WASHINGTON (Reuters) - The 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 Amendment rights.
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 not like.”
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 economic analysis.
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