Press Releases

Committee to Review Reforms to Improve and Enhance the SEC

Washington, September 14, 2011 - The Financial Services Committee will hold a hearing on Thursday to examine reforms needed to improve accountability and the effectiveness of the Securities and Exchange Commission.

While the agency experienced a tripling of its budget from 2000 to 2010, shortcomings and failures of the SEC came to light as the financial crisis unfolded, including the agency’s failure to detect the Bernard Madoff and Stanford Ponzi schemes.

In light of these failures, the Dodd-Frank Act directed the SEC to hire an independent consultant to study the need for comprehensive reform of the agency.  The SEC, at a cost of $4.85 million, selected the Boston Consulting Group to perform that study.

During Thursday’s hearing, the committee will review the Boston Consulting Group’s reform recommendations as well as two legislative proposals -- “The SEC Modernization Act” from Committee Chairman Spencer Bachus and “The SEC Regulatory Accountability Act” from Rep. Scott Garrett, who chairs the Subcommittee on Capital Markets and Government Sponsored Enterprises.

“The SEC Modernization Act” is draft legislation that would restructure the SEC and implement reforms recommended by the agency’s inspector general, the Government Accountability Office and the Boston Consulting Group.

To strengthen accountability and ethical safeguards at the SEC, the draft proposal would require the agency’s Office of Ethics Counsel to develop a system for identifying potential conflicts of interest and documenting employee recusals.  In addition, the draft proposal from Chairman Bachus would require the ethics counsel’s office to memorialize the guidance it provides to SEC employees and would ensure the independence of the agency’s inspector general and ombudsman.

“The SEC Regulatory Accountability Act” (H.R. 2308) would direct the SEC to abide by President Obama’s executive order issued in January requiring government agencies to ensure that the benefits of any rulemaking outweigh the cost.  Because the SEC is an independent agency, it is currently exempt from this executive order.

“These important reforms will give the SEC the ethical safeguards, operational structure and regulatory accountability needed to better protect investors, police capital markets and promote capital formation,” said Chairman Bachus.

The hearing will take place on Thursday at 10 a.m. in room 2128 Rayburn.

Witnesses scheduled to testify:

Panel I:
The Honorable Mary Schapiro, Chairman, Securities and Exchange Commission

Shubh Saumya, Partner and Managing Director, Boston Consulting Group

Panel II:
The Honorable Harvey L. Pitt, former SEC Chairman (2001-2003) and Chief Executive Officer, Kalorama Partners, LLC

The Honorable Paul S. Atkins, former SEC Commissioner (2002-2008) and Visiting Scholar, American Enterprise Institute

Jonathan G. “Jack” Katz, former Secretary of the SEC (1986-2006), on behalf of the U.S. Chamber of Commerce

Stephen D. Crimmins, former SEC Deputy Chief Litigation Counsel and Partner, K&L Gates, LLP

J.W. Verret, Assistant Professor of Law, George Mason University School of Law

Print version of this document