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U.S. SEC nominees back new settlement policy to seek admissions
06/27/2013 Email this story  |  Printable Version

* Piwowar, Stein say settlements should not be on autopilot

* Under new policy SEC will seek admissions in some cases

* Senator Warren said SEC is heading in right direction

* Piwowar also says SEC should allow tick-size pilot program

By Sarah N. Lynch

WASHINGTON, June 27 (Reuters) - President Barack Obama's two nominees to serve on the U.S. Securities and Exchange Commission told lawmakers on Thursday they support the agency's new plan to seek admissions of wrongdoing in some of its settlements.

SEC Republican nominee Michael Piwowar and Democratic nominee Kara Stein spoke of their views about SEC Chair Mary Jo White's new settlement policy during their confirmation hearing before the Senate Banking Committee.

White's new policy, announced last week, marks a shift from the SEC's traditional practice of routinely letting most defendants settle cases without admitting or denying the charges.

While that practice will continue, White said the SEC will try to extract admissions in select cases in which there is widespread investor harm, egregious intentional misconduct, or attempts to thwart an SEC investigation. [ID: nL2N0EU24E]

"The 'no admit, no deny' policy seems to go on autopilot," Piwowar said in response to a question from Senate Democrat Elizabeth Warren of Massachusetts, who has been critical of the SEC's settlement practices and has urged regulators to take more defendants to trial.

"Enforcement cases should be on a case-by-case basis. I was pleased to see that she said that in some cases it is appropriate, in other cases, it is not," he added.

Stein agreed, telling Warren the SEC should use "all of the tools it has at its disposal" to enforce the federal securities laws.

"I think that Chair White is onto something really important here," Warren replied. "I hope other regulators are paying attention."

Piwowar and Stein both work as U.S. Senate aides, Piwowar works under Senate Banking ranking Republican Mike Crapo as the committee's chief economist and Stein is a staffer for Rhode Island Democrat Jack Reed, a senior member of the panel.

They faced no opposition from lawmakers during Thursday's hearing, which was largely dominated by debate over the more controversial nomination of Congressman Mel Watt to serve as director of the Federal Housing Finance Agency. [ID: nL2N0F30K2]

"Mike and Kara are familiar faces on this side of the dais, and I wish them all the best," Senate Banking Chairman Tim Johnson said.

The committee and the full Senate are expected to move fairly quickly to confirm Piwowar and Stein. A committee aide said the panel may vote on the nominees as soon as July.

Once confirmed, they will replace Republican SEC Commissioner Troy Paredes and Democrat Elisse Walter.


The SEC is facing a daunting agenda, as it works to complete all of the rules required by the Dodd-Frank and the Jumpstart Our Business Start-Ups (JOBS) laws.

Both Piwowar and Stein said they believe finishing these rulemakings should remain a priority at the SEC.

In addition, they said the SEC should keep exploring potential market structure reforms, with Piwowar advocating for the launching of a pilot to test the way shares are priced for small and mid-cap companies.

"There is one discrete issue that the SEC can move forward on, and that is a pilot study on the tick size for small-cap companies," Piwowar said.

The SEC has been mulling whether to launch a pilot for tick sizes, or the minimum pricing increment that can be used to trade securities, at the urging of some major market players including NYSE Euronext and Nasdaq OMX.

The practice known as "decimalization," in which the SEC required all listed stocks to be traded and quoted in one-penny increments instead of in fractional increments such as one-sixteenth of a dollar, was introduced in 2001.

That change was prompted by concerns that the use of fractions was leading to excessive profits for market-makers.

Since then, however, some critics have complained that such small increments have reduced trading margins to the detriment of smaller companies, and need to be increased from a penny.

Proponents of change want a more tailored system that allows tick sizes of more than a penny for small- and mid-cap stocks rather than a uniform size across the board.

The SEC started looking into the matter last year, after a provision in the JOBS Act called for the agency to study it.

That study ultimately did not call for any rulemaking to increase the tick size, but the SEC held a roundtable in February to explore the idea.

The SEC has still not decided whether to launch a pilot program, according to an agency spokesman. (Editing by Maureen Bavdek)

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