* 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
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
"I think that Chair White is onto something really important
here," Warren replied. "I hope other regulators are paying
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
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.
NOMINEE EYES TICK-SIZE PILOT
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)