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News October 26, 2015 Issue

SEC Commissioner Nominees Face Key Votes

Lisa Fairfax and Hester Peirce are going to have an interesting few months ahead of them.

The two, nominated last week by president Barack Obama as SEC commissioners, will first face the sometimes-grueling process of Senate confirmation. Once confirmed, they are likely to be called upon to support SEC chair Mary Jo White’s agenda on issues such as the proposed data reporting rules for advisers and funds, the proposed liquidity risk management rules for mutual funds, and expected upcoming proposed rules on derivatives, transition planning, and stress testing.

The two will also be part of a Commission precedent once on board. The SEC, for the first time in its history, will have women as four of its five commissioners. Obama, in nominating Fairfax and Peirce, filled vacancies left by the departures of two male commissioners, Daniel Gallagher and Luis Aguilar. The two women already on the Commission are White and existing commissioner Kara Stein. Commissioner Michael Piwowar would be the sole remaining male member.

Traditionally, aside from the Commission chair, the other Commission members are split between Democrats and Republicans. Obama’s nominations continue in this tradition:

  • Fairfax is a Georgetown University law professor who has studied shareholder activism. Her name was reportedly on a list of possible nominees circulated by senator Elizabeth Warren (D-Mass.), generally considered a liberal in the area of financial regulation. She would also be the third African-American commissioner in the SEC’s history. She would replace Aguilar, whose term expired.
  • Hester is a former aide to Senate Banking Committee chair Richard Shelby (R-Ala.). She is a senior research fellow at the George Mason University’s Mercatus Center, described as a free-market-oriented think tank, and is a critic of the Dodd-Frank Act, and was the editor of a book called, "Dodd-Frank: What It Does and Why It’s Flawed." She would replace Gallagher, who resigned his seat earlier this month.

"The SEC has a lot of important work to do and it is critically important that the agency have a full complement of Commissioners," said Investment Adviser Association president Karen Barr. "We look forward to working with them at the SEC."

"Everyone would like to know how Peirce and Fairfax will vote on various issues," said Ropes & Gray counsel David Tittsworth. Referring to the issues on White’s agenda such as the proposed data reporting rules and proposed liquidity rules mentioned above, he said that they all "are driven by the SEC’s desire to retain its jurisdiction of asset managers and funds and to prevent an incursion by the Financial Stability Oversight Council or banking regulators."

"At least in concept, both Democratic and Republican Commissioners have found common ground on the broad notion of ceding SEC authority of the asset management profession to the banking regulators," he said. "Whether this translates to broad support by the Commissioners on all of these pending or anticipated rules remains to be seen."

"I suspect that the two candidates will bring very different world views to the Commission, and it will be interesting to watch how that plays out in terms of White’s agenda," said Stroock partner and SEC former Division of Investment Management deputy director Robert Plaze.