Former prosecutor White nominated to head SEC

President Barack Obama announced Thursday his nomination of former U.S. Attorney Mary Jo White to be the chairman of the SEC.

If her nomination is approved by the Senate, White will replace Elisse Walter, who took leadership of the agency on a short-term basis after Mary Schapiro stepped down as chairman in December.

White was the first woman to hold the prestigious position of U.S. attorney for the Southern District of New York, which includes Manhattan, for nearly nine years through January 2002. Her successful major prosecutions resulted in the convictions of Ramzi Yousef in the 1993 World Trade Center bombing and mob boss John Gotti in 1992, when she was acting U.S. attorney in the Eastern District of New York.

White currently is chair of the 225-lawyer litigation department at Debevoise & Plimpton LLP in New York. She has served as a director of the NASDAQ stock exchange.

Obama also renominated Richard Cordray as head of the Consumer Financial Protection Bureau, which he has directed since 2012. Cordray also is a former prosecutor and previously served as the consumer protection agency’s enforcement director.

Prosecutor a first

White’s background as a prosecutor may help bolster the agency’s reputation for enforcement. Although the SEC has overseen numerous prosecutions that led to civil penalties in the wake of the financial crisis, critics have complained that the fines represented small percentages of firms’ revenue, and that executives were rarely held accountable for roles they played in the crisis.

White said that if confirmed by the Senate, she would “fulfill the agency’s mission to protect investors and ensure the strength, efficiency, and the transparency of our capital markets.”

She said the SEC has a lot of tough work ahead. If confirmed, White will take over an agency that has seen a great deal of change in recent months following Obama’s November reelection, with several high-profile departures. Earlier this month Enforcement Director Robert Khuzami left the SEC. The SEC’s enforcement arm underwent significant changes under Khuzami. He created specialized prosecution units to concentrate on high priorities such as investment advisers and private funds, large-scale trading and market abuse, mortgage and other structured products, bribery of foreign officials under the Foreign Corrupt Practices Act, and municipal securities and public pensions.

Meanwhile, the SEC continues to implement rules mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, P.L. 111-203, that was passed in response to the financial crisis. A Senate panel concluded that the crisis occurred after regulators failed to stop financial firms from engaging in high-risk, conflict-ridden activities, and some Dodd-Frank provisions aim to end those activities.

Structural changes the SEC already has implemented with respect to Dodd-Frank include the creation of a program for whistleblowers to report suspected wrongdoing, and establishment of offices to oversee credit ratings agencies and municipal securities.

The SEC has proposed or adopted rules for over 80% of the 90 mandatory rulemaking provisions that apply to the agency, according to a Jan. 9 letter from Walter to the U.S. Government Accountability Office (GAO). A GAO report says that as of December, final rules existed for just 48% of the 236 Dodd-Frank provisions that require regulators to issue rulemakings in nine key areas. Some of these rules are the responsibility of the SEC, and many are the responsibility of other regulators.

Complexity of the issues involved and the need for coordination among multiple regulators has slowed the rulemaking process, according to the report. Weaknesses in the regulatory system remain as a result of the slow progress, the report says.

A prominent Dodd-Frank requirement that has yet to be finalized is the controversial “Volcker Rule,” which was devised by former Federal Reserve Chairman Paul Volcker. The rule was created to prevent banks from making risky bets with federal government-insured funds, but has generated concerns that it will hamper legitimate types of trading by banks.

—Ken Tysiac (ktysiac@aicpa.org) is a JofA senior editor.