Will the SEC Survive Financial Regulatory Reform?

Abstract

The Securities and Exchange Commission’s (“SEC”) conspicuous failures during the financial crisis of 2008 have led many to question the agency’s relevance in the modern financial era. Some commentators have called for the creation of new super-agencies to assume a substantial portion of the SEC’s duties. Others highlight enforcement failures and question the agency’s commitment to its investor protection mission. Despite its recent missteps and persistent calls for regulatory overhaul, the SEC’s future seems secure for now as President Obama’s reform proposals (the “Obama Plan”) as currentlyconceived preserve the agency’s independence. Although thus far the Obama Plan protects the SEC’s status as an independent agency, several aspects of the plan threaten the agency’s long-term prospects. The proposal to expand the executive branch’s role in oversight over financial institutions may represent the beginning of an incremental encroachment on SEC authority. Similarly, the proposed Consumer Financial Protection Agency could absorb a portion of the SEC’s traditional investor protection role. In the end, the SEC’s survival depends on whether its leadership takes effective action to restore its credibility and regain the public trust in the years to come.