Connecticut Senator Richard Blumenthal has written to SEC Chair White urging that the SEC label so-called “fee-shifting” bylaws major risk factors and require companies to disclose them before any initial public offering. Moreover, Blumenthal believes the SEC should take the position that fee-shifting provisions are inconsistent with the federal securities laws and should refuse to permit registration statements to move forward for any company that has adopted these provisions.
I believe that Senator Blumenthal is a good and decent man, and I base this in part on some indirect personal knowledge of him. I also think that there are legitimate concerns with fee-shifting bylaws and that a debate on those and other provisions is perfectly appropriate. However, I find it seriously troubling that our legislators feel obliged to tell the SEC how to do its job, particularly at such a granular level. Are they trying to do away with the SEC? Do our senators and congressmen believe that they can do a better job regulating our capital markets and disclosure directly rather than through the SEC?
I happen to think that, in general, the SEC has done a superlative job in both areas. Of course, there have been errors of commission (no puns intended) and omission (e.g., can you say “Madoff”?), but over the 80+ years of its existence, the SEC has generally been an apolitical beacon of serious and legitimate regulation. And I suspect there’s a strong correlation between the SEC’s screw-ups and congressional interference (or lack of funding).
I don’t think for a nanosecond that Senator Blumenthal wants to do away with the SEC. So why is he trying to do so by more subtle means?
What do you think?