Three more weeks have now passed since a supposedly "routine" April 7 vote in Congress to approve SEC commissioner nominees Lisa Fairfax and Hester Peirce was abruptly terminated without a vote even taking place. Surely the Senate has gotten its act together by now to confirm (or not) President Obama's nominees for the short-handed SEC, right? Think again.

To the contrary, all SEC commissioner-related proceedings in the Senate remain "postponed" indefinitely, with no new hearings in sight. As Ted Knutson, D.C. correspondent for Financial Advisor magazine joked last week on Twitter, "Look for SEC to put faces of Hester Peirce, Lisa Fairfax on milk cartons, nominated 1/2 year ago, they are no where to be seen." Today, Knutson reported on Twitter that when he asked Peirce when Sen. Richard Shelby, Chairman of the Senate Banking Committee, was going to move forward with her SEC nomination, she replied, "you are talking to the wrong woman."

The issue that is causing these nominations to drag on is the nominees' refusal to date to agree to Democratic senators' demand that the nominees promise that they will support a rule requiring publicly-traded corporations to disclose political contributions. Sen. Charles Schumer, who is on the Senate Banking Committee, stated after the hearing on April 7 that "the SEC needs commissioners who believe in and support campaign spending transparency, and unfortunately these nominees have yet to answer that call." Schumer accused the nominees of “fence-sitting” on the issue.

As former SEC commissioner Prof. Joseph Grundfest wrote this week in a WSJ op-ed, however, SEC commissioners are not permitted to participate in the adoption of a rule unless they are open to persuasion based on public comment. If a commissioner has an “unalterably closed mind,” the D.C. Circuit Court of Appeals has held, then he or she is disqualified.  

As Prof. Grundfest observes,

[a]ny nominee who agrees to such a demand effectively disqualifies herself from participating in the rule-making that the senator so ardently desires. By demanding the promise, Mr. Schumer and his colleagues destroy her ability to deliver on the promise. It also transforms the nomination process into a scene from the theater of the absurd: “I promise to support a policy position that I won’t be able to vote on because I am making this promise.”

Jack Katz, the former Secretary of the SEC for many years, recently told TheCorporateCounsel.net that he cannot recall a single SEC commissioner nominee in the past 40 years who failed to be confirmed, so history is in Fairfax and Peirce's favor. It may just take quite a while.

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