The legacy of Mary Jo White
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When Mary Jo White, outgoing chair of the U.S. Securities and Exchange Commission (SEC), was appointed in 2013, she brought a well-rounded perspective based on her experience as a top federal prosecutor as well as a top corporate lawyer. Over the last three years, she has generally used that background well to carry out the agency’s mission.

During her confirmation testimony, White identified three key areas of focus: mandatory rulemaking dictated by the Dodd-Frank Act and the Jumpstart Our Business Startups (JOBS) Act, strengthening enforcement of the securities laws, and keeping up with fast-changing technologies used in securities markets. She kept her focus on these areas and has achieved many of her goals.

Carrying out extensive mandated rulemaking

Her first task of dealing with extensive rulemaking mandated by Congress was daunting. The Dodd-Frank Act imposed more than 80 new rulemaking initiatives on the SEC, all with aggressive deadlines. As of November, the SEC had adopted 67 of those rules, proposed another 15, and has only four remaining rules to propose.

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Congress also required the SEC to create five new internal offices, all of which are open for business. The SEC and its staff have issued 30 reports or studies mandated by Congress. The agency also adopted all rules required by the JOBS Act.

While this effort had begun before her confirmation and was largely staff-driven, White has successfully guided the process forward. Some have criticized her for not having enough focus on technical regulatory issues given her background as a prosecutor, and some staff criticized her office for slowing down the adoption of final rules.

But the reality is that many of these rules presented complex issues that could not be adopted overnight. This onslaught of congressionally mandated rulemaking also created the risk of tying up the agency. White’s most important success in this regard was not allowing the mandatory rulemaking to overwhelm the SEC’s other everyday business activities.

Stepping up enforcement of securities laws

The SEC reported increased enforcement efforts during her tenure. The past year saw a record 868 cases filed, compared to 180 fewer cases in 2013 when she joined. The agency has hired more former federal prosecutors (like her) than in the past. We in the securities defense bar have, as a result, seen some changes in attitude, including the SEC's increased confidence to take cases to trial.

Enforcement efforts have focused on using more data analytics to uncover alleged fraud and more industry-wide sweeps. One key focus has been investment advisers and private equity and hedge funds, with the SEC primarily bringing claims related to fee disclosures and conflicts of interest in management of the funds that are unlike any cases brought in the past.

The agency kept its attention on its whistleblower office, paying out a record $57 million in bounties to whistleblowers in 2016. Due to confidentiality provisions, it is hard to know exactly which cases were initiated by whistleblowers. But the increased risk that a whistleblower may be lurking has forced public companies and regulated entities to use a more cautious approach when potential violations are brought to management’s attention.

Of course, not all of the SEC’s enforcement initiatives under White have been as successful as she might have liked. Her much-touted change in policy to require admissions of wrongdoing in certain cases has not altered the usual way in which cases are settled. But this apparent failure actually is good for the system.

The SEC’s prior long-standing policy of allowing a settling defendant to “neither admit nor deny” the allegations is a much better way to resolve cases. SEC defendants often face parallel criminal actions or private litigation. Forcing an admission makes defendants less likely to settle cases, and as a result, ties up scarce agency resources.

As another example, White’s “broken windows” strategy of going after every violation, no matter how small, seems to have inflated the SEC’s statistics. However, there is little evidence that it serves to prevent bad actors who receive the equivalent of “parking tickets” from becoming even bigger bad actors in the future.

Keeping pace with industry technology

The SEC has tried hard to keep up with fast-paced technological changes in the securities markets. The agency adopted rules seeking to enhance liquidity risk management by mutual funds and exchange-traded funds (ETFs). White has sought better information sharing among international regulators.

She has served as a member of the Dodd-Frank-mandated Financial Stability Oversight Council, where the SEC has provided input on the asset management industry in particular. She has tried to focus her staff on identifying market risks before they occur. Finally, the SEC adopted regulations to address crowdfunding to raise money for new ventures.

While it remains to be seen whether the SEC’s efforts to keep up with financial markets will prove to have been successful when the next crisis occurs, there have been no major regulatory failures yet.

The SEC is a critical agency to our financial regulatory system, and White has guided it well over the last three years. One can only hope that her successor will do the same.

Brian Miller served as special counsel to U.S. Securities and Exchange Commissioner Steven M.H. Wallman during the Clinton administration. He now chairs the securities litigation practice at Akerman LLP.


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