On Oct. 24, the Senate Banking Committee met in open session to interview Hester Peirce and Robert Jackson, Jr., President Trump's nominees to fill open seats on the Securities and Exchange Commission.
Jackson is nominated for the remainder of a five-year term expiring June 5, 2019. He is a professor at Columbia Law School and director of its program on corporate law and policy. His academic work focuses on corporate governance and the use of advanced data science techniques to improve transparency in securities markets.
His career has spanned the public and private sectors. He served as a senior advisor at the Department of the Treasury during the Financial Crisis, assisting Kenneth Feinberg in his work as special master for TARP Executive Compensation, and previously worked as a lawyer in private practice.
Jackson holds two bachelor's degrees from the University of Pennsylvania, an M.B.A. in Finance from the Wharton School of Business, a master’s degree from Harvard’s Kennedy School of Government, and a law degree from Harvard Law School. He may be best known to SEC watchers as one of the professors who spearheaded a campaign, and petition for rulemaking, seeking the disclosure of political contributions by public companies.
Peirce would serve for the remainder of a five-year term expiring June 5, 2020. She is a Senior Research Fellow at the Financial Markets Working Group at the Mercatus Center at George Mason University. Previously, she served on the staff of the Senate Banking Committee, and as a staff attorney with the SEC from 2000 to 2008.
She is the editor and a contributor to the 2012 book, “Dodd-Frank: What It Does and Why It’s Flawed.” The book concludes that Dodd-Frank "not only fails to achieve many of its stated goals, it also creates dangerous regulatory pathologies that could lay the groundwork for the next crisis."
Peirce was an unconfirmed nominee to fill the same post by President Obama back in October 2015. Neither she, nor fellow nominee Lisa Fairfax, a Democrat and law professor at the George Washington University Law School, garnered the full and necessary support of Senate Democrats.
“The nominees to serve on the SEC will finally bring the Commission to full strength at a critical time,” Sen. Sherrod Brown (D-Ohio), said at the hearing. “The SEC has joined corporate America as a cyber-attack victim. Not only must the SEC protect the data it collects, it must make sure the public companies that are the engine of our economy are upfront with investors and their customers about cyber-risks and breaches.”
“The failure to hold any senior executives responsible for the massive misconduct during the Financial Crisis stands out as a failure in enforcement and not just at the SEC,” he added. “Ms. Peirce and Mr. Jackson, this is something that should bother you as well, and if you are confirmed, I expect you to do everything you can to promote a strong enforcement program.”
“I desire to return to the SEC because I believe that individuals, institutions, and innovation are important to our capital markets and the broader society,” Peirce said in her opening statement.
“An effective institutional framework establishes reasonable rules, fosters compliance, and swiftly pursues violations when they occur,” she added. “It does all of these things with an unwavering commitment to due process. The SEC is a key part of our institutional framework. It is therefore incumbent on the SEC to lay out clear rules, enforce them diligently and impartially, and modernize them when necessary.”
“If regulation is appropriately flexible, innovation can bring new investors into the financial markets, lower prices, and improve the quality of financial products and services. Innovation forces existing companies to stay on their toes and pushes them aside when they fail to meet people’s needs,” Peirce said. “A regulatory structure that blocks new firms or prohibits innovation lets existing companies grow complacent to the detriment of the rest of the economy. By contrast, a regulatory system that invites competition ensures that the capital markets work for Main Street.”
She said she looked forward to, given the opportunity, working “to implement, enforce, and modernize rules that support healthy, dynamic capital markets.”
Jackson opened his remarks by stating that “there is no greater privilege or responsibility than upholding the SEC’s mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate access to capital.”
Jackson told the Senate panel about growing up in the Bronx, using those memories to establish his interest in the fair and well-functioning markets.
“Every month my parents plowed their hard-earned paychecks into the market, knowing that if their investments were protected and growing they would one day be able to afford to send me to school. That’s really the only reason why I had the chance to go to college,” he said.
“I believe that the SEC’s purpose is to protect everyday investors like my Mom and Dad,” he added. “Because today’s markets are so complex, it can be easy to get lost in technical details and forget why those safeguards are so important. But my story shows why protecting America’s investors is at the heart of what the SEC does. Safe markets not only encourage investment and entrepreneurship and growth.”
Safe markets, Jackson said, “are at the core of the American dream.”
“At the Treasury Department during the Financial Crisis, I was proud to help develop rules that tie top managers’ pay more closely to performance and give investors a voice on executive compensation,” he added. “When my research team at Columbia Law School showed that the SEC’s systems were inadvertently giving high-speed traders market-moving information before the public could see it on the SEC’s website, I worked with this Committee’s staff to help make sure the SEC gave investors the level playing field they deserve.”
Jackson said he would be “a strong advocate for exploring how new technologies can make corporate disclosures more reliable and enforcement efforts more effective and efficient.”
“I will encourage the Staff and my fellow Commissioners to draw on the SEC’s long history of favoring transparency as a means of maintaining investor confidence in our markets,” he said. “And I will work to implement the corporate-governance protections that Congress has enshrined into law—so that investors, employees, and communities can be sure that our companies are working to produce the kind of long-term value creation that has been the hallmark of the American economy for generations.”
Compliance Week will have full coverage of the nomination hearing in our Oct. 31 newsletter.