The Securities and Exchange Commission's new chairman seems more eager to pass new rules allowing hedge funds to advertise than either of her predecessors.
While the regulator has received more than 200 comment letters about the proposal to end the 80-year-old ban on hedge fund marketing, Mary Jo White does not seem inclined to make major changes to the draft regulation formally introduced in August. Instead, White reportedly hopes to add investor protections to the rule later, Bloomberg News reports.
The rule was mandated by last year's JOBS Act, and the SEC was given until this past July to produce a final rule. But it has failed to do so, and the maneuvers around the rule have provoked controversy and much grumbling from both sides.
Former SEC Chairman Mary Schapiro was reportedly set to push through a narrow rule allowing hedge fund advertising in August. But, according to published reports, she backtracked when criticized by consumer groups, who are concerned that allowing hedge funds to advertise without specifying investor protections would lead to an increase in fraud. That delay infuriated the SEC's two Republican members, as well as Republican lawmakers.
Those Republicans would likely be pleased with White's new plan, but the woman credited with stopping the rule last year, the Consumer Federation of America's Barbara Roper, isn't happy.
"It would be a very bad sign—a cause for grave concern about the substance of the issue and process of how investor protection concerns are addressed," she said.
White isn't likely to have an easier time with her fellow Democrats on the Commission: Luis Aguilar wrote this month that the rule needs to be rewritten and criticized the "aggressive effort to exclude pro-investor initiatives." And Elisse Walter, who served as interim SEC chairman between Schapiro and White, suggested that more work was needed, and that the rule as written would force the SEC to expend more resources to guard against fraud. And an SEC investor advisory committee has pushed for investor protections to be added.
During her confirmation hearing last month, White told senators that "the SEC needs to get the rules right, but it also needs to get them done." The agency has been struggling with a rule-making backlog due both to the JOBS Act and the Dodd-Frank financial regulation reform law. White has reportedly said that rewriting the rule as Aguilar suggests would take too long. Instead, she is said to favor a "concept release" that would seek comment on how to increase protections without creating further obligations for the SEC.