Former SEC Chairman Slams Dodd-Frank Act

The New York Times reports that Harvey Pitt, who served as Chairman of the Securities and Exchange Commission from 2001 to 2003, testified before the Senate Banking Committee that the Dodd-Frank Act “is unduly complex, adds more layers of regulatory bureaucracy to an already over-bloated bureaucracy, makes financial regulation more cumbersome and less nimble than it already was.” His objections revolved around rules that favor institutional investors over regular shareholders, the new SEC whistleblower program, and the ineffectiveness of the legislation in preventing another financial meltdown.

Stock Market Operators Ask SEC for Unsupervised Access Rule Delay

Bloomberg reports that the New York Stock Exchange, Nasdaq, Bats Global Markets, and Direct Edge Holdings issued a joint letter to the Securities and Exchange Commission requesting that the July 14 ban on unsupervised market trading be delayed until November 30. The rules, adopted as part of the Dodd-Frank Act implementation, regulate how brokers send orders to venues, and would ban unfiltered access to the markets.

Coalition Protests Dodd-Frank Risk-Retention Rules

Bloomberg reports that legislators from both sides of the aisle, along with the American Bankers Association and 39 other groups, are protesting a draft rule known as the QRM standard. The rule, mandated by the Dodd-Frank Act, relates to the need for lenders and bond issuers to retain a five percent stake in securitized loans that are bundled for investors – with the exception of Qualified Residential Mortgages (QRM). The proposed rule, developed by six federal agencies, defined QRM as all mortgages except those where borrowers make a 20 percent down payment. Those objecting to the proposed rule say that it is inconsistent with Congressional intent, and could have the unintended consequence of raise the cost of mortgage credit and make it more difficult for consumers to purchase a home. The agencies involved in this rulemaking have extended the public comment deadline to August 1.

SEC Says No to SOX 404(b) Exemptions

As mandated by the Dodd-Frank Act, the Securities and Exchange Commission studied the question of whether companies with a market cap of $75 million to $250 million should be completely exempted from complying with the Sarbanes-Oxley Act’s Section 404(b). The recently-released SEC report recommends no new exemptions to the Section, which relates to the auditor’s report on internal controls for financial reporting. In addition, the study found that the cost of compliance went down since the implementation of Auditing Standard No. 5.

Auditors Escape DFA, But Come Under PCAOB Scrutiny

The New York Times reports that, unlike the Sarbanes-Oxley Act of 2002, which created the Public Company Accounting Oversight Board to oversee the work of external auditors, the Dodd-Frank Act took a hands-off approach to auditors. Nevertheless, the new PCAOB Chairman, James Doty, recently blasted auditors for failing to do the work to support their opinions for audits conducted for firms that played an integral role in the financial crisis. Doty also said that, during the 2010 audit cycle, PCAOB inspectors have identified significant problems with valuations. Some board officials believe that the secrecy associated with PCAOB investigations and disciplinary actions bodes ill for the integrity of the profession. Although the PCAOB has asked Congress to amend the law, but no action is forthcoming.