Tag: SEC

Securities and Exchange Commission building with seal and American flags reflected in window

Most Americans believe the Securities and Exchange Commission and the Federal Reserve should be politically independent.

That makes sense. A politically driven central bank or securities regulator can lose credibility and reinforce short-term political objectives—to the harm of long-term stability.


New research, however, finds partisanship among SEC commissioners rose recently to an all-time high. Driving the rise? More-partisan commissioners replaced less-partisan ones.

Partisanship at the SEC even appears in the language of new SEC rules and commissioners’ voting behavior, according to the paper “The Partisanship of Financial Regulators.”

“The Fed and SEC have institutional features that are designed to shield them from the effects of partisanship,” said Asaf Manela, Olin associate professor of finance and a coauthor of the paper.

In recent decades, US politics have grown significantly polarized and are testing those safeguards.

Language-based approach

The four scholars used a proven language-based approach to identify partisan phrases in Congress, such as “red tape” and “climate change,” and reviewed regulators’ usage of them. Basically, they examined whether Republican or Democratic regulators spoke like Republican or Democratic members of Congress.

They found Federal Reserve governors appeared to be “largely immune from the increased partisanship in American society.” The Fed was relatively nonpartisan throughout the research sample period of 1920-2019.

But partisanship among SEC commissioners rose to an all-time high.

The most partisan phrases suggest that Republican regulators favor less regulation than Democrats. For example, SEC Democrats emphasize investor and consumer protection, according to the paper, forthcoming in the Review of Financial Studies. SEC Republicans emphasize regulatory burdens and the unintended consequences of policy intervention.

Partisanship extends to governing

“Partisanship is not restricted to their speech but extends to their governing activity,” Manela said. “Rules are more likely to sound like the partisan language of the majority party in the regulatory body.”

In addition, partisanship at the SEC might affect commissioners’ regulatory philosophies, the study found.

“Many government entities were designed to be immune from partisan influence. The approach here can be used to evaluate whether the rise in partisanship in American society has spilled over into these entities.”

Asaf Manela

The study also documented “a dramatic increase in partisan voting behavior” at the SEC between 2006 and 2019. Dissenting activity increased substantially, and dissenting votes disproportionately occurred along party lines.

Manela said the approach of using congressional speech to examine the speech of non-congressional speech can be applied more broadly. Researchers can use the methodology to see if the US Supreme Court or state and local governments have also become more partisan.

“Many government entities were designed to be immune from partisan influence,” he noted. “The approach here can be used to evaluate whether the rise in partisanship in American society has spilled over into these entities.”

In addition to Manela, the researchers included Joseph Engelberg, University of California-San Diego; Matthew Henriksson, University of Mississippi; and Jared Williams, University of South Florida.

Alumni in the news

Mikhail Pevzner, associate professor of accounting in the University of Baltimore’s Merrick School of Business and program director of Merrick’s Master in Accounting and Business Advisory Services program, has been appointed an Academic Accounting Fellow for the U.S. Securities and Exchange Commission’s Office of the Chief Accountant. He will serve in this role in the SEC’s Washington, D.C. offices beginning this August and continuing for one year. Pevzner earned his PhD at Olin.

The Office of the Chief Accountant acts as the primary adviser to the SEC on auditing and accounting matters. Academic Accounting Fellows serve as research resources for SEC staff by interpreting and communicating research materials as they relate to the agency.

The fellows have been assigned to ongoing projects in the Chief Accountant’s office including rulemaking, monitoring the developments of the accounting and auditing standards-setting bodies, and consulting with registrants on accounting, auditing, independence and reporting matters.

MPevzner196Pevzner says he is deeply honored that the SEC has selected him to be one of the two visiting academic fellows during the upcoming academic year.

“I sincerely hope that my academic expertise in auditing and financial reporting will help the SEC in their very important mission of ensuring the effective regulatory oversight of the U.S. capital markets,” he said. “I want to express my deep thanks to everyone within and outside UB for their support in my pursuit of this highly prestigious fellowship. I am very hopeful that the knowledge I will gain from working at the SEC will greatly benefit UB students and my faculty colleagues upon my return to teaching.”

Pevzner earned a bachelor’s in business administration with a focus in accounting from the University of Minnesota. He earned Ph.D. in business administration with concentration in accounting from Washington University in St. Louis and is a licensed CPA in Maryland and Minnesota. Pevzner is a member of the American Accounting Association and the Maryland Association of CPAs. He holds the Merrick School’s EY Chair in Accounting and its Yale Gordon Chair in Distinguished Teaching. He also serves as academic director for the M.S. in Accounting and Business Advisory program.

Pevzner recently was awarded the school’s Black & Decker Outstanding Article award for a co-authored paper entitled “When Firms Talk, Do Investors Listen? The Role of Trust in Stock Market Reactions to Corporate Earnings Announcements.” The article, co-authored with Profs. Fei Xie of University of Delaware and Xiangang Xin of City University of Hong Kong, was published in July 2015 issue of Journal of Financial Economics.

From August 4, 2016 News Release from The University of Baltimore


Carlton Fields Jorden BurtOur morning session on May 26 kicked off with Jason Gould and Richard Choi, two inspiring speakers from Carlton Field Jorden Burt. Carlton Fields is a leading provider of legal and consultation services, mostly to financial institutions, offering solutions to compliance systems and fighting for clients in court. They described the necessity of regulation and the degree of regulation that will protect the industry as well as avoid burdening the business. After various meetings with legislative representatives, we complete our tour in D.C. by hearing from the other side of the aisle. We saw their passion and commitment to speak for regulation objectives and represent their interests. Regulation and legislation together make the financial industry healthy and secure.

