Seal of SEC

Fairfax and Peirce Nominated to SEC

Seal of SECPresident Obama selected Democrat Lisa Fairfax and Republican Hester Peirce to serve on the SEC.

Lisa Fairfax

Lisa Fairfax

Fairfax, a law professor at George Washington University, surfaced after liberal groups pressured the White House not to hire a corporate lawyer who had previously worked to represent Wall Street. She has been active in promoting diversity on corporate boards, serving as co-director of the DirectWomen Board Institute, which identifies and supports women attorneys as board candidates.

Hester Peirce

Hester Peirce

Peirce, a former Senate Banking Committee staffer who now works as a senior research fellow and director of the financial markets working group at the Mercatus Center at George Mason University, was widely expected to be tapped for the Republican seat. (Obama taps Lisa Fairfax and Hester Peirce to serve on U.S. SEC) Among Peirce’s recent papers is one criticizing the Commodity Futures Trading Commission for engaging in “backdoor” rule-making, which she said created uncertainty in the industries it regulates. (Shareholder Activism Expert, Regulatory Critic Nominated for SEC) The Financial Markets Working Group she heads is bankrolled by billionaire Charles Koch.

TheCorporateCounselBroc Romanek noted the appointments, if confirmed, would be unprecedented in terms of women running a federal agency:

SEC Commissioners: 4 Women & 1 Man?!?

By my count, there have been 97 Commissioners since the SEC was created in 1934. Of those there have been 12 women: Roberta Karmel; Barbara Thomas; Aulana Peters; Mary Schapiro (counted twice); Laura Unger; Cynthia Glassman; Annette Nazareth; Kathleen Casey; Elisse Walter; Mary Jo White and Kara Stein. Here’s the SEC’s list of Commissioners if you want to check my math. Overall, the percentage of women that have served on the Commission is about 12% – with the past few decades running at about a 20% rate.

So from that perspective alone, it’s exciting to see President Obama nominate two women yesterday to be added to the two that currently serve as Commissioners. That means – if confirmed by the Senate – the five Commissioners will be 80% female. Wow! Not sure any other federal agency can match that. Ever. 

The Republican nominee to replace Dan Gallagher is Hester Peirce, a researcher at George Mason’s Mercatus Center and a former Senate Banking Committee staffer (where she worked with current Commissioner Piwowar). As I’ve blogged before, it helps to obtain the Senate’s confirmation when you nominate one of their own. Hester also used to work at the SEC – she served as a staffer for SEC Commissioner Paul Atkins. I moderated a panel with Hester on it a few years back at our annual executive pay conference.

The Democratic nominee to replace Luis Aguilar is also local to DC. Professor Lisa Fairfax has been teaching at George Washington Law School since ’09; before that she served as a Professor at the U. of Maryland in Baltimore. This NY Times article comments on Lisa not being a “revolving door” nominee – and the fact that she would be only the third black Commissioner…

You might enjoy my 2-minute video about “5 Steps to Becoming a SEC Commissioner” – as well as this blog entitled “What is the Process for Selecting SEC Commissioners?“…

Another first is that both women currently serve on the SEC’s Investor Advisory Committee. An examination of their records on that committee might yield some good information on what their focus as commissioners would be. However, the group’s latest meeting held last week was Fairfax’s first. Consumer Federation of America Director of Investor Protection Barbara Roper, who also serves on the SEC-IAC, called both nominees well qualified.

Since both nominees have worked in academia, we might get some hint of future direction by looking at SSRN.

For example, here is an abstract of Fairfax’s latest article on SSRN, The Future of Shareholder Democracy:

This Article seeks to ascertain the impact of the Securities and Exchange Commission’s rejection in 2007 of a proxy access rule, a rule that would have required corporations to include shareholder-nominated candidates on the ballot. On the one hand, the SEC’s rejection appears to be a stunning blow to the shareholders’ rights campaign because many shareholders’ rights advocates have long considered access to the corporate ballot as the holy grail of their campaign for increased shareholder power. On the other hand, some corporate experts maintain that characterizing proxy access as the indispensable ingredient for sufficient shareholder influence fails to appreciate the significance of recent developments such as the success of majority voting and the adoption of the e-proxy rules. Because these developments provide shareholders with alternative methods for influencing corporate affairs, some have even argued that they may make the issue of proxy access moot. However, this Article reveals the fallacies of such an argument and the importance of the continued pursuit of proxy access. Although other devices may prove useful, it is not likely that they will be as effective as proxy access in empowering shareholders.

See more by Fairfax at SSRN

A recent example by Peirce is The Financial Industry Regulatory Authority: Not Self-Regulation after All abstracted below:

Broker-dealers in the United States are regulated by the Financial Industry Regulatory Authority (FINRA). Although commonly perceived to be a self-regulator, FINRA is not accountable to the industry in the way a self-regulator would be. Nor is it accountable to the public, Congress, the president, or the courts. FINRA’s structure and monopoly status shield it from close oversight. Consequently, an important part of the securities markets is under the control of a regulator with limited accountability. As FINRA seeks to expand its regulatory footprint into areas such as investment adviser regulation, its unique form of regulation warrants reconsideration.

See more by Peirce at SSRN.

Once confirmed, I look to see who they choose as staff and how effectively both will be in influencing Chair White.

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