A Washington turf battle between the SEC and the FSOC spilled into public view in comments by SEC Commissioner, Dan Gallagher. The comments, made at the Practicing Law Institute’s “SEC Speaks” forum last Friday, criticized recent action taken by FSOC, created by the 2010 Dodd-Frank-Act.
Central to the dispute is money market fund reform – stemming from the 2008 Reserve Fund meltdown. In November, after the SEC abandoned a reform proposal, the FSOC put forward a near-identical reform measure to overhaul the $2.6 trillion money-fund industry. Gallagher cited what he and others perceive to be a threat to the SEC’s ability to function independently and its status as the primary federal regulator of investment products.
Former SEC Chairman, Mary Schapiro, who led the SEC’s aborted reform proposal, said that the FSOC’s role is critical to financial regulation. Citing the FSOC’s action in an interview earlier this week, she noted, “otherwise, it would have died at the SEC.”
Among its responsibilities, Congress charged FSOC with the authority to recommend to primary financial regulators, including the SEC, application of “new or heightened standards and safeguards for financial activities practices.” “It is immensely troubling then to think of the FSOC as an institutionalized mechanism for one set of regulators to pressure another in the latter agency’s field of expertise – yet that is exactly what is happening, “ said Gallagher.