WSJ: Election Marks Crossroads for SEC

Wall Street Journal reporter Tatyana Shumsky writes:

The Securities and Exchange Commission is likely to get a new chairman no matter who wins Tuesday’s presidential election, raising doubts about the agency’s priorities.

The SEC has yet to complete three major initiatives that would change corporate financial reporting. A new leader could shelve work on rules governing disclosure of executive pay, corporate sustainability efforts and a push to streamline financial filings, a signature project of the agency’s current chairman, Mary Jo White. An incoming chairman also could revive rules requiring companies to report their political spending, which Ms. White dropped from the SEC’s agenda, or focus on new issues, shifting the regulatory outlook for corporate America.

“No matter which party takes office, there’s going to be legislative initiatives and regulatory changes that will result in new compliance risks,” said Richard Chambers,chief executive of the Institute of Internal Auditors.

Chris Stansbury, finance chief of Arrow Electronics Inc., said he is doing a “radar sweep” ahead of the election. That involves speaking with other chief financial officers and talking to auditors, advisers at large accounting firms and consulting firms.

“In the short-run it’s a nonevent, no matter who gets in,” he said. “Everybody is anticipating gridlock.”

Both Democratic presidential candidate Hillary Clinton and Republican Donald Trump would probably have trouble persuading a divided Congress to back their proposals immediately, Mr. Stansbury said.

Whether to require companies to disclose their political spending has been a particularly controversial issue. Ms. White, an independent, dropped the matter from the SEC’s agenda in 2013. She said such requirements would be aimed primarily at changing corporate behavior, and not at ensuring that investors get timely information about matters affecting a company’s financial health.

Senate Democrats want companies to disclose the sums they spend on lobbying efforts, trade organizations and other political activities. Sen. Elizabeth Warren of Massachusetts, a consumer-protection advocate, last month asked President Barack Obama to demote Chairman White for her failure to press the issue.

Others support Ms. White’s stance. Using disclosure rules for purposes other than to inform investors pulls the SEC away from its mandate of protecting investors and politicizes the agency, said Harvey Pitt, who was SEC chairman under former President George W. Bush. “It has really pushed the SEC into territory it is ill-equipped to handle,” he said, adding that a Republican chairman would be unlikely to pick up the issue.

The SEC says it already has completed nearly 80% of the rulemaking under the Dodd-Frank financial overhaul law, which was enacted in 2010. The agency’s remaining tasks under the law include completing rules requiring companies to report how executive pay is linked to performance and to outline their policies on clawbacks and hedging and how they are enforced.

“A Trump chairman could look at what’s been done and go back and amend things,” said Daniel Gallagher, a former Republican SEC commissioner and now a partner at Washington-based consulting firm Patomak Global Partners LLC.

A Republican SEC chairman could curtail some already implemented Dodd-Frank rules, such as those requiring miners and oil producers to report payments to government officials. New rules could be watered down or delayed, said former SEC commissioners.

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