Securitization professionals have been wondering if the exit of Chairman Mary Schapiro from the Securities and Exchange Commission in December, leaving a commission of two Democrats and two Republicans, could hinder the agency’s rulemaking process. With Chairman Elisse Walters temporarily taking the post and Mary Jo White nominated by President Barack Obama to replace her, the commission is in transition. Republican Commissioner Troy Paredes sought to provide a measure of relief from fears of a potential slowdown in regulatory progress at Tuesday’s keynote address, framed as a question-and-answer session between Paredes and the American Securitization Forum’s Executive Director Tom Deutsch, managing director of public policy Jim Johnson, and managing director and senior counsel Evan Siegert.
“If it is of course the case that Mary Jo White is confirmed, that would be quite a bit of change at the chairman level in a relatively short period of time,” said Paredes, adding , “I have no doubt that the agency is going to be … well positioned to continue to fulfill our responsibilities.”
Paredes expressed his concern that regulatory “overhang” could continue to impede the improvement of market conditions, describing the regulatory regime he has been a part of since 2008 as “frankly quite challenging,” but added that “our sleeves are rolled up.”
Impeding the commission’s ability to focus on moving the process forward, Paredes noted, is the fact that commissioners’ private meetings between one another are limited due to the Government in the Sunshine Act of 1976, which requires all agency meetings to take place publicly. While transparency is crucial to the SEC’s mission, he said, “It does place … not insignificant limits on the ability of the commission to get together and talk things through collectively, because in effect … the Sunshine Act … doesn’t allow more than two of us to sit down and talk an issue through without it being pursuant to an open meeting.”
Paredes also addressed his views on Regulation AB II’s requirement that private 144a offerings include elements of disclosure usually limited to publicly registered transactions, saying that he has previously expressed concern “that we were going too far in treating the private market just like the public market, and that, as a consequence of that, we may compromise the value that the private market brings to bear.” He added that the thought that the relative lack of legal protections for investors in the private-label market makes such disclosure requirements important is obviated in part by the sophistication of the investors in the space.
“I remain unpersuaded that the fundamental reason that the securitization market has been struggling in the last few years is because we don’t have a piling on of regulatory demands,” he said. “That’s not to say there is not some room for improvement” in disclosure enhancements, but that the SEC could “end up undercutting the objective of trying to move the ball forward when it comes to the securitization market being conditioned to take off again.”
To which Deutsch replied, on behalf of attendees who received less resolute answers from some regulatory panelists yesterday, “Hallelujah, brother.”