WASHINGTON Feb 21 The U.S. Securities and
Exchange Commission should press ahead and complete work on
rules mandated by Congress even if the courts shoot them down,
Democratic Commissioner Kara Stein said on Friday.
The SEC has had a rough time prevailing against industry
legal challenges to its rules in the U.S. Court of Appeals for
the District of Columbia Circuit.
But Stein said they should not be deterred by this.
"If a rule is rejected by a court, we should dust ourselves
off, make the rule better and finish it," Stein said in a speech
at the Practising Law Institute's annual SEC Speaks conference.
"We should not be intimidated into backing off our
obligation to implement the law."
Stein knows a thing or two about what Congress intended when
it comes to SEC rules.
Before becoming a commissioner, she worked as a counsel to
Senator Jack Reed, a Democrat from Rhode Island and a senior
member of the Senate Banking Committee.
In that capacity, she helped draft legislation, including
the 2010 Dodd-Frank Wall Street reform law.
Several provisions of that law, however, have since come
under attack through industry lawsuits.
In 2011, for instance, the U.S. Court of Appeals for the
District of Columbia Circuit tossed out an SEC Dodd-Frank rule
that would have made easy for shareholders to nominate directors
to corporate boards.
The SEC ultimately decided not to rewrite it.
More recently, the SEC has also battled the industry over
several disclosure-related rules from Dodd-Frank.
One rule known as "extractive resources" would force energy
companies to disclose payments they make to foreign governments
for projects; the other would require manufacturers to say
whether their products contain certain "conflict minerals" from
the troubled Democratic Republic of the Congo region.
A federal judge tossed out the resource extraction rule, and
the SEC opted not to appeal it. The agency is planning to
rewrite the rule, but a timeline is still unclear.
The SEC prevailed in its defense of the conflict minerals
rule, but it was appealed.
During oral arguments, two of the three judges voiced
skepticism about whether the rule violated companies' First
The case has yet to be decided.
Stein did not voice her opinions on any of the rules that
have been challenged. But she said people's views about the
rules should not affect whether they get done, as long as
Congress mandated it.
"We should not be leaving any of our statutorily required
rulemakings behind," she said, "even those that some of us may
Over the years, many of the industry challenges have hinged
on flawed rulemaking procedures or a lack of proper economic
analysis to justify the rules.
In another speech at SEC Speaks on Friday, Republican
Commissioner Michael Piwowar, an economist, called on the agency
to continue improving how it studies its rules.
Better analysis, he said, "makes a rule less likely to be
challenged and overturned in court."
Some Dodd-Frank rules that could be prone to legal
challenges, such as the Volcker rule to ban banks' proprietary
trading, have recently come under criticism for a lack of
Federal Reserve officials have previously said they were not
required to do such an analysis because the Volcker rule was
mandated by Congress.
However, Piwowar took issue with this view Friday, saying
that just because a rule is required does not mean regulators
can skirt their responsibilities to study its economic impact.
(Reporting by Sarah N. Lynch; Editing by Lisa Von Ahn)