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New SEC Chairwoman Walter faces deadlocked commission, money market reform battle

Elisse Walter

As Elisse Walter prepares to take Mary Schapiro’s place as chairman of the Securities and Exchange Commission, she faces an ongoing battle over Dodd-Frank rules and a deadlocked commission.

More than 60 rule-makings required under the 2010 Dodd-Frank Act remain unfinished, inciting fear among industry participants about market stability. The rule-makings could face legal challenges from opponents who emerged victorious last year after a U.S. appeals court ruled that the SEC conduct a more thorough cost-benefit analysis of its rule-makings, a process that could delay the proposals for years, Reuters reports.

“It’s an ongoing, enormous challenge,” Amy Borrus, the deputy director of the Council of Institutional Investors, which represents some of the largest pension funds, said, according to Reuters.

President Obama nominated Walter on Monday, and she could theoretically hold the position until December 2013, after which time she will have to be re-nominated and re-confirmed by the Senate. Because Walter has already been confirmed by the Senate as an SEC commissioner, she is able to bypass a second confirmation to become chairman.

Walter’s leadership will likely be similar to Schapiro’s, as Walter is a confidante and adviser to Schapiro and has largely voted alongside her.

As Shapiro prepares to step down next month, Walter’s first challenge could be overcoming a stalemate in an evenly split commission filled by two Democrats and two Republicans.

“Nothing happens under a 2-2 vote,” Edward Fleischman, a former SEC commissioner, said, according to Reuters.

One of the most contentious issues facing the commission involves reform of money market funds, a financial savings instrument critical for investors and an important source of corporate lending. Though the commission tightened up rules governing the quality of funds in 2010, Schapiro and other regulators maintain that further action is necessary to prevent another run on funds that could freeze the economy as in 2008.

Schapiro planned to force funds to eliminate the fixed $1 per share standard or put aside additional capital to cushion against potential losses. Amid intense opposition from the fund industry, Schapiro withdrew her plans, which were supported only by Walter.

Peter Crane, a longtime money fund analyst and president of Crane Data, said that Walter “may be more willing to compromise,” adding that “the fund industry may be more willing to compromise with her,” Reuters reports.

The commission must also work to complete the 95 total rule-makings assigned to it by Dodd-Frank. Only 32 have been met with finalized rules, while the agency has missed deadlines for 50 rule-makings.

The commission is also responsible for developing rules lifting advertising restrictions for firms that raise funds through various private offerings. Though the SEC proposed the rules in August, the regulator has yet to issue final rules, according to Reuters.

Some large investors also plan to pressure the commission to issue rule change allowing them more input in corporate governance. Ann Yerger, the executive director of the Council of Institutional Investors, said that Walter should “make the financial regulatory system more transparent, accountable and responsive to investors.”

The SEC will also need to make changes to the system used to count shareholder proxy votes, a system that has been under review for years as industry participants fear conflicts in corporate elections.

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