| WASHINGTON, July 24
WASHINGTON, July 24 A top U.S. Securities and
Exchange Commission official on Thursday defended his agency's
decision to grant the Royal Bank of Scotland a
regulatory waiver, saying the bank had already been punished in
connection with Libor manipulation.
In a somewhat tense exchange at a congressional hearing, SEC
Corporation Finance Director Keith Higgins and Massachusetts
Democrat Stephen Lynch went back and forth over the issue, with
Higgins saying the SEC does not use waiver denials to punish
"The SEC needs to ensure that the American people are
protected from egregious conduct ... The SEC should penalize the
Royal Bank of Scotland for its conduct instead of granting them
a waiver," Lynch told Higgins at a hearing before a U.S. House
of Representatives financial services panel.
"I want you to persuade me that I am wrong here."
Lynch's concerns center on a growing controversy surrounding
what is known as a "well-known seasoned issuer" or WKSI waiver.
A WKSI tag is generally afforded only to companies that
raise large amounts of capital and are widely followed in the
market. Companies that have a WKSI status enjoy numerous
benefits, including qualifying for automatic shelf
registrations, which allow companies to raise money immediately
from securities offerings without having to wait for the SEC to
review offering documents.
Companies can potentially lose their "WKSI" status if they
are convicted of a felony or if they violate the civil
anti-fraud laws, but SEC rules give companies a way to avoid
losing it through a waiver.
Earlier this year, SEC Democratic Commissioner Kara Stein
made scathing public comments and dissented over granting Royal
Bank of Scotland a WKSI waiver, after one of its units pleaded
guilty and paid a fine for its role manipulating the Libor
interest rate benchmark.
Stein said the SEC had gotten into the habit of routinely
granting waivers to big banks that break the law, in what may be
creating a policy of "too big to bar."
Since then, her comments have sparked a major debate on
Capitol Hill and within the SEC.
Higgins' division is the one that is tasked with reviewing
applications for WKSI waivers.
It has the authority to grant or deny a request, though in
the case of the Royal Bank of Scotland the issue was elevated to
the full five-member commission for a vote because of concerns
by both Stein and Democrat Luis Aguilar.
Higgins told Lynch Thursday that the U.S. Justice Department
had already punished RBS and ordered the bank to pay a fine.
"That's being paid ... by the investors," Lynch responded.
"The investors are getting penalized with the fine. And that's
"The WKSI disqualification was never considered by the
commission to be a penalty for the underlying conduct," Higgins
(Reporting by Sarah N. Lynch; Editing by Bernadette Baum)