Prof. Karmel on Securities Regulation

In an article in last week’s New York Law Journal, BLS Prof. Roberta S. Karmel describes some of the challenges facing the Obama Administration, in particular, Mary L. Schapiro, the 29th chairman of the U.S. Securities and Exchange Commission (SEC). In the current financial crisis, the SEC, commemorating its 75th Anniversary this year, is confronting some of the most daunting challenges in its existence s leaving some question whether it will survive as an independent agency.

Prof. Karmel notes that, under the Bush Administration, the SEC faced heavy, if unfair, criticism for its lack of regulatory oversight regarding the Madoff scandal and the collapse of the major broker-dealers. Looking forward to financial regulatory reform to restore confidence in the financial sector, Prof. Karmel questions how such regulation will take place and whether the SEC is the appropriate agency. There is certainly enough grist for the regulatory mill: broker-dealer holding companies, over-the-counter (OTC) derivatives, credit rating agencies, investment advisors and hedge funds. Efforts to bring these entities within the regulatory scope of the SEC, which have faced opposition in the past described in detail by Prof Karmel, may be easier given the current economic meltdown. The article ends by asking:

“Are the Obama administration, the SEC and Congress up to meeting all of the new challenges discussed in this column, as well as many other challenges on the table of financial regulatory reform? History teaches that most regulatory reform has occurred in an atmosphere of crisis and scandal, but that statutes drafted under such conditions are neither thoughtful nor even coherent. Hopefully, the new chairman of the SEC will be able to exert a salutary influence on such legislation.”

For the 75th Anniversary of the SEC, the SEC Historical Society will conduct a Fireside Chat on Tuesday, February 24th. Registration is at with no cost. The event is the first in the sixth season of Fireside Chats and will look at the work of the SEC Division of Corporation Finance. Topics will include the changing financial markets, working under legislation that does not change, using safe harbors, no action letters and rule-making.