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Candidates Hit SEC Over Revolving Door, Political Spending

Joe Mont | September 1, 2015

The Securities and Exchange Commission found itself in the crosshairs of two 2016 presidential candidates this week.

On Monday, Hillary Clinton co-authored a Huffington Post article with Sen. Tammy Baldwin (D-Wis.) on the so-called “revolving door,” a career path where financial industry personnel join regulatory agencies and later return to their former firm or a competitor. Bringing private-sector experience into the government can, at times, be an asset, they wrote, but it can also affect the public trust “if a public servant's past and future are tied to the financial industry.”

“That's when people start worrying that the foxes are guarding the hen house,” the co-authors added.

The piece was intended to garner support for the proposed Financial Services Conflict of Interest Act, co-authored by and Rep. Elijah Cummings (D-Md.). The bill would require senior financial service regulators to recuse themselves from any official actions that directly or substantially benefit the former employers or clients for whom they worked in the previous two years before joining federal service. Government employees would be barred from accepting bonuses from their former private sector employers for entering government service.

The legislation would also expand the current prohibition on federal examiners from accepting employment with any financial institutions they oversaw from one year to two years. Government procurement officers would not be allowed to work for companies that received contracts overseen by the procurement officers during their last two years in government service.

Senators Elizabeth Warren (D-Mass.) and Brian Schatz (D- Hawaii) have signed onto the Senate bill as co-sponsors.

Later that same day, Clinton’s rival for the Democratic nomination, Sen. Bernie Sanders (D-Vt.), joined 39 other senators in signing a letter to SEC Chair Mary Jo White that demands action on a rulemaking petition for the disclosure of political contributions by public companies.  

 “We believe this is consistent with the SEC’s requirement for public companies to disclose meaningful financial information to the public,” the senators wrote. “Because shareholder are the true owners of a corporation, a public company should be required to disclose to its owners how their money is being spent. When it comes to spending on political activity, only roughly 2.2 percent of all pubic companies in the United States make such disclosures, and they do so voluntarily. We ask that you make this a top priority for the SEC in the near term, and inform us of the basis for your decision should you not plan to include it on the Commission’s agenda for the coming year.”

The push for political spending disclosures initiated with a Petition for Rulemaking filed by a team of 10 prominent law professors. Robert Jackson, an associate professor at Columbia Law School, and Harvard Law School Professor Lucian Bebchuk spearheaded the effort in 2011. An amended rulemaking request was submitted to the SEC in 2014 by the advocacy group Citizens for Responsibility and Ethics in Washington. The petition, thus far ignored by the SEC and kept off its rulemaking agenda filed with the White House’s Office of Management and Budget, has garnered 1.2 million comment letters, sparked a superhero-themed ad campaign, and is the subject of a current lawsuit.