Securities and Exchange Commission Chairman Mary Jo White rebuffed calls by House Republicans to forswear a rule that would force public companies to disclose political spending, saying she won’t “prejudge the issue.”
Responding to lawmakers who pressed her on the matter at a Financial Services subcommittee oversight hearing today, White said the SEC’s staff is reviewing a 2011 petition for such a rule signed by a group of prominent law professors.
“No one is working on a proposal now,” she said.
The agency’s rulemaking agenda indicates it is studying whether to propose a rule. Republicans urged White to swear off any action on the issue, calling it a partisan undertaking that would hurt the SEC’s credibility as a regulator.
Debate over corporate political spending gained attention after the U.S. Supreme Court ruled in a 2010 case known as Citizens United that companies and unions could spend unlimited money on election ads. More than 500,000 comments have been filed in response to the petition, which is supported by the Council of Institutional Investors and the American Federation of State, County and Municipal Employees.
The U.S. Chamber of Commerce and other large business groups oppose the call for a rule.
“These types of political witch-hunts will only poison the well and make achieving your other priorities all the more difficult,” said Representative Scott Garrett, a New Jersey Republican.
Representative Jeb Hensarling, the Texas Republican who leads the Financial Services Committee, sought to tie the issue to the furor surrounding the Internal Revenue Service’s selective screening of nonprofit groups with ties to the Tea Party movement, which caused the resignation yesterday of the IRS’s acting commissioner.
“This rulemaking is well-known to be part of a partisan political agenda of labor union bosses, George Soros and assorted leftist groups who conveniently would not have to abide by the rule,” Hensarling said.
The SEC has three statutory purposes -- protecting investors; maintaining fair, orderly and efficient markets, and facilitating capital formation, Hensarling said.
“That is why it is most disturbing to many of us to realize that while the SEC has missed numerous mandatory rulemaking deadlines, it is devoting time and resources to a discretionary rulemaking and more specifically, a highly controversial discretionary rule,” he said.
White told lawmakers that a House bill that would mandate how the SEC uses cost-benefit analysis would create new risks for agency rule-writers. The legislation would require the SEC to review existing rules on a regular basis and judge whether they are outmoded or should be changed.
“That pops out to me as creating uncertainty for the market and putting the rules under constant challenge,” White said. “That would create a lot of litigation that would undermine our ability to do our job.”
The House is scheduled to vote tomorrow on the bill, which President Barack Obama’s administration has said it opposes.
The SEC issued new guidance to inform its economic analysis in March 2012, eight months after the U.S. Court of Appeals for the District of Columbia invalidated an agency rule citing inadequate economic review.
A report sponsored by the Chamber of Commerce, issued in March, said the SEC’s 2012 guidance should be an example for other financial regulators. The Government Accountability Office wrote in December that the SEC had improved its use of economic analysis in rule-writing policies.
Lawmakers also pressed White to explain the SEC’s plan for a pilot to test wider tick sizes for small stocks. The regulator held a roundtable in February that solicited views on how to build a pilot program.
Proponents of widening tick sizes, or the minimum quoting increment for bids and offers, say it would encourage more interest in lightly traded stocks.
“We’re sort of looking at whether there should be one or more pilot programs in order to further that, and that decision ought to be made pretty quickly,” White said.
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