This week, the Senate Banking Committee held a hearing on the two pending nominees for SEC Commissioner and senators wasted no time peppering the nominees about their views on the SEC's priorities, including the completion of outstanding Dodd-Frank executive compensation rules and the SEC's ability—and desire—to hold individual executives accountable for corporate scandals. During the hearing, when asked about their specific priorities upon being confirmed, Republican nominee Hester Peirce emphasized evaluating market structure while Democrat nominee Robert Jackson, a former TARP official with expertise in executive compensation, highlighted the need to complete the pending Dodd-Frank rules, specifically pointing to clawbacks. As a follow-up to Mr. Jackson's response, Ranking Member Sherrod Brown (D-OH) discussed the Equifax scandal and queried Mr. Jackson on how the public can be sure that companies are disclosing the right content at the right time. In a noteworthy response, Mr. Jackson stated the current disclosure system's foundation on the concept of "materiality"—what a reasonable investor would consider important in making an investment decision—is "not keeping pace" with current events and should be re-evaluated.
In another oft-repeated line of questioning by senators from both sides of the aisle, the nominees were asked what specific steps they would take to bolster "individual executive accountability." Ms. Peirce responded that she was worried that "we are too often seeing [company] settlements [with the SEC] which are only using shareholder money with no individual accountability" and that she would re-examine the enforcement strategy if confirmed. Mr. Jackson agreed, adding that he believed the SEC may lack the needed tools to hold individuals accountable and that the law should be updated to allow the agency to do so more effectively.
At the end of an otherwise cordial hearing, Senator Elizabeth Warren (D-MA) targeted both nominees on the outstanding Dodd-Frank rulemakings, specifically naming the incomplete pay for performance, clawback, and financial services incentive compensation rules. Ms. Peirce's refusal to endorse prompt completion of the rules provoked a stern admonishment from Sen. Warren, who demanded the SEC "stop [the] lawless behavior" of not completing mandated rulemakings.