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SEC’s Piwowar cleared of overstepping bounds with rule re-proposals

Joe Mont | September 6, 2017

A review of actions taken by Commissioner Michael Piwowar, while serving as acting chairman of the Securities and Exchange Commission, concluded that no laws governing the Commission were violated.

“Our review identified no evidence that his actions could either undermine the SEC’s mission or potentially prove to be a waste of SEC staff time and resources,” says a letter from SEC Inspector General Carl Hoecker to Senate Democrats, who requested the investigation, says.

Piwowar was first appointed to the SEC by President Barack Obama and was sworn in on August 15, 2013. He was designated Acting Chairman of the SEC by President Trump from Jan. 23, 2017, to May 4, 2017, when the Senate confirmed Jay Clayton as the next Chairman of the SEC.  During his tenure, he advanced a reconsideration of rules related to conflict minerals and the disclosure of CEO pay as a ratio to a company’s median employee.

In March, a quartet of Senate Democrats who are demanding that Hoecker conduct an investigation into the two actions.

“Piwowar has directed the Commission staff to reconsider two congressionally mandated SEC final rules and scaled back the investigative powers of the agency's enforcement staff,” they wrote. “We are concerned that Commissioner Piwowar's actions may lack adequate justification, undermine the SEC's mission, exceed his authority as Acting Chairman, violate other procedural requirements, and could potentially prove to be a waste oft he SEC staff's precious time and resources.”

Their argument:  Piwowar's position as Acting Chairman is temporary; he has not been confirmed by the Senate as chairman; he will hold the Acting Chairman title only until the Senate confirms a permanent chairman and the SEC has lacked a traditional quorum during his entire tenure as acting chairman because there has only been one additional confirmed commissioner.

“Nevertheless, Commissioner Piwowar ‘has decided to jumpstart the deregulatory agenda,’ freezing unfinished Dodd-Frank requirements and opening the door to scaling back some completed rules he considers 'politicized,' a major exertion of authority for a position usually seen as a short-term caretaker," the letter says. It later adds: “Piwowar's political views are not a sound basis for undoing a congressional mandate and re-opening a final SEC rule for comments only on supposed industry hardship.”

Signing the letter were Sens. Sherrod Brown (D-Ohio), Elizabeth Warren (D-Mass.), Robert Menendez (D-N.J.), and Brian Schatz (D- Hawaii).

“Based on our review and analysis of the issues raised in [the letter], we are unable to conclude that Commissioner Piwowar exceeded his authority during his 3-month tenure as SEC Acting Chairman,” Hoecker wrote. “We are likewise unable to conclude that he violated other procedural requirements under current law, or that his actions lacked adequate justification. Moreover, we are unable to conclude that Commissioner Piwowar’s actions may serve to undermine the SEC’s mission or could potentially prove to be a waste of the SEC staff’s time and resources.”

As for the lack of a traditional quorum during Piwowar’s tenure as acting chairman, “we did not find that [his] decision to opine and seek public input on the final SEC Pay Ratio and Conflict Minerals rules constituted ‘agency action,’ therefore, no quorum was required in any event,” the report says. “Additionally, we cannot conclude that then-Acting Chairman Piwowar was required to seek fellow Commissioner Stein’s approval prior to directing SEC staff on Jan. 31, 2017, to reconsider the appropriateness of the 2014 Conflict Minerals rule guidance.”