Sen. Warren Calls on Obama to Fire SEC Chair Mary Jo White
Dear President Obama:
Corporations are flooding our elections with millions of dollars in secret political contributions,
drowning out the voices of working families. Yet two weeks ago, Republican leaders
successfully forced a rider into must-pass legislation to fund our government that prohibited the
Securities and Exchange Commission (SEC) from issuing a final rule requiring public companies
to disclose these political contributions. As the White House Press Secretary noted, the rider
"essentially protect[ s] the ability of special interests to funnel money into political campaigns
without having to disclose it." Democrats will continue to fight to remove the rider when
Congress considers the next government funding bill in December, and I urge you to make clear
in advance that you will veto any bill that includes it.
But the rider is not the biggest barrier to making progress on this critical issue. For years, the
Chair of the SEC, Mary Jo White, has refused to develop a political spending disclosure rule
despite her clear authority to do so, and despite unprecedented and overwhelming investor and
public support for such a rule.
This brazen conduct is merely the most recent and prominent example of Chair White
undermining your Administration's priorities and ignoring the SEC's core mission of investor
protection. From the beginning of her tenure, Chair White has made clear that she is concerned
that companies disclose too much to investors - a presumption directly counter both to the views
of investors themselves and the animating purpose of this agency for more than eighty years.
She has failed to complete disclosure mandates Congress enacted in the wake of the 2008
financial meltdown, while simultaneously devoting the SEC's limited discretionary resources to
a far-reaching, anti-disclosure initiative cooked up by big business lobbyists seeking to reduce
the amount of information public companies must make available to their investors. And she has
remained conspicuously silent when your Administration has issued veto threats against anti-
disclosure bills, providing cover to those in Congress who seek to roll back disclosure
requirements and compromise the transparency and safety of our markets.
Enough is enough. To address your concerns on political spending disclosure, and to advance
other priorities of your administration and investors, I respectfully urge you to exercise your
unilateral authority under 17 C.F .R. § 200.l0 to immediately designate another SEC
commissioner as Chair of the agency.
Presidential Authority and Obligation to Designate a New SEC Chair
The President has unilateral authority - independent of both the Senate and the
Commission- to designate a Chair from among the Commission's members. While all five
members of the SEC are appointed by the President with the advice and consent of the Senate,
federal regulations establish that the "Chairman is designated by the President" pursuant to the
SEC's Reorganization Plan No. 10 of 1950. Four years ago, you used this authority to designate
an existing Commissioner, Elisse B. Walter, as Chair of the Commission, without intervening
action by the Senate.
While demoting an existing Chair and selecting another from among the agency's current
Commissioners would be an uncommon act, Chair White's extraordinary, ongoing efforts to
undermine the agency's central mission make such a step necessary. Congress created the SEC
more than eighty years ago in response to the widespread loss of confidence in public markets
following the stock market crash of 1929. Here is how the agency describes its purpose:
The laws and rules that govern the securities industry in the United States derive
from a simple and straightforward concept: all investors, whether large
institutions or private individuals, should have access to certain basic facts about
an investment prior to buying it, and so long as they hold it. To achieve this, the
SEC requires public companies to disclose meaningful financial and other
information to the public. This provides a common pool of knowledge for all
investors to use to judge for themselves whether to buy, sell, or hold a particular
security. Only through the steady flow of timely, comprehensive, and accurate
information can people make sound investment decisions.
Transparency helps investors separate desirable investments from undesirable ones and
evaluate business activities objectively, thus allowing them to allocate their capital more
efficiently. By contrast, reducing requirements for public companies to disclose information
material to investment decisions undermines efficient markets, encourages fraud, and, in extreme
cases, can sow the seeds of future economic meltdowns.
Chair White's comprehensive anti-disclosure agenda runs directly contrary to the SEC's
purpose. It hurts investors, undermines Administration policy, and willfully misinterprets
congressional mandates. You have the authority to designate a new SEC Chair, and I believe
Chair White's anti-disclosure efforts give you ample reason to do so.
