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Apr 04, 2012

SEC update

There will be a focus conducting more sophisticated cost-benefit analysis in order to determine the real-life impact of rules.

The SEC has been a little bogged down implementing rules laid out in the Dodd-Frank legislation but in the coming year Troy Paredes, SEC commissioner, would like to see more work on some of the discretionary activities and rule making.

There will be a focus conducting more sophisticated cost-benefit analysis in order to determine the real-life impact of rules, especially on the smaller end of the market. ‘We need to look more at small business capital formation and smaller investors in general,’ Paredes told attendees at the CII Spring Conference. There are a lot of rules that are angled towards investment advisors and broker dealers. It is important to scale the regime so that we don’t have a one size fits all set of rules that unduly burdens smaller companies and entities.

Paredes also wants to challenge the perception that you either facilitate capital formation or institute protections for small investors: ‘I think we need to breakdown that divide. They are not necessarily mutually exclusive. It is about recognizing that investors need to be protected from fraud and have access to the information they need to make decisions but that these protections do come at a cost to the companies and can slow opportunities for investment in some places’

In order to achieve the goal of developing better understanding of the real financial impacts for rule making the SEC is setting a goal of employee a lot more non-lawyers, with a specific eye on economists. ‘We need to staff up to make sure we have the right mix of expertize in business, economics, law, policy and so on. We cant make the right policy decisions without having the right expertize,’ Parades explains.

Finally, Paredes suggests there needs to be a new submission of the Volcker Rule. ‘I voted for it not because I support the specific content but the overall idea and so we can get more feedback. One of the main complaints is that the proposal as structured will unduly complicate liquidity which is. The most prudent path forward would be a re-proposal that would allow us to take into account all the comments we have received. I think this is better than trying to change the existing proposal because the depth and breathe of complaints indicate that we would be better off coming up with a completely new proposal. It would allow for a better outcome.’

Brendan Sheehan

Brendan Sheehan is the former Executive Editor at Corporate Secretary magazine, and is a leading expert in public company governance and compliance. He regularly lectures on cutting edge governance, risk and compliance issues and is a regular...