The last time there were vacancies on the Securities and Exchange Commission, it took two presidential administrations and more than two years to fill those seats.

In June, President Trump, hoping to avoid another agency-crippling Congressional impasse, was quick to nominate Elad Roisman, upon news of Commissioner Michael Piwowar’s planned departure.

On July 24, Roisman, a Republican, made his pitch for the job during a nomination hearing before the Senate Banking Committee. His term would expire on June 5, 2023.

Roisman said that joining the SEC would be a natural extension of his past experience. “My professional experience as a securities lawyer at a global law firm, a chief counsel at NYSE Euronext, counsel to an SEC commissioner, and now chief counsel on this committee, have afforded me a broad spectrum of experiences that would enable me to effectively serve the public and carry out the SEC’s mission should I be confirmed,” he testified.

“While serving as a chief counsel at NYSE Euronext, I saw firsthand the excitement and pride of entrepreneurs and innovators when they rung the opening bell as their companies went public, enabling them to grow their companies, invest in communities, and allow investors to share in their success,” he added. “My belief in the importance of fair markets and the role they play in our country is what motivated me to move from New York to Washington, D.C., and join the SEC [to serve as counsel to former Commissioner Daniel Gallagher].”

He pledged to “utilize my insights and experiences from the private sector and passion for the securities markets to help further the SEC’s important mission.”

To maintain the U.S. capital markets’ reputation as “the envy of the world,” the “importance of the SEC’s role in this cannot be overstated,” Roisman said. The Commission “must examine and re-examine its rules, regulations and guidelines to ensure that they are still working as intended.”

This imperative most recently manifested in areas such as data protection and cyber-security, as well as the emergence of new investments and technologies like initial coin offerings and blockchain, Roisman said. “It is essential that the SEC approach these new challenges in a fair and transparent manner, provide clarity and certainty to the markets and investors, and enforce the laws and regulations that hold market participants accountable,” he added.

Sen. Mike Crapo, chair of the Senate Banking Committee, was effusive in his praise for his former colleague. “Elad—thank you for being a trusted advisor and resource to me, and to others on this committee,” he said. “We will be sad to see you go, but the SEC will have gained a tremendous asset from which our whole country will benefit.”

Sen. Sherrod Brown (D-Ohio) was not as easily impressed. “Although I expect Mr. Roisman to face many difficult issues, if he is confirmed, I hope that he pays attention to the downward trend in enforcement actions and penalties,” Brown said. “Market participants need to see meaningful efforts by the SEC to enforce the law and punish bad actors. Ten years after the financial crisis, we are reminded that regulators failed to hold any senior executives accountable for the widespread misconduct that devastated millions of families.”

“Tough enforcement policies can discourage wrongdoing and maybe even help avoid the practices that led to the last crisis,” he added, urging Roisman to “do everything you can to make strong enforcement a priority.”

“It is important for the SEC, if they have rules on the books, to enforce them,” Roisman said. “There is no place in our markets for bad actors.” Enforcement of securities laws, he added, need to be “accurate and transparent.”

Sen. Bob Menendez offered a specific enforcement concern. “I think we can all agree that the SEC functions best with a strong Enforcement Division that stays ahead of the markets,” he said. “Unfortunately, over the past 18 months, the Commission has taken steps to undermine its enforcement capabilities.”

He explained that, in 2009, former SEC Chair Mary Shapiro expanded the investigative authorities of senior officials in the Enforcement Division, “a critical post-crisis decision.”

Last year, while serving as acting chairman, Piwowar scaled back those powers, taking subpoena and investigative authority out of the hands of Enforcement Division staffers and limiting them to its director. Chairman Jay Clayton, thus far, has upheld that decision.

“Since you were at the SEC when this stronger enforcement policy was in place, is it problematic in your view?” Menendez asked.

“One concern folks have had with employees having the ability to issue subpoenas is when there may be an ongoing investigation in another office,” Roisman said. “For example, one of the advantages of having director-level is that they have lines of sight into all enforcement cases. Also, when you keep it at the director level, you have people who have authorized subpoenas in multiple cases and know when it is appropriate or not.”

Roisman’s views on a proposed SEC “fiduciary rule’ for brokers were also questioned and challenged throughout the hearing.

On April 18, the SEC made good on past promises and proposed a package of proposals—more than 1,000 pages, with 1,800 footnotes—to “address retail investor confusion about the relationships that they have with investment professionals.”

Under the Commission’s proposed Regulation Best Interest, a broker-dealer making a recommendation to a retail customer would have a duty to act in the customer’s best interest, without putting their own financial or other interests ahead of the client. Firms face requirements to disclose to their retail customers key facts about the relationship, including material conflicts of interest.

“Despite a 2011 SEC study recommending a uniform standard of conduct for brokers and investment advisers, the SEC’s recent proposal fails to establish a uniform standard of conduct for broker dealers and investment advisers,” Menendez said. “It puts the burden on the customer to understand the difference between brokers and investment advisors, ignoring the SEC’s own findings

“Why should customers have to bear the burden of trying to decipher the complex legal relationships to understand whether they are making good investment decisions?” he asked. “I have some serious concerns with the proposal and don’t think it will come close to eliminating the conflicts that hurt American families.”

“I think it is important for there to be investor choice and different types of services provided to investors,” Roisman said, avoiding the fundamental question of whether he does, or does not, support the proposal as drafted. “I think it is important for investors to understand the nature of their relationship with a financial services provider… if there are conflicts, they need to be addressed. Whatever the SEC, or another agency does [on that front] is critical.”

“If you are on Medicare, your doctor cannot get kickbacks from drug manufactures in exchange for prescribing their drugs,” added Sen. Elizabeth Warren (D-Mass.). “Your lawyer cannot represent the opposing party in a lawsuit. So, why should your broker be able to have serious conflicts of interest, like receiving monetary rewards or other perks for recommending certain investments, even if those investments are not in the customers best interest?”

“First of all, the SEC has traditionally been a disclosure agency,” Roisman said. “One of the things that you try to do is provide information to investors so they can make informed decisions. It is important for them to have adequate disclosure to understand the nature of the relationship, including how conflicts of interest exist and how they can be addressed.”

What should a proper fiduciary standard look like? Things that are important, in Roisman’s view, include securing access to financial advice, ensuring that investors understand their relationship with a financial advisor, and ensuring access to financial advice. Investors also need to “understand their relationship with a financial services provider, including any conflicts, how they are addressed or mitigated.”

“Another critically important thing to consider is whether the rule is revenue-model neutral,” he added, “meaning that the SEC is not picking winners and losers, and is preserving consumer choice.” He similarly stressed that it is “critical to preserve the marketplace for small investors” and keep firms from shunning them in favor of more profitable customers.

No date has been set for when Roisman’s nomination heads to the full Senate. Next up on the SEC nomination front if he is conformed: replacing Commissioner Kara Stein, a Democrat currently serving past her intended term.

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