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Schapiro’s departure from SEC could slow Dodd-Frank implementation

Mary Schapiro

With Mary Schapiro preparing to step down as chairwoman of the Securities Exchange Commission, her successor will face an evenly split commission between Democrats and Republicans that could hinder the agency’s progress on Dodd-Frank rules.

Elisse Walter, a current commissioner and ally of Schapiro who has almost always voted alongside the chairwoman, will take over for Schapiro when she departs on Dec. 14. The commission will then be split evenly between Walter and Luis Aguilar, both Democrats, and Troy Paredes and Daniel Gallagher, the commission’s Republicans, according to National Journal.

“The daily work of the SEC on enforcement and investigations, those will go on and no one will notice a difference,” Brian Gardner, the senior vice president of Washington research at Keefe, Bruyette & Woods, said, National Journal reports. “But the big policy issues of the day — the implementation of Dodd-Frank, money mark[et] fund regulation — those all really require a full commission to act because of the split at the commission.”

The SEC is tasked with writing 95 rules under Dodd-Frank, but only one-third of the rules have been finalized. David Lynn, the co-chair of the law firm Morrison & Foerster’s Public Companies and Securities Practice, said that finding common ground on the remaining rules will not be an easy task for the divided commission.

“I think they’re all pretty contentious right now,” Lynn said, according to National Journal. “If they haven’t been adopted yet, there’s probably a good reason for that.”

Lynn said that the SEC may see some staff turnover with Schapiro’s departure because the division heads and other employees tend to leave when the chairman does.

The deadlock in the commission may force both parties to compromise in order to make progress. Some consumer advocates have voiced concern, however, that the rules emerging from a split commission may be so diluted that they are too weak to accomplish what they were intended to do, National Journal reports.

Walter, Schapiro’s successor, will likely remain chairwoman at least for a few months if not the rest of next year. Because Walter is already a commissioner, she is able to bypass a second Senate confirmation to become chairwoman. Once her term is up, however, she will have to be re-appointed by President Obama and re-confirmed by the Senate.

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