Press Releases

As Banks Prepare to Plead Guilty, Waters Calls for Transparent SEC Waiver Process

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Washington, DC, May 15, 2015 | comments

Following reports that five of the largest banks will soon plead guilty to criminal antitrust violations and pay several billion dollars for rigging foreign currencies, the top Democrat on the Financial Services Committee is raising concerns about the possibility that the Securities and Exchange Commission (SEC) will allow these banks to continue doing business as usual, by waiving certain bad actor disqualifications in the securities laws.

In a letter to SEC Chair Mary Jo White, Congresswoman Maxine Waters (D-CA), Ranking Member of the Financial Services Committee, underscored the importance of rules that automatically bar bad actors from beneficial statuses, and urged the adoption of a “more rigorous, fair, and public process for determining whether to waive these disqualifications.” Reports indicate that although the banks are pleading guilty to the Department of Justice, they are seeking to have these disqualifications waived by the SEC. Moreover, it has been reported that the SEC, in turn, has asked the DOJ to delay the announcement of the guilty pleas until the banks’ requests had been reviewed.

Waters wrote “Such egregious, long-lasting criminal behavior is unacceptable. While I applaud the Department [of Justice] for seeking guilty pleas and pursuing actions directly against the parent companies of these banks, I am concerned with reports that the Securities and Exchange Commission has asked to delay the announcement until it can review the banks’ requests to waive the automatic disqualifications in the securities laws…As I have said before, these disqualification provisions are important tools that protect investors, the markets, and the public by deterring misconduct, reducing recidivism, promoting market integrity, and removing bad actors from the market.”

In March, Waters released the “Bad Actor Disqualification Act,” draft legislation that would ensure a more thorough, transparent and public process for granting waivers of bad actor disqualifications at the SEC. In today’s letter, Waters underscored that the proposal was a direct response to concerns that the SEC has granted waivers virtually automatically, particularly to the largest financial firms.

“Given the egregious criminal conduct in this case, I believe that it is even more important that the SEC adopt a waiver process that, as in the bill, is sufficiently rigorous and provides for adequate opportunity for public input.”

Full text of the letter is below. A signed version is available online.

May 14, 2015

The Honorable Mary Jo White
Chair
U.S. Securities and Exchange Commission
100 F St NE
Washington, DC

Dear Chair White,

I write today to emphasize the importance of the collateral consequences in the securities laws that automatically disqualify bad actors from certain beneficial statuses and urge you to adopt a more rigorous, fair, and public process for determining whether to waive these disqualifications.

According to recent press reports, the Justice Department will soon announce that the bank holding companies of Barclays, JPMorgan Chase, Citigroup and the Royal Bank of Scotland will collectively pay several billion dollars and plead guilty to criminal antitrust violations for rigging the price of foreign currencies. UBS, as a result of this same misconduct, is expected to be found in violation of its 2012 nonprosecution agreement and will plead guilty and pay a fine for its earlier manipulation of the benchmark interest rates.

According to the U.K. and Swiss regulators, along with the Commodity Futures Trading Commission and the Office of the Comptroller of the Currency, who last year took action against most of these same firms, the banks, over the course of five years attempted to manipulate the systemically important foreign exchange market for their own benefit and to the detriment of their clients and other market participants. In addition, “The Banks failed to manage obvious risks around confidentiality, conflicts of interest and trading conduct.”[1]

Such egregious, long-lasting criminal behavior is unacceptable. While I applaud the Department for seeking guilty pleas and pursuing actions directly against the parent companies of these banks, I am concerned with reports that the Securities and Exchange Commission has asked to delay the announcement until it can review the banks’ requests to waive the automatic disqualifications in the securities laws.

As I have said before, these disqualification provisions are important tools that protect investors, the markets, and the public by deterring misconduct, reducing recidivism, promoting market integrity, and removing bad actors from the market. That is why, in March, I proposed draft legislation entitled The Bad Actor Disqualification Act of 2015. As you know, that proposal was a direct response to concerns that the SEC has granted waivers on a seemingly automatic basis and done so disproportionately for large financial firms, leading to the public perception that these institutions are “too-big-to-bar.” In our previous conversations you indicated a willingness to work with me to address this concern.

Given the egregious criminal conduct in this case, I believe that it is even more important that the SEC adopt a waiver process that, as in the bill, is sufficiently rigorous and provides for adequate opportunity for public input. I look forward to continuing to work with you on this issue and hearing your suggestions about how to improve the SEC’s waiver process, particularly in this case.

Sincerely,

Maxine Waters
Ranking Member

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Tags: SEC



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