July 22, 2011
Dodd-Frank@1: Reforming the SEC?
Posted by joanheminway

As some of you know, I have been following and assessing (through the lens of change leadership literature) reform efforts at the Securities and Exchange Commission during the Obama administration.  My former articles on this topic are available here and here.  In last year's forum, I posted about the numerous studies mandated by Dodd-Frank.  This post (as well as a short discussion group paper I have written for next week's SEALS conference) in some small way brings those two lines of thought together.

Section 967 of Dodd-Frank calls for the SEC to "hire an independent consultant of high caliber and with expertise in organizational restructuring and the operations of capital markets to examine the internal operations, structure, funding, and the need for comprehensive reform of the SEC, as well as the SEC’s relationship with and the reliance on self-regulatory organizations and other entities relevant to the regulation of securities and the protection of securities investors that are under the SEC’s oversight."  The section goes on to prescribe the areas of study and require that the independent consultant render a report to SEC and the U.S. Congress “[n]ot later than the end of the 150-day period after being retained.”  The SEC hired BCG--The Boston Consulting Group--to conduct the study.  The resulting 256-page report (not including the cover page, table of contents, and glossary) was issued on March 10, 2011.  To what effect?  Were my tax dollars well spent on this legislative and regulatory exercise?

The SEC was reforming itself in ways consistent with the contents of the BCG report before the study was conducted.  But the BCG report does add new ideas and actons to the mix.  And the BCG report notes that without appropriate funding, Congress must cut back on the mandates for the agency's activities (a no-brainer, but perhaps a useful apolitical observation). 

Bottom line?  We should develop assessment rubrics and processes to evaluate the efficacy of congressionally mandated studies.  Under Section 967(c) of Dodd-Frank, the SEC must report out to Congress on its progress in implementing the BCG report every six months for the two-year period following the report's issuance.  That means the first report is to be made in September 2011.  Without an assessment tool, Congress will be ill-equipped to handle that report.  I fear that the conversation will lapse into political line-drawing, rather than focusing on regulatory efficiency and effectiveness.  [sigh]

And who, in the end, will evaluate the quality of Congress's judgment in requiring the study and the implementation of its findings?  Might the SEC have done just as well in continuing on the road to reform it had been on pre-Dodd-Frank? . . . . 

Masters: Dodd-Frank@1 | Bookmark

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