Legislative leaders seek overhaul of SEC powers
Two key legislative leaders who oversee financial issues in Congress are calling for a sweeping overhaul of securities…
Two key legislative leaders who oversee financial issues in Congress are calling for a sweeping overhaul of securities regulation.
Rep. Richard Baker, R-La., chairman of the House Financial Services Committee’s subcommittee on capital markets, insurance and government-sponsored enterprises, wants to open up the process so that legislators and regulators can discuss pending regulations.
“I am concerned, frankly, about the manner in which prior SECs have acted,” he said.
And Sen. Phil Gramm, R-Texas, chairman of the Senate Banking Committee, repeated his call to review the original, 1930s-era laws setting up regulation of the securities industry.
“We need dramatic review and reform of SEC law and regulation,” the senator declared.
Both lawmakers laid out their plans in Washington this month at the annual congressional conference of the New York-based Security Traders Association.
divine interpretation
Mr. Baker criticized the Securities and Exchange Commission’s practice of voting in private. “They meet secretly and come up with this mystical, divine interpretation of the legislative intent and put it into law by publication, and we can’t know about it or have any communication until it’s done,” he said.
Since legislators and regulators cannot communicate about pending regulations, lawmakers are often forced to threaten agencies with legislation or committee hearings to protest regulations with which they disagree, Mr. Baker said.
He noted that his subcommittee and the financial institutions and consumer credit subcommittee held hearings in April on regulations issued by the Federal Reserve Board, restricting merchant banking operations at companies affiliated with banks. Most subcommittee members disagreed with the regulations.
Mr. Baker said he intends to start “a pilot effort” with the SEC so that those who make policy can question agencies before they “go off in a direction that makes no sense.”
In the next year, he also plans to hold hearings and meet with Mr. Gramm and Rep. Michael Oxley, R-Ohio, chairman of the House Financial Services Committee. Currently regulators are barred from talking to politicians about pending rules.
Mr. Baker is contemplating introducing legislation to change that.
Mr. Gramm said current laws that place a heavy regulatory burden on the securities industry originally were designed to give investors information about the price of securities.
“Yet we have the same securities law and the same regulations that we had when we were desperately trying to simply let people know at what price stocks were being bought and sold,” he added.
As part of his plan for reform, information will be widely available to the public on the best offers for securities, Mr. Gramm noted.
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