Securities and Exchange Commission Chair Mary Jo White will face questions from the House financial services committee on Wednesday, November 18, 2015. An Obama appointee, she’s nevertheless drawn sharp criticism from Democrats as well as Republicans. Public Citizen also challenges her stewardship. Here are questions we hope committee members will ask. We also take the liberty of proposing an ideal answer, and then the answer that we expect.

Banker pay: Dangerous pay structures helped cause the Wall Street bubble that burst in 2008. Congress approved a law requiring you to reform those structures and set a deadline: May 2011. When will you propose a good rule?

Ideal answer: There’s no excuse for taking more than five years on this. We’ve completed more complicated rules (including multi-agency rules) in less time. I’ve directed my staff to bring a proposal before commission vote by December.

Expected answer: This is a multi-agency rule that requires a great deal of cooperation. I assure you, we are working diligently. But I can’t give you any date because these are all difficult issues.

Political spending: More than 1.2 million investors have petitioned the SEC to draft rules requiring firms to disclose all their political spending. What is the timeline for moving forward on the rulemaking?

Ideal answer: While this is a political hot potato, shareholders deserve to know where corporations spend their money, especially if it involves public policy which could have a reputational impact on their invested monies. And the writing’s on the wall. All the major presidential candidates on the Democratic side support this, so if one is elected, they’ll undoubtedly appoint a chair who will implement this policy. But the president who appointed me also endorses this policy. I’m happy to announce that we’ll propose and institute this rule so that whatever party controls Washington after 2016, shareholders will have a better understanding of how their investments factor into political decisions.

Expected answer: The SEC has many priorities already mandated by Congress, so we have not yet gotten to this rule.

DOL Fiduciary Rule: The Department of Labor is completing a rule that would require Wall Street agents intersecting with an IRA or other tax-advantaged plan to put the client’s best interests first, ahead of any consideration about which recommendation might generate a fatter commission. Shouldn’t the SEC be working on this in a complementary fashion while the DOL finishes its regulation?

Ideal answer: Wall Street drains about $17 billion from IRA and 401(k) investors every year because they put their own commission calculations ahead of their clients. The DOL is responsible overseeing this arena and I welcome their fine efforts. We’re behind in our effort, but I pledge to advance a parallel reform rule within the next six months.
Expected answer: This is an important area, but I cannot give you any estimate of when the SEC might publish a proposed rule.

Materiality: The SEC’s Office of Chief Accountant is working with the Financial Accounting Standards Board to change the standard of “materiality.” Currently, companies must disclose information that “could” change an investor’s view of the firm. Under the new standard, firms could hide all information except that which they (and their lawyers) judge would “substantially alter” an investors view. How does this help investors?

Ideal answer: It doesn’t. It simply helps firms hide more information under the specious claim that investors receive too much information about their company investments. I’ve informed FASB that we won’t accept their proposal. Following Columbia Professor John Coffee’s criticism of our Chief Accountant James Schnurr, wherein he said that Mr. Schnurr “seems to have taken the protection of the industry as his priority,” I’ve decided to look for a new Chief Accountant.

Expected answer: The FASB is an important institution and we look forward to their thinking on this issue.

Wall Street Crime: Our own attorneys general have demonstrated that massive fraud led to the financial crash. Yet neither the Department of Justice nor the SEC has held any senior individual responsible, nor has the SEC curbed business operations, nor has Washington exacted penalties that bankers, instead of shareholders, must shoulder. Instead, the SEC has granted pardons — waivers — from otherwise mandatory SEC penalties. Doesn’t this send the message not only that crime pays, but as one banker observed, “If you ain’t cheating, you ain’t trying?”

Ideal answer: It certainly does. From now on, I will only vote for a waiver if every other commissioner agrees. Rep. Maxine Waters has introduced legislation that would codify such a practice. The SEC will no longer credit Wall Street firms for cooperation without the identification of those responsible for the infraction.

Expected answer: The SEC has brought a record number of enforcement actions and exacted a record about in penalties.

Bartlett Naylor is the financial policy advocate with Public Citizen’s Congress Watch division.

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