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Sen. Warren Calls White’s Leadership “Extremely Disappointing”

Massachusetts Sen. Elizabeth Warren in a letter accused SEC Chair Mary Jo White of breaking promises on both enforcement and Dodd-Frank rulemaking. White, in a statement, defended her tenure at the market regulator and said Warren mischaracterized both her past statements and the SEC’s record.

Sen. Elizabeth Warren on June 2, 2015, cast SEC Chair Mary Jo White’s leadership as “extremely disappointing” and charged White with breaking promises on corporate disclosure rules and enforcement issues.

In a 13-page letter to the SEC chief, the Massachusetts Democrat said White’s recusals, some of them stemming from her husband John White’s role as a corporate attorney with Cravath, Swaine & Moore LLP, had damaged the commission’s enforcement work. John White headed the SEC’s Corporation Finance Division from March 2006 until December 2008.

Warren also questioned the SEC’s delays with its executive compensation disclosure rules, the last major piece of Dodd-Frank Act rulemaking.

The 2010 Wall Street reform law requires companies to disclose a ratio comparing the chief executive’s compensation to that of the median employee. The agency in 2013 proposed the pay ratio rules in Release No. 33-9452, Pay Ratio Disclosure , but has yet to finalize them.

Democrats, Warren included, have repeatedly urged regulators to complete the rules. Republican lawmakers and pro-management groups have asked the SEC to back away from the requirements because the ratio is expensive to calculate and does not provide investors with useful information.

Warren spent much of her letter attacking White over the market regulator’s enforcement record, saying that the SEC has been too lenient with violators. The SEC has failed to extract admission of wrongdoing in too many of its settlements, Warren said. The senator, who sits on the Senate Banking Committee, also framed the commission as a “rubber stamp” for so-called bad-actor waivers.

Unless they receive an SEC waiver, banks and other large issuers found guilty of fraud and other violations risk losing special status as “well known seasoned issuers” (WKSI). The status confers advantages that include the use of shelf registrations, which streamline the securities offering process for banks with clean records. The SEC has come under fire recently for its use of WKSI waivers, most recently for five banks that pleaded guilty to charges of rigging the foreign exchange market.

The SEC on May 20 granted waivers to Barclays plc, Citigroup Inc., UBS AG, JPMorgan Chase & Co., and the Royal Bank of Scotland Group Plc (“RBSG”) to let them keep their WKSI status, among other benefits.

“Despite the widespread criminal conduct to which these large banks admitted, the SEC granted WKSI waivers to each of them,” Warren wrote. “The commission also granted them several additional waivers, which in effect allow the banks to continue conducting their business with minimal consequences. These waivers apparently reflected the commission’s view that these banks deserved to continue to enjoy special privileges under the securities laws despite the deep breeches of trust and evident mismanagement displayed in these cases.”

In a statement, White said Warren had mischaracterized both her past statements and the SEC’s record.

“I am very proud of the agency’s achievements under my leadership, including our record year in enforcement and the commission’s efforts in advancing more than 30 congressionally mandated rulemakings and other transformative policy initiatives to protect investors and strengthen our markets,” White said. “Senator Warren’s mischaracterization of my statements and the agency’s accomplishments is unfortunate, but it will not detract from the work we have done, and will continue to do, on behalf of investors.”