. With this in mind, earlier this year Piwowar praised the use of XBRL technology in reducing the disclosure burden for issuers and making it easier for investors to access disclosures.

In his resignation letter to Trump, Piwowar wrote: ‘We have accomplished a great deal for the forgotten investor in a short period of time’.

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