Today, Congressman Frank Lucas (OK-03) joined his colleagues on the House Financial Services Committee for a hearing on “Oversight of the Securities and Exchange Commission”.
Lucas questioned U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler on the negative impact of the SEC’s proposal to publicly disseminate large security-based swap positions.
Lucas also expressed his concerns at the volume and speed of the SEC’s rulemaking and how the SEC’s regulatory agenda could impact interconnected financial products and sectors.
Click here to watch Lucas’ Q&A.
On security-based swaps
“There is a consensus from market participants that the SEC’s proposal to publicly disseminate large security-based swap positions would deeply harm liquidity, particularly in the credit market. I’ll note, standing-up a large position reporting regime for confidential, regulatory purposes is sensible.
“As you know, for example, the CFTC has a large position reporting regime for futures. But, that information is anonymous and aggregated. In November, I sent you a letter with many of my Republican and Democratic colleagues on this committee regarding this proposal.
“We specifically asked that you support an approach that requires confidential reporting, noting the potential harm of putting sensitive position information out to the market.”
On volume and breadth of SEC rulemaking agenda
“The volume and breadth of SEC rulemakings is of significant concern to me. The implications of many of the proposed rules are massive, and often affect the same or interconnected financial products and market sectors. The adverse consequences in one sector can bleed into another, causing lasting economic harm.
“I’d like to reflect on my time as Chairman of the Ag Committee during the implementation process of Title 7 of Dodd-Frank. The CFTC’s rulemaking process was rushed and chaotic, which led to proposed rules that were poorly vetted. As a result, the CFTC routinely resorted to last-minute staff guidance and no-action letters that were needed to modify new rules that simply weren’t workable. This patchwork approach circumvented the standard rulemaking process and lacked any real cost-benefit analysis.
“At that time, many of the proposed rules were required by Dodd-Frank. The same cannot be said today. Even still, the SEC is following the same flawed path.
“The proposed rules have a major impact on every asset class under the SEC’s jurisdiction, with serious consequences for public companies, investors, and retirees.
“I get the impression from personnel across the SEC that there are concerns about the high volume and the fast pace of this rulemaking. Let’s try to get it right, not get it done in a hurry.”
Last Congress, Lucas led a bipartisan letter with Congresswoman Alma Adams (D-NC) regarding the SEC’s proposed rule for security-based swap position reporting, expressing concern that the SEC had not properly considered the total negative impact the rule would have on investors and market participants.