The remainder of this letter details some of my concerns.
Political Spending Disclosure
The SEC will not make progress on a political spending disclosure rule under Chair
White's leadership. Despite immense bipartisan support from the public, the investor
community, academic experts, former SEC commissioners, and yourself, Chair White has
steadfastly opposed SEC action in this area.
As you know, the Supreme Court's Citizens United decision in 2010 facilitated unlimited
political spending by corporations. In his opinion for a bare, five-Justice majority, Justice
Kennedy expressed strong support for public disclosure of that corporate spending:
A campaign finance system that pairs corporate independent expenditures with
effective disclosure has not existed before today .... With the advent of the
Internet, prompt disclosure of expenditures can provide shareholders and citizens
with the information needed to hold corporations and elected officials accountable
for their positions and supporters. Shareholders can determine whether their
corporation's political speech advances the corporation's interest in making
profits, and citizens can see whether elected officials are "'in the pocket' of socalled
moneyed interests." ... The First Amendment protects political speech; and
disclosure permits citizens and shareholders to react to the speech of corporate
entities in a proper way. This transparency enables the electorate to make
informed decisions and give proper weight to different speakers and messages.
Building on Justice Kennedy's analysis, in August 2011, a bipartisan group of ten law
professors submitted a petition to the SEC, asking the agency to "develop rules to require public
companies to disclose ... the use of corporate resources for political activities." Investors and
the public submitted hundreds of thousands of comments in support of the petition - a show of
support unprecedented in SEC history. In response, shortly before leaving office in early
2013, then-SEC Chair Mary Schapiro announced that the agency would begin work on a political
spending disclosure rule and that the agency expected to propose such a rule by April 2013.
When she took office in April 2013, Chair White reversed course. The agency did not begin
work on a political spending disclosure rule. Then, under pressure from Republican
lawmakers and business groups representing the companies seeking to hide their political
contributions, Chair White removed the political spending disclosure rule from the agency's
2014 regulatory agenda- effectively killing the rule for the next year. The rule has not
appeared on the agency's regulatory agenda since.
Chair White's refusal to move forward on a political spending disclosure rule serves the
narrow interests of powerful executives who would prefer to hide their expenditures of company
money to advance their own personal ideologies. Despite her refusal, however, broad support
from shareholders, experts, and the public has not waned. The agency has received more than
1.2 million comments related to the potential political spending rule, the vast majority of which
support agency action. 13 Forty-four Senators have expressed strong support for a political
spending disclosure rule. 14 And a bipartisan group of three former SEC commissioners -
including Republican Chairman William Donaldson and Democratic Chairman Arthur Levitt -
called the SEC's inaction on a political spending disclosure rule "inexplicable," and said that the
agency's "failure to act offends not only us ... but investors and the professionals who serve
them." They added that the agency's inaction "flies in the face of the primary mission of the
Commission, which has since 1934 been the protection of investors."
Even after congressional Republicans rammed through a limitation on political spending
disclosure in last December's government funding bill, Chair White could have directed the SEC
to begin work on a disclosure rule. While the rider prohibited the SEC from using any funds "to
finalize, issue, or implement any rule, regulation, or order regarding the disclosure of political
contributions, contributions to tax exempt organizations, or dues paid to trade association,"
dozens of senators and congressmen noted in a letter to Chair White that the limited restriction
did not "bar the SEC from discussing, planning, investigating, or developing plans or possible
proposals for a rule or regulation relating to the disclosure of political contributions."
