Waters looks to tighten up SEC waivers

A leading House Democrat wants to make it tougher for regulators to allow bad acting financial firms back into their good graces.

Rep. Maxine Waters (D-Calif.) is drafting a bill that would require the Securities and Exchange Commission to go through a more rigorous process before it grants a waiver to a financial firm that has previously pled guilty to fraudulent activity.

{mosads}Under existing rules, financial firms are subjected to tighter rules or barred from certain activities if they have been found guilty of certain anti-fraud practices. However, regulators have the ability to waive some of those restrictions on a firm-by-firm basis.

Waters, the top Democrat on the House Financial Services Committee, argues that waivers have been effectively automatic at the SEC and wants to see a more open, deliberative process put in place.

“I have been disappointed with the seemingly reflexive granting of waivers to bad actors, which can enshrine a policy of ‘too-big-to-bar,’ ” she said in a statement. “For large financial institutions, fines are often a mere cost of doing business, and waiving disqualification provisions allow bad actors to continue to operate in the marketplace undeterred.”

Under her bill, a decision to grant a waiver at the SEC could only be made by top commissioners — currently, waivers are granted at the staff level. Also, any time the SEC considers granting a waiver, there would have to be a period of public comment and the opportunity to request a hearing on the matter.

Waters’s plan has received the backing of several financial reform groups as well as the AFL-CIO.

Easily granted waivers have long been a concern for Waters. For example, in February, she and other Democrats criticized the SEC for giving a waiver to Oppenheimer & Co., weeks after it agreed to pay $20 million and admit to wrongdoing surrounding money laundering charges.

SEC Chairwoman Mary Jo White will testify before the House Financial Services Committee Tuesday, where Waters will likely press her on the issue.

Tags Maxine Waters U.S. Securities and Exchange Commission

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