Next, we departed for Capitol Hill and met with Mr. Ron Klein, a former U.S. Congressman for Florida in the House of Representatives. He served on the full Financial Services Committee, and was also a member of the subcommittee on capital markets, insurance, and government-sponsored enterprises, in addition to the subcommittee on financial institutions and consumer credit. With all this experience, he shared with us his opinions on the mortgage industry, Sarbanes Oxley, the 2007-2009 financial crisis, Fintech, government regulation, student loans, and even his thoughts on the TV series House of Cards.

Day 9 - Capitol Clock

During the speech, we heard the buzzers from the clock on the wall several times. Mr. Klein explained to us that if there are 5 bells and 5 lights on the left, there is a five-minute vote taking place. If there are 3 bells, a pause, and 5 more bells, there is a 15-minute quorum call immediately after the five-minute recorded vote.

After a short lunch break, we headed to International Monetary Fund (IMF) for a meeting to learn about its history and current role. The speaker began by sharing with us the history of the IMF, and providing insight into the IMF’s roots and its founders. Basically, it is an international central bank which promotes financial stability and cooperation between countries. We have come to appreciate its role as an international corporation. In the Q&A session, one student asked about how to determine if a country’s currency is undervalued or overvalued. The speaker spent a good deal of time answering the question, solving the doubt for students.

Day 9 - IMF

After leaving the IMF, we finally got the chance to explore the mysterious and globally renowned Brookings Institute. We then came back to the conference room and learned from Mr. Paul Gumagay, Senior Special Counsel, Office of International Affairs at the Securities and Exchange Commission (SEC).

Day 9 - SEC

Mr. Gumagay’s speech was very comprehensive. He started from the very beginning of the SEC and outlined the history and structure of the organization. His presentation was also full of stories from the finance world, which helped us better understand the significance of financial regulations.

In the Q&A session, Mr. Gumagay answered questions concerning regulation of crowdfunding, lending clubs, and other kinds of financial technology firms. Combining this with what we’ve already learned about Fintech and regulation, we now have a more thorough understanding of the concept of Fintech, and how people can better utilize it to make the financial world more efficient and accessible.

Guest Bloggers: Qu (Ashley) Chen, Jialu (Lily) Zhu, Zhiru (Shirley) Lin, Mengchuan (Kitty) Wang (GMF 2016)

This is a series of blogs chronicling the experiences of 41 Global Master of Finance (GMF) dual degree students during their two week immersion course in New York and Washington, DC. Each blog will be written by a small subset of students during their experience.

Today, new rules go into effect that allow anyone to invest in a startup and receive shares in that startup. Previously, the Securities and Exchange Commission required investors backing private companies to have a minimum net worth of at least $1 million or an annual income of at least $200,000.

Olin’s Cliff Holekamp, senior lecturer in entrepreneurship and director of the entrepreneurship platform says the new rules will expand the entrepreneurial playing field, to a point.

Cliff Holekamp

Cliff Holekamp

“Due to concerns for consumer protection from fraud, the SEC has historically restricted the right to invest in startups and other private investments to wealthy ‘accredited investors.’ The new rules going into effect this week open the door slightly to allow non-accredited investors to invest small amounts into startups under certain limits and with additional regulatory and reporting requirements for the entrepreneurs,” said Holekamp.

The major shift enables crowdfunding for debt and equity. Startups raising seed money through SEC-approved online sites will now be able to sell shares to people regardless of their wealth. Previously, those companies were limited to rewarding backers solicited from crowdfunding sites with in-kind types of rewards, such as branding materials or early product prototypes.

While the change is seen as a way to make the entrepreneurial investment process more equitable, Holekamp says don’t expect a free-for-all.

“These rules do not bust the door wide open to wild-west wheeling and dealing that many detractors had feared, nor does it open up the capital markets to the degree that many entrepreneurs had hoped. It does, however, offer an incremental step toward a more even playing field where average investors would have the same rights as the wealthy,” Holekamp said.

by Erika Ebsworth-Goold, WashU, The Source

When Congress passed the Jumpstart Our Business Startups Act in 2012, a proposal for a system of “equity crowdfunding” to back entrepreneurial ventures was included. There was excitement about democratizing investments beyond the virtual monopoly of venture capital funds. It’s been three years, and the Securities and Exchange Commission  just issued 685 pages of crowdfunding rules last week which won’t take effect until after a 90-day comment period and final vote.

Dave Nicklaus takes a look at the new rules in his St. Louis Post-Dispatch column and gets Cliff Holekamp’s read on the issue.

Cliff Holekamp, a partner at Cultivation Capital who teaches an entrepreneurship class at Washington University, advises founders to approach the new rules warily. If you pitch your company later to traditional venture capitalists, he said, they may not want to deal with dozens of $2,000 investors who backed your crowdfunding campaign.

“I’m advising my students and entrepreneurs I work with to stick with the old rules until we learn how the new rules are going to play out,” Holekamp said. “But the more options we can provide for entrepreneurs, the better.”

Holekamp is senior lecturer in entrepreneurship and director of the MBA Entrepreneurship Platform at Olin.

Link to Nicklaus’ column.