SEC Schapiro’s Exit May Stall Dodd-Frank Rules

Even split between Democratic, GOP commissioners could strand dozens of regulations.

When Mary Schapiro steps down as chairman of the U.S. Securities and Exchange Commission this week, she’ll leave behind a commission composed of two Democrats and two Republicans -- an even split that could drag an already sluggish agency to a standstill.

Dozens of rules could run aground, including the so-called Volcker rule to limit risky trading by deposit-holding banks, restrictions on executive pay, a ban on conflicts of interest in asset-backed securities and swaps-market regulations.


More recent is this year’s Republican-backed Jumpstart Our Business Startups Act, which passed Congress with support from both parties but now faces resistance from Democrats calling for more investor protections.

Pace Slowed

Law firm Davis Polk & Wardwell LLP has been tracking Dodd-Frank progress, and its latest report last week shows the SEC has finalized just 32 of the 95 rules the 2010 law required. In the first year after the law was enacted, the agency averaged nine votes a month to propose or adopt rules. The pace slowed by about half after the federal-court rejection of a rule for insufficient cost-benefit analysis.

2008 Crisis

Some of the SEC’s delayed rules strike at the root of the 2008 crisis, including one banning firms from designing asset-backed securities deals that put their interests in conflict with investors. The SEC didn’t propose the rule until September 2011, five months after the law said it should be adopted. The comment period was extended twice, and the commission hasn’t yet scheduled a final vote.

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