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US Securities and Exchange Commission

Ex-SEC Commissioner Piwowar Suggests Cutting Commission Rulemaking from Legislative Reforms

Bill Flook  Editor, Accounting and Compliance Alert

· 5 minute read

Bill Flook  Editor, Accounting and Compliance Alert

· 5 minute read

Former SEC Commissioner Michael Piwowar on March 9, 2023, suggested Congress move forward with securities law reforms that do not require commission rules, arguing the SEC “screwed up” some rulemaking components of the JOBS Act. Sec. 1 of pl112-106

Piwowar testified before the House Financial Services Committee’s Capital Markets subcommittee in a hearing that covered a range of deregulatory bills, including some that would extend relief granted under the 2012 law. Among those bills was a draft measure that would expand the number of lower-revenue companies exempt from the auditor attestation requirements under Section 404(b) of the Sarbanes-Oxley Act.

The JOBS Act is a package of reforms that cleared the path for small companies to go and stay public, allowed others to stay private, and provided other avenues, such as equity crowdfunding, for private companies to raise funds from non-accredited investors.

Piwowar pointed to Title I of the JOBS Act as a model for cutting SEC rulemaking out of the picture. Title I, among other provisions, established a lighter accounting and disclosure regime for Emerging Growth Companies (EGCs) going public.

“If you look at the Jobs Act overall, some of the titles required SEC rulemaking and Title I did not,” Piwowar said. “It went in and surgically amended various parts of the” Securities Act of 1933 and the Securities Exchange Act of 1934, Piwowar said. “It was self-effectuating, became effective immediately upon enactment, that is one of the reasons why it made it so successful. And the SEC was so far behind and actually screwed up some of the other rulemakings.”

Piwowar, who served as acting chair of the commission for several months in 2017, cited his own dissent in the 2015 final rules for Regulation Crowdfunding in Release No. 33-9974Crowdfunding. The rules, under Title III of the JOBS Act, allows startups to raise capital from the public through registered online portals or broker dealers, subject to certain scaled accounting and disclosure requirement and investment limits. Republican critics blame the SEC for churning out hundreds of pages of complex regulatory requirements based off the JOBS Act mandate, which they argued rendered it unworkable. Piwowar said he did not support the crowdfunding rules “because it was so far away from Congressional intent.”

Piwowar’s comments run parallel to the broader GOP opposition to the hard-charging rulemaking push by current SEC Chair Gary Gensler. A day before the Capital Markets hearing, the Subcommittee on Oversight and Investigations held a hearing on the Biden administration’s “wasteful spending and regulatory overreach,” which featured testimony from Rebecca Sharek, deputy inspector general for Audits and Evaluations at the SEC’s Office of Inspector General (OIG).

Representative Ann Wagner, a Missouri Republican, grilled Sharek on an October 2022 OIG report that detailed conversations with managers in multiple SEC divisions, “some of whom raised concerns about increased risks and difficulties managing resources and other mission-related work because of the increase in the SEC’s rulemaking activities,” the report stated. Some of those managers, according to the report, reported an overall increase in attrition “and difficulties hiring individuals with rulemaking experience.”

Representative Ann Wagner, a Missouri Republican, asked Sharek to “please provide additional detail on these risks that are being created by the mission-related work that’s being neglected because of the increase in rulemaking activities, as well as the causes and impacts of the coordination and communication challenges in the rulemaking process particularly given potential overlaps in jurisdiction and differences in opinion?”

Sharek declined to elaborate on specific risks.

“I don’t have any specific risks to any specific activity that I can offer to you,” she told Wagner. “The conversations that we had with knowledgeable individuals were broad. They broadly described, as you mentioned, the volume and the urgency.”


This article originally appeared in the March 10, 2023 edition of Accounting & Compliance Alert, available on Checkpoint.

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