Nonetheless, Chair White refused to act. While she retains that same authority under the current
rider extending through early December, there is no reason to believe she will change course
As your Press Secretary said recently, "transparency in politics is something that is worthy of
bipartisan support." Indeed, it has historically enjoyed bipartisan support – and continues to do
so today among the American public, notwithstanding recent efforts by Republican leaders in
Congress. Congressional Democrats will fight to remove the recently passed rider from
December's government funding legislation, and I urge you to threaten to veto any effort to
extend this corrupt policy. But these efforts will be meaningless as long as Chair
White continues to control the agenda of the SEC. You have the authority to make a change at
the agency, and I respectfully urge you to use that authority.
Chair White's Extraordinary Anti-Disclosure Record
Chair White's anti-disclosure views extend well beyond political spending. For the last
three years, these views have undermined the SEC, your Administration's priorities,
Congressional mandates, and the best interests of investors. This extensive record provides
additional, compelling evidence for an immediate leadership change at the SEC.
Chair White's "Disclosure Effectiveness Initiative"
From the beginning of her tenure, Chair White has operated from the curious
presumption that public companies currently disclose too much information. That presumption
has led her to devote the SEC's limited discretionary resources to something called the
"Disclosure Effectiveness Initiative," a review geared toward reducing companies' existing
Chair White has advanced her comprehensive, anti-disclosure agenda under the guise of
addressing "information overload," which she has defined as "a phenomenon in which ever-
increasing amounts of disclosure make it difficult for investors to focus on the information that is
material and most relevant to their decision-making. "In an October 2013 speech, fewer than
six months after she took office, Chair White said that concerns about information overload
"resonate[d]" with her, despite failing to cite a single complaint from a single investor about
receiving too much information.
Indeed, "information overload" is not a serious concern of the investor community.
Consider the views of the SEC' s Investor Advisory Committee, which was formed in the wake
of the 2008 financial meltdown to - in the words of Chair White herself - "help advise the [SEC]
as it seeks to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital
formation," and is "comprised of individuals with diverse expertise representing a wide variety
of investor interests." The Advisory Committee recently described the current amount of
disclosure as "appropriate." The Chartered Financial Analyst Institute, the premier organization
for investment professionals around the world, has called the idea of information overload a
"misperception," and other investor representatives have expressed similar sentiments.
While the investor community does not believe that information overload is a problem, one
prominent group does: the U.S. Chamber of Commerce, which lobbies government on behalf
of the giant companies responsible for making these disclosures. In 2014, the Chamber
published a lengthy report on what it called the "pressing concern" of information overload.
While requirements to provide transparent, objective information to investors and the public is
undoubtedly an inconvenience for some of the companies who bankroll the Chamber, this report
was also unable to present a single piece of evidence that their concern was actually "pressing"
for investors, whose interests the SEC is intended to serve.
Despite the lack of data to support this effort, Chair White plowed ahead with it. At a
2013 speech before the National Association of Corporate Directors - a group representing the
board members of public companies - Chair White reiterated that she was "raising the
question ... as to whether investors need and are optimally served by the detailed and lengthy
disclosures about all of the topics that companies currently provide," both publicly and
"internally at the SEC." Once again skipping over the SEC's main purpose as established by
Congress, Chair White asserted that a much narrower congressional mandate in the Jumpstart
Our Business Startups Act represented an exciting "opportunity" to begin advancing her anti-
In December 2013, the SEC's Division of Corporation Finance issued a report on a portion of the
agency's existing disclosure requirements. The report argued that the SEC should conduct an
additional review of the internal and external factors that "may have contributed to the length and
complexity of company filings and the costs of compliance" as a "possible next step." Once
again, this report included no actual evidence that the "length and complexity of company
filings" bothered investors. In fact, the six-page section describing its scope does not mention the
needs of investors once. By contrast, that section expresses concern over the "ongoing
compliance burden associated with public company status." Again, the agency moved forward,
devoting its limited discretionary resources toward the creation of something it called the
Disclosure Effectiveness Initiative. This April, the SEC released the first component of the
Initiative: a Concept Release that assesses whether certain disclosure requirements "continue to
provide the information that investors need to make informed investment and voting decisions
and whether any of our rules have become outdated or unnecessary."
