SEC Holds Off on Divisive Rules
Tuesday, October 6, 2009
The Securities and Exchange Commission soon will begin to limit short selling to keep stocks stronger during market crashes and will require new surprise audits of money managers to avoid a repeat of the Bernard L. Madoff Ponzi scheme, while delaying action on several other proposals that have stirred debate.
After unveiling a battery of new proposals over the past six months to tighten oversight of Wall Street, the agency is moving into a new phase in which it is putting the new regulations into effect. At the same time, however, the SEC is taking a more gradual approach on other policies that have proven to be more complex or divisive.
Commissioners will wait until next year to pass rules making it easier for investors to nominate directors for corporate boards. And they will wait on rules tightening oversight of credit-rating agencies, the companies that judge the quality of bonds, as well as rules banning "flash orders," a trading technique that critics say gives some on Wall Street an unfair advantage.
The SEC has been under pressure to show it is a relevant and aggressive regulator after having its profile badly tarnished amid the financial crisis.
Mary L. Schapiro, who became chairman in late January, instructed the agency's staff to draft a series of proposals designed to prevent a repeat of the financial calamities of the past two years.
Each of the proposals had a comment period, drawing intense interest from banks and other Wall Street firms as well as representatives of average investors and large funds.
In coming days, the SEC is planning to release a draft strategic plan, open for public comment, which is a required overview of the agency's goals in the next three to five years. The plan has been delayed a year.
It will discuss policymaking in a number of key areas that the agency hasn't previously previewed, including ensuring that investment advisers and brokers follow the same rules. It will also discuss the top-to-bottom reviews occurring in the enforcement and examination divisions of the agency.
Even as it begins to finalize some of the proposals it has disclosed, the SEC is preparing to make yet more proposals for new regulations.
Before the end of the year, the agency is expected to propose requiring more disclosure for electronic dark pools. These pools allow traders to buy and sell big positions without disclosing ahead of time what they're looking to trade.
It is also planning to take up disclosures relating to asset-backed securities, such as bundles of mortgages or credit card loans that are sold as investments.
Additionally, the SEC is planning to propose new rules related to target-date funds, popular investment products that change the combination of stocks, bonds and cash in a portfolio over time as the investor nears retirement.