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UPDATE 1-U.S. SEC's White breaks her silence on controversial waiver policy
March 12, 2015 / 2:06 PM / 3 years ago

UPDATE 1-U.S. SEC's White breaks her silence on controversial waiver policy

(Updates with details from the speech, background)

By Sarah N. Lynch

WASHINGTON, March 12 (Reuters) - U.S. Securities and Exchange Commission Chair Mary Jo White on Thursday defended the process her agency follows when deciding whether to grant regulatory waivers to companies that break the law, saying it is not a “knee-jerk exercise.”

Thursday marked the first time White has publicly discussed her views on the waiver process, which came under scrutiny about a year ago after the agency’s two Democratic commissioners began accusing the agency of rubber-stamping waivers and creating a policy of “too-big-to-bar.”

White took a balanced approach to the issue, saying the SEC will not be deterred from denying waivers to big banks if necessary. At the same time, she said, waivers should not be viewed as an enforcement tool to deter misconduct.

“Denying a company a waiver under circumstances where the applicable legal standards to grant it are satisfied would be a miscarriage of our duty,” White said in comments at Georgetown Law’s Corporate Counsel Institute.

“Granting a waiver where it is not justified would also, of course, be a miscarriage of our duty and risk harm to investors and the markets.”

The discussion of SEC regulatory waivers was sparked last year by SEC Commissioner Kara Stein, who issued a scathing public dissent over a type of waiver granted to the Royal Bank of Scotland Group Plc after one of its units pleaded guilty to manipulating the Libor benchmark interest rate.

Stein accused the SEC of creating a policy of “too big to bar” by rubber-stamping waivers from banks that keep breaking the law.

White directly addressed the too-big-to-bar question on Thursday, saying no such view exists at the commission.

“One series of questions that has been raised in the dialogue is whether financial institutions ... are too big to indict or otherwise charge, too big to jail, or even too big to bar,” she said. “My answer to all of these and similar questions is a resounding ‘no.'”

Federal securities laws allow for disqualifying companies that break criminal laws or commit fraud from engaging in certain activities, such as private capital deals.

But companies can apply to the SEC and other regulators for waivers or exemptions that let them continue the activities as long as certain conditions are met.

Several top SEC officials, including Republican Commissioner Daniel Gallagher, have taken issue with Stein and Democratic Commissioner Luis Aguilar’s approach on waivers, arguing they are not meant to be an enforcement tool to deter repeat offenses.

White concurred with that sentiment in her speech Thursday. (Reporting by Sarah N. Lynch; Editing by Bill Trott)

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