Despite public inquiries, including from Congress, Chair White has never produced any data to
suggest the counterintuitive, "information overload" concern represents an actual problem that
actual investors have ever raised. At a June 2016 Banking Committee Hearing, Chair White was
unable to answer my basic questions about what evidence the SEC had, upon launching the
Disclosure Effectiveness Initiative, "that information overload was a real problem for investors."
In a letter sent after the hearing, Chair White stated that the SEC's "periodic" investor surveys
"have generally suggested that many disclosures are regarded as lengthy and complicated." Yet
the most recent investor survey Chair White cited was a 2008 report showing that investors
wanted less "legal jargon" and the ability to access disclosure documents online - not that they
wanted their disclosures to cover fewer topics.
Chair White also referenced "other reports and studies" exposing the "challenges ... [of] the
increasing length and complexity of company annual reports," but cited reports that focused
primarily on the format, not content, of disclosures. As I have told Chair White repeatedly, I
"support efforts to enhance disclosure for investors by cutting out pure redundancies" and
"improving disclosure presentation." But the Disclosure Effectiveness Initiative goes well
beyond that by aiming to reduce the number of topics disclosed to investors - something the
investor community almost uniformly opposes.
Chair White has also refused to say how much time and agency resources have been spent on
this voluntary initiative. When I asked the Chair that specific question in a letter earlier this year,
she did not provide an answer. Nevertheless, the volume of work the agency has produced in
connection with this initiative - including the 341-page Concept Release the agency issued
recently- indicates that agency has dedicated considerable time to this effort despite failing to
finalize several congressionally mandated rules.
Thus, despite constant lip service to the imaginary concept of "information overload,"
Chair White's initiative should be seen for what it is: a far-reaching, time-intensive,
anti-disclosure initiative cooked up by big business lobbyists seeking to reduce the amount of
information public companies make available to their investors. Giant public companies have
every right to advocate for less transparency in public markets, whatever the broader economic
consequences. But the SEC was not created to work for them. Under a new Chair, the agency
can re-direct its limited discretionary resources away from actively undermining the interests of
investors and back toward its core purposes.
Refusal to Complete Congressionally Mandated Rules
Chair White's anti-disclosure agenda extends well beyond her decisions about allocating
the discretionary resources of the agency. Her zeal in pursuing the discretionary Disclosure
Effectiveness Initiative stands in stark contrast to her failure to implement numerous disclosure
requirements required by federal law.
In the wake of the greatest economic meltdown since the Great Depression, Congress passed the
Dodd-Frank Wall Street Reform and Consumer Protection Act, in part, to address inadequate
investor understanding of company behavior. The Act required the SEC to develop several rules
to this end. Chair White, however, appears to view these congressional mandates as mere
suggestions that the agency is free to ignore. And she has gone further – publicly denigrating
some of these requirements as superfluous and misguided.
In a 2013 speech, for example, she asserted that provisions requiring the disclosure of mine
safety violations and sources of conflict minerals "seem more directed at exerting societal
pressure on companies to change behavior, rather than to disclose financial information that
primarily informs investment decisions." She "question[ ed], as a policy matter, using the
federal securities laws and the SEC' s powers of mandatory disclosure to accomplish these
goals." In making these assertions, Chair White once again ignored the views of actual
investors, who had explained in detail why these disclosures would help them make investment
This reluctance to follow the law goes well beyond the required conflict minerals rule. As of
October 2016, the SEC has yet to finalize nineteen mandatory rules under the Dodd-Frank
Act. Many of those unfinished rules would offer investors additional information to assist
them in navigating public markets. These include a rule to enhance the reporting and
dissemination requirements of security-based swap information; a rule to require registrants to
disclose "pay versus performance" information; and a rule to increase the transparency of
information available "with respect to loan or borrowing of securities."
