The classic news cycle of a political story – from substance to process – appears to be taking hold of the biggest financial story of the day. Commentators are redirecting their intense scrutiny of the SEC’s announcement of charges against Goldman Sachs toward the SEC’s decision to charge Goldman Sachs. The turning point from text to metatext in this story occurred with Bloomberg’s report that the Commission split 3-2, when the two Republican appointees – Kathleen Casey and Troy Paredes – dissented from the Commission’s decision to bring an enforcement action against Goldman.
Anecdotally, the phenomenon of dissents from SEC decisions appears to be growing, given the number of high-profile instances in recent years. This particular quintet of Commissioners divided along the same partisan lines (or roughly partisan lines, since Chair Mary Schapiro is technically an independent) just a few months ago on the promulgation of new rules restricting short selling and requiring climate change
disclosure. On the enactment of new rules for money market funds earlier this year, Casey dissented alone. And, just a few years ago, Commissioners Cynthia Glassman and Paul Atkins dissented very publicly from new hedge fund regulations.
To conclude that the SEC is becoming more political might seem attractive but somewhat odd, inasmuch as its very composition has long been explicitly divided along partisan lines. So perhaps the SEC is simply one more political body that, like so many of our political bodies today, appears to be growing less content to disguise or cabin its political nature.
Perhaps rather than (or as well as) becoming more political, the SEC is becoming more adjudicative and operating more akin to a judicial entity. While the split decision in this Goldman case was not publicized, previous dissents have come with lengthy minority reports setting forth analyses and arguments critiquing the Commission’s decision. And that sort of analysis may not be a bad development, as it may contribute to a more sophisticated and nuanced corpus of rulings. When one considers that huge numbers of public comments on SEC rulings are often homogeneous, dissents by Commissioners could add greater richness to the public debate over SEC regulations.
With that said, it seems badly done for the SEC not to have responded in the first instance to the enormities of the financial crisis with a single voice. To the extent that any violations of securities regulations occurred during the late unpleasantness – not a terribly controversial supposition – surely the SEC could have roused itself to start enforcing the