SEC Commissioner Gallagher Indignant Towards Dodd-Frank Rules

November 3rd, 2014

Last week on October 24, 2014, Securities and Exchange Commission (SEC) Commissioner Daniel Gallagher delivered remarks before the 47th Annual Securities Regulation Seminar of the Los Angeles County Bar Association in Los Angeles, California. During his speech, Commissioner Gallagher outlined some of the agency’s key policy and enforcement priorities in the New Year.

Commissioner Gallagher explained that the SEC needs to focus its regulatory efforts on fixed income markets, capital formation, removal of credit rating agency rules from securities laws, revision of transfer agent rules, reevaluating the Securities Investor Protection Act and completing broker-dealer risk assessment program rules.  Specifically, the SEC will focus on the “heavy exposure of retail investors to products and trading practices that are little understood by and all too opaque to the average investor” within fixed income markets.  The SEC will also address capital formation for small businesses.

As for the SEC’s enforcement and rulemaking obligations, Commissioner Gallagher said, “Never in the Commission’s history has it been so important to be at the top of our game.”

Commissioner Gallagher also described the burdens on the agency created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), calling the legislation, “a 2,319 page Frankenstein’s monster cobbled together out of a hodgepodge of provisions advanced by special interests, very few of which have any nexus with the actual causes of the financial crisis or the SEC’s core mission.”  The agency has exhausted “dozens of SEC staff members spent thousands of hours working on these two rules alone, which our economists estimated would cost issuers an astonishing $4 billion,” Commissioner Gallagher explained. Commissioner Gallagher specifically called out the Volcker Rule; he spoke of the “time and resources the agency wasted on the Volcker Rule, despite the fact that the rule’s namesake as well as the then-Secretary of the Treasury who presided over the creation of Dodd-Frank both publicly stated that proprietary trading had nothing to do with the financial crisis.”

While Commissioner Gallagher’s speech provided valuable insights into the agency’s rulemaking agenda, his remarks, more tellingly, reflect the SEC’s attitude toward implementing the remaining provisions of the Dodd-Frank Act and growing criticism from lawmakers on Capitol Hill.


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