SEC Update

SEC Chairwoman Mary Schapiro spoke to the Senate Banking Committee on Thursday, and here are some of the things she talked about:

  • Up-Tick Rule: The SEC will consider reinstating the rule or “something much like it.” The rule required short sellers to trade only when the stock increased in value. Many believe that without this rule short sellers can manipulate the share value by putting downward pressure on it.
  • Corporate Governace: The SEC is working t provide “meaningful opportunities for a company’s owners to nominate its directors.” Perhaps they could move to an online approach. Individual investors may be more inclined to particpate, however it could open the door to security (in the safety context; not the ’33 Act context) issues.
  • Regulatory Authority: Mary Schapiro talked about creating a systemic risk regulator that would “focus on investor protection.” She also talked about regulating CDOs and municipal securities. My worry about regulating CDOs though is that doing so will create a false sense of security. Creative investors and bankers will find a way around regulation. Finally, the Chairwoman talked about merging investment adviser and broker-dealer regulatory schemes in order to prevent fraudsters like Bernie Madoff.
  • Money Market Mutual Funds: Lastly, Schapiro talked about maintaining credit and liquidity by addressing mutual funds. She wants to avoid funds “breaking the buck” which happened last Fall. That incident is often cited as “one of the closest points to a complete freeze in the credit markets that the U.S. economy has experienced throughout this entire crisis.”

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