SEC Commissioner on Volcker, Money Funds, and Rubber Duckies

Jan 17, 2013

SEC Commissioner Dan Gallagher laid out his take on the commission’s 2013 agenda in front of a standing room only crowd yesterday at the U.S. Chamber. The overriding theme of his speech? “Better rules, not longer rules.”

Dodd-Frank—a law Gallagher called a “perfect example of not letting a good crisis go to waste”—passed two and a half years ago, but only one-third has been implemented, implying a long road ahead. With the SEC taking on ten times its normal workload because of Dodd-Frank, Gallagher said the commission will have to focus on what’s important to be effective, naming the Volcker Rule, money market mutual fund reforms, and capital requirements from the JOBS Act as issues on his radar.

A Workable Interpretation of the Volcker Rule

Gallagher criticized the October 2011 Volcker Rule proposal for being overly vigorous and lengthy. Gallagher said, “The proposal throws the baby out with the bathwater, along with the rubber ducky, the bathtub, and all of the plumbing for good measure.” 

SEC Commissioner Dan Gallagher speaks at the U.S. Chamber of Commerce on January 16, 2012.Despite the Volcker Rule’s architect admitting that “proprietary trading in commercial banks was there but not central" to the financial crisis and even the EU—known for its strict rules on financial institutions and banks—finding the rule too harsh, it is generally accepted that it will move forward in some form. Gallagher called the Volcker Rule a solution in search of a problem, but said that the final regulations to implement Volcker “should be codification of what most banks have already done” in preparation for rule’s regulations. 

The Jurisdiction of the Money Market Fund Issue

Last year the commission, then under the leadership of former Chairman Mary Schapiro, did not have support to take up a money market mutual fund proposal. The Financial Stability Oversight Council (FSOC) then stepped in with its own proposal, though Gallagher questioned if the issue was in FSOC’s purview and thought instead that the council should focus on preventing the next financial crisis. "We at the commission can and have been proceeding without too much reference to what's going on with FSOC."

Reform of money market mutual funds will be one of the "primary issues" that Gallagher expects the SEC to tackle in the coming months. He is supportive of looking at the floating Net Asset Value (NAV), but he did warn that “there are pretty serious tax and accounting issues that need to be addressed and haven't been addressed."

Not on the SEC Agenda

Also notable was what is not on the SEC’s agenda for 2013: a proposal to require that companies disclose their political spending. Gallagher said the issue was something on a “political wish list” and that it should not be a priority. As Reuters’ Sarah Lynch reported, “the lack of support effectively kills for now the measure which has been pushed by disclosure activists.”

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