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November 15, 2012

Post-election SEC could emphasize enforcement over rule-writing, says former chair

With the U.S. Congress still politically divided after the elections that returned President Barack Obama to office, the U.S. Securities and Exchange Commission is likely to take an enforcement approach to supervision rather than look to change conduct by writing new rules, former commission chair Harvey Pitt said.

A divided Congress, he said, would struggle to check an SEC that turned to enforcement actions to implement policies it saw as in keeping with the Dodd-Frank Act.

“If you’ve got a split Congress, effectively it means that Congress’s principal weapon (against a regulator) will be holding hearings … That is a lot less of a potent weapon than the notions that if Congress doesn’t like what you do, they may pass a law that curtails your ability to do what you’ve been doing.””


“Should Schapiro decide to leave her post, as some have speculated, it would present a golden opportunity for the President Obama to elect somebody who will bring about tougher supervision, said Dennis Kelleher, president and chief executive officer of the public advocacy group Better Markets Inc.

Pointing out that regulations have not yet been written for a fiduciary standard for broker-dealers and the Volcker rule limiting risky trading by banks, Kelleher said that appointing an aggressive chairman would send a very clear signal that the President wants financial reform to succeed.

“I think the SEC needs to be aggressive on the rules side and the enforcement side. Crime unpunished is crime undeterred and it always results in more crime. Wall Street is a high crime area so we need a talented aggressive regulator in the SEC to bring back the rule of law to Wall Street.””

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