SEC's Republicans won't back political disclosure rule

Reuters News
Posted: Jan 16, 2013 3:30 PM

By Sarah N. Lynch

WASHINGTON (Reuters) - There is not enough support among top U.S. Securities and Exchange Commission officials to advance a proposal that would require companies to disclose their political spending, a Republican commissioner said on Wednesday.

Daniel Gallagher said the agency had other priorities, and said the two Republican commissioners would not back such a measure.

With the SEC currently divided between two Democrats and two Republicans, the lack of support effectively kills for now the measure which has been pushed by disclosure activists.

"That should not be one of our priorities," Gallagher told the U.S. Chamber of Commerce. "That is just a political wish list."

In his first public speech of 2013, Gallagher said he sees other issues as more important, including money-market fund reforms, Dodd-Frank Act rules, and capital-raising regulations required by the 2012 Jumpstart our Business Startups, or JOBS, Act.

Gallagher's comments will be a blow to supporters of political spending disclosure, who had been heartened by a federal notice in December saying a rule was under consideration.

The call by some for more disclosure on campaign spending comes after the Supreme Court's "Citizens United" ruling in 2010 that found independent expenditures by corporations are constitutional.

That decision paved the way for a dramatic increase in political action committees known as Super PACs, which played a major role in the 2012 presidential campaign.


While Gallagher was not enthused about the idea of a political spending disclosure rule, he was more optimistic on a proposal to reduce the risk of runs on money market funds.

Former SEC Chairman Mary Schapiro last year had sought to propose a series of potential reforms. But she could not muster the votes from Gallagher, his fellow Republican commissioner Troy Paredes, or Democratic commissioner Luis Aguilar.

She also faced staunch opposition from the $2.6 trillion fund industry.

Schapiro said more reforms were needed to prevent a repeat of the Reserve Primary Fund incident during the financial crisis. Heavy exposure to collapsed investment bank Lehman Brothers caused the net asset value (NAV) of the Reserve Primary Fund, a large money market fund, to fall below $1 per share, or "break the buck" in industry parlance.

That had a ripple effect that destabilized global markets.

Schapiro, who retired in December, had suggested capital buffers coupled with redemption hold-backs. Another option involved moving from a stable $1 per share net asset value to a floating NAV, so that investors would not get spooked by the prospect of funds breaking the buck.

After the SEC hit a stalemate, the newly created Financial Stability Oversight Council stepped in late last year and issued a similar proposal in an attempt to pressure the SEC to act.

Gallagher has previously said he could be open to the idea of floating the NAV, as long as the tax and accounting issues were properly addressed.

On Wednesday, he told the Chamber he is optimistic the tax and accounting issues can be resolved, saying the SEC has authority over accounting standards and hopefully can "figure something out there."

(To watch Gallagher's remarks, go to


Gallagher on Wednesday also blasted the proposed Volcker rule, a Dodd-Frank requirement that would ban banks from proprietary trading.

He said the rule, which was jointly proposed by the SEC and banking regulators, needs to be scrapped and re-drafted. He also lamented that the SEC is "playing second fiddle" to the banking regulators in how it is crafted.

The SEC has been far behind in completing many of the rules required by the Dodd-Frank Wall Street oversight law to regulate the roughly $640 trillion over-the-counter derivatives market.

However, Gallagher told reporters on the sidelines of the event that a critical proposal on how derivatives regulations will be applied overseas could be unveiled as early as next month.

(Reporting By Sarah N. Lynch; Editing by Gary Hill, David Gregorio and Tim Dobbyn)