Regulators, particularly those at independent agencies, are vested with a great deal of
discretion. Such discretion, however, flows entirely from federal laws created by Congress. It
has never extended- and indeed it cannot extend - to a bald-faced refusal to comply with clear
and unambiguous legal requirements created by Congress. Like every federal official, Chair
White is sworn to follow the law, regardless of any potential divergences between Chair White's
personal policy preferences and Acts of Congress. Rather than force investors to suffer the time
and expense of litigation in an effort to force her to do her job, you can make substantial progress
toward fixing this problem - and protecting the safety and efficiency of our financial markets - by
immediately designating a different SEC Commissioner as Chair of the agency.
Disclosure Rollbacks in Congress and SEC Inaction
Throughout her tenure, Chair White's unapologetic anti-disclosure posture has also resulted in an
SEC that regularly fails to stand up for its own authority and regulations in this area. Her stance
has empowered efforts to weaken federal disclosure requirements. During this Congress alone,
House Republicans have passed several bills that would weaken disclosure requirements over
your Administration's veto threats. In each instance, Chair White refused to weigh in with
opposition to the anti-disclosure measures.
In September, for example, your Administration expressed its "strong" opposition to H.R.
2357 because it would force the SEC to reduce the disclosures required in its Form S-3 and
"limit the SEC's ability to finalize previously proposed investor protections," among other
language that would "weaken ... Dodd-Frank." Your veto threat stated that the bill would "reduce
transparency and inhibit effective regulatory oversight of our capital markets by the Securities
and Exchange Commission." But H.R. 2357 passed a few days later- without public opposition
from the SEC.
That same month, your Administration threatened to veto H.R. 5424 because it "would enable
private fund advisers to slip back into the shadows." Specifically, your Administration took issue
with the fact that the bill would "repeal important safeguards," including the requirement that
private fund advisers "deliver a plain language narrative brochure to clients annually." Yet once
again, the SEC did not publicly oppose the bill, and it passed the House despite your
Administration's strong opposition.
The SEC's lack of public opposition helps provide momentum to anti-disclosure efforts your
Administration regards as dangerous. Powerful companies seeking to roll back SEC transparency
requirements do not typically announce their desire to withhold material information from the
markets in order to confuse, cheat, or defraud investors into handing over their money. Instead,
legislative rollbacks of market protections are typically advanced under the guise of reducing
"regulatory burdens" and unnecessary "red tape," and are frequently promoted as having few
harmful effects on investors.
For example, the two bills discussed above are titled the "Accelerating Access to Capital Act"
and the "Investment Advisers Modernization Act."
Members of Congress and the public look to the SEC to closely scrutinize these proposals and to
sound the alarm when purportedly technocratic changes might cause real damage to investors
and the financial markets. During Chair White's tenure, the SEC has failed to sound that alarm
time and again. The conspicuous silence of the federal agency in charge of protecting investors
has undermined your Administration's priorities and hurt the cause of the investor community.
Under the authority outlined in 17 C.F .R. § 200.10, you may immediately designate another
SEC Commissioner as Chair of the agency. I strongly urge you to use that authority today.
I do not make this request lightly. I have tried both publicly and privately to persuade Chair
White to direct the agency's resources toward pressing matters of compelling interest to investors
and the public, and toward completing those rules that Congress has required it to implement.
But after years of fruitless efforts, it is clear that Chair White is set on her course. The only way
to return the SEC to its intended purpose is to change its leadership.
United States Senator
October 14, 2016
To Learn More:
Letter to President Obama (Elizabeth Warren, U.S. Senate) (pdf)
Corporations are not Afraid of Regulation by the Securities and Exchange Commission (SEC) (by Noel Brinkerhoff, AllGov)
Revolving Door at SEC is in a Whirl as Hundreds Hired by Industry they Regulated (by Noel Brinkerhoff and Danny Biederman, AllGov)
SEC Chooses Corporate Lawyer to Handle Whistleblower Tips (by Noel Brinkerhoff, AllGov)
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