ASA CEO Iacovella Testifies at House Financial Services Hearing on SEC Reform

WASHINGTON – American Securities Association (ASA) President and CEO Chris Iacovella testified before the House Financial Services Committee at a hearing titled "A New Day at the SEC: Restoring Accountability, Due Process, and Public Confidence." In his testimony, Iacovella described how the Securities and Exchange Commission (SEC) has increasingly acted outside of its statutory mandate to pursue partisan political policies, and outlined how Congress can change this by reasserting its policymaking prerogative over the agency through targeted reforms.

"The SEC has increasingly acted outside of its statutory mandate to pursue partisan political policies that have not been authorized by Congress," Iacovella said in his testimony. "The pendulum on hot-button political and cultural issues has swung from administration to administration, and this has turned the historically apolitical and technocratic agency into an unelected political actor."

In his testimony, Iacovella noted how "the SEC must be viewed as an objective regulator, focused solely on its statutory mission, not one that caters to special interests – regardless of where they fall on the political spectrum.  Congress can change this by reasserting its policymaking prerogative over the agency and reforming the agency."

ASA's key recommendations include:

• The Commission’s delegation of policymaking authority to career staff must end. This is appropriate solely for administrative matters, but not policy decisions.

  
  

• Career staff must obtain Commission approval to initiate ‘industry-wide’ sweeps. This power is too great to be delegated to unaccountable career staff.

  
  

• The public deserves a minimum 60-day comment period for rule proposals and at least 90-days for complex rules, such as market structure, exemptive relief, and definitional changes.

  
  

• The SEC needs to publish a transparent fine schedule for administrative rule violations, such as record keeping. This will help the public understand how fines are calculated.

  
  

• Enforcement staff must be held to the same ethical standard as every other licensed attorney. Having staff sanctioned for lying to federal courts and dismissing dozens of cases because staff acted improperly erodes the public’s trust in the agency. To change this, senior leadership in the enforcement division should have securities experience, not just prosecutor experience.

  
  

• SEC rules must respect the cost-benefit analysis that Congress required. Using random unjustified costs and saying: “we are unable to reliably quantify the potential benefits and costs of the rule” is unacceptable. This disregards a Congressional directive specifically designed to stop unjustified rules from harming the economy.

  
  

• SEC rules must be authorized by Congress. The public should not be subject to a “comply or sue” scenario. Lawsuits are costly. And repeated court losses damaged the agency’s credibility.

  
  

• Rule filings from FINRA and MSRB should be sent directly to the Commission. They should not be subject to pre-negotiated “sign-offs” by career staff before going to the Commissioners.

  
  

• The SEC’s unauthorized delegation of its core functions to SROs must end. These delegations circumvent the appropriations process, and impose open-ended costs on the industry that should be on the agency’s budget. An example of this is the SEC’s delegation of CAT to the SROs, which required the industry to fund a multi-billion-dollar regulatory surveillance scheme that collects the personal and financial information of every American investor.

  
  

  Iacovella's full testimony expands on these reforms and can be found here. To watch his opening statement, click here.

  
  

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The American Securities Association (ASA) represents the retail and institutional capital markets interests of regional financial services firms who provide Main Street businesses with access to capital and advise hardworking Americans how to create and preserve wealth. ASA’s mission is to promote trust and confidence among investors, facilitate capital formation, and support efficient and competitively balanced capital markets. This mission advances financial independence, stimulates job creation, and increases prosperity. The ASA has a geographically diverse membership of almost one hundred members that spans the Heartland, Southwest, Southeast, Atlantic, and Pacific Northwest regions of the United States.