SEC’s turf threatened, Commissioner Michael Piwowar says


SEC Commissioner Michael Piwowar speaks on "advancing and defending the SEC's core mission" at the U.S. Chamber of Commerce in Washington on January 27, 2014. Piwowar is one of the newest members of the Securities and Exchange Commission. (Kevin Lamarque/REUTERS)

One of the newest members of the Securities and Exchange Commission blasted a panel of top financial regulators Monday for encroaching on the agency’s turf — and rebuffing him when he tried to get a seat at the table.

In one of his first public speeches since joining the SEC in August, Republican Commissioner Michael Piwowar said that the Financial Stability Oversight Council is “reaching into the SEC’s realm” and posing “an existential threat” to the agency and other regulators.

The council, also known as the FSOC, was charged by Congress with heading off risks to the financial system. It consists of regulators from the Federal Reserve, the Federal Deposit Insurance Corp. and others — including the SEC. Each of the top regulators on the council has a voting member, and for the SEC, that’s been the commission’s chairman.

In a speech at the U.S. Chamber of Commerce, Piwowar said that one of his first acts as commissioner was to ask for an “observational role” at FSOC meetings, and for permission to have some key staff members attend the council’s bi-weekly deputies meetings.

But the request was denied, Piwowar said. The council, led by Treasury Secretary Jack Lew, said that if the SEC were to bring multiple people to meetings, every agency would ask for the same treatment, Piwowar told the crowd.

“My answer to that concern is that the FSOC should get a bigger table,” Piwowar said. “Or, it should stop allowing the Federal Reserve to bring three people to the council meetings when other member agencies are afforded only one seat.”

The Treasury Department declined to comment.

Critics of the council, including some Republican SEC commissioners, have complained that the panel operates in a secretive way. At the SEC in particular, some commissioners have said that it’s unfair to have one commissioner represent the views of the entire body.

“It was a creative ask,” said Scott Kimpel, former counsel to SEC Republican Commissioner Troy Paredes, who left the agency last year. “Other commissioners have had some heartburn over the structure issue, but this is the first time someone in his position has gone that far. It’s the first time I heard anyone make that ask.”

The issue came to a head more than a year ago, when the council strong-armed the SEC into more tightly regulating the money-market fund industry, a once reliably safe sector that nearly imploded during the financial crisis. The agency was at an impasse over how to proceed when the council stepped in. Last year, the SEC unanimously approved a proposal that presented options on how to revamp a portion of the industry.

In his speech, Piwowar said that he agreed on the need for reform, and that he’s studying the agency’s proposal. But he also said that the SEC “ceded ground” to the FSOC, compromising the agency’s independence and allowing the panel’s other regulators to big-foot onto SEC turf.

“One of the most shocking decisions in the 80-year history of the SEC was the wholesale abdication of the commission’s responsibility to the FSOC on the money-
market funds,” Piwowar said.

He also criticized a study last year prepared for the FSOC by the Treasury Department that he said paved the way for regulation of the asset management industry. The SEC was the only one of the FSOC regulators to solicit comments from the public on the study, at SEC Chairman Mary Jo White’s request, Piwowar said. He commended the chairman for doing that.

“I’m not criticizing Mary Jo in any way,” Piwowar said in an interview after the speech. “It’s the FSOC that my beef is with.”

Dina ElBoghdady covers housing policy for The Washington Post.
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