Mary Jo White, chair of the U.S. Securities and Exchange Commission, delivered the 14th Annual A.A. Sommer, Jr. Lecture on Corporate, Securities, and Financial Law at Fordham Law School on Oct. 4.

In less than an hour, White described an agency with global reach that mirrors the ever-evolving markets it regulates. While dealing with fresh issues ranging from “flash trading” to “dark pools” and other high-speed phenomena, the SEC must also implement new rules put forth by the Dodd-Frank Act, the 2010 law that overhauled the nation’s financial regulatory system—all while remaining fiercely independent and nonpartisan, she said.  

In her talk, “The Importance of Independence,” White noted that the very law that the SEC is now charged with implementing almost stripped the agency of its regulatory power to protect investors of mutual funds when, in 2008, many in Congress wanted to create a new agency. White cited then-Chairman Mary Schapiro’s steadfast fight to keep the regulatory power under the agency’s “blanket of expertise”—despite pushback from the Obama administration—as a clear example of the agency’s independence.

Now three years since Dodd-Frank became law, the agency’s role in carrying out that law is firmly established. White listed a series of historic precedents that predated Schapiro’s 2009 stance, including several by the lecture’s namesake, Al Sommer. Sommer was sworn in as SEC commissioner shortly after the Watergate scandal tainted the agency as being too cozy with the Nixon Administration. White said Sommer quickly reestablished the SEC’s reputation as the most staunchly independent federal agency.

Nevertheless, one audience member questioned the agency’s independence as it relates to the “revolving door” between the SEC and private industry, a reference to the chair’s own background in the private sector.  White, however, said working in private practice made her a better U.S. attorney for the Southern District—a position she held for 19 years—and a better SEC chair.

“Being in private practice, you really learn about the respect and leverage that the SEC has. I don’t think the SEC folks who haven’t been in the private sector realize just how much leverage they have.”

Now, as chair, White said that she is acutely aware of the power the SEC has to impose criminal liability on private companies. She noted that certain Dodd-Frank rules passed by Congress invoking the commission’s mandatory disclosure powers are more directed at exerting societal pressure on companies, rather than requiring them to disclose financial information to inform investment decisions.

White said that such intent—whether to improve safety conditions of mines in the Congo, or environmental concerns—may be laudable to her as a private citizen but do not have a place in the SEC.

White maintained that while disclosure remains key to regulating securities, too much disclosure can lead to “information overload” that makes it difficult for investors to make decisions.

“To safeguard the benefits of this ‘signature mandate,’ the SEC needs to maintain the ability to exercise its own independent judgment and expertise when deciding whether and how best to impose new disclosure requirements,” she said.

The SEC’s unique expertise makes it best suited to determine disclosure rules consistent with the federal securities laws, said White.  She expressed concern that recent directives from Congress “have been quite prescriptive, essentially leaving no room for the SEC to exercise its independent expertise and judgment in deciding whether or not to make the specified mandated disclosures.”

Nevertheless, White said she recognized that when Congress and the president enact a statute mandating such a rule, she can’t say no. Instead, the commission must write the rules in a way that faithfully carries out Congress’ mandate.

White discussed how the courts review the SEC’s enforcement settlements requiring admissions of defendants’ wrongdoing even when a settlement is reached. She said she was the first U.S. attorney to require admissions as part of a deferred prosecution agreement with a corporation. Likewise, at the SEC she said admissions are appropriate.

“In some cases involving particularly egregious conduct or widespread harm to investors, for example, a heightened level of public accountability in the form of admissions may be called for if we are to send a sufficiently strong message of deterrence,” she said.

The free symposium, which focuses on regulations targeting the global derivative markets since the 2007-2008 economic crisis, is expected to bring together representatives from the academic, private practice and regulatory communities of business law to exchange ideas.

“Derivatives were a leading culprit behind the recent financial crisis, and the goal of much recent financial system regulation has been to make sure such an event doesn’t happen again,” said Sean J. Griffith, T.J. Maloney Chair in Business Law and director of Fordham’s Corporate Law Center. “Since many of these regulations are new, the symposium will serve to evaluate what the likely effects will be and whether these regulations can succeed.”

Fordham’s overseas campus was chosen as the symposium’s venue, said Griffith, because London is a leading financial center for derivatives.

Fordham Law’s center has partnered with the Office of International and Non-JD programs, Fordham’s business schools, the London campus and Oxford University to design an all-day program. Among those presenting are:

• Daniel Awrey, Oxford University lecturer in law and finance fellow, on ‘Toward a More Robust Theory of Complexity and Innovation within Modern Financial Markets;”

• Griffith on “Incentive Problems and Governance Solutions in Derivative Clearing,” and

• Richard Squire, associate professor of law at Fordham, on “Shareholder Opportunism in a World of Risky Debt.”

Afternoon roundtables that include regulators from the United States’ Securities and Exchange Commission (SEC) and the European Commission’s Internal Market Directorate General, will discuss clearing and transparency issues, among others.

Griffith noted that the idea for the conference grew out of an integrated law and business school seminar on global finance that he co-taught with John D. Finnerty, Ph.D., professor of finance. The venue of Fordham’s London Centre at Heythrop College, he said, can also serve to  raise Fordham’s global profile.

Fordham’s Corporate Law Center, founded in 2001, helps foster the discussion and study of business and financial law through public lectures, roundtable discussions, expert panels, and academic symposia on topics of current interest. The center is co-sponsoring the event with the Office of International and Non-JD programs.

Griffith said that the center hopes to do more global finance symposia, choosing different venues around the world to coincide with issues being presented.

For more information, see the full day’s schedule on the Fordham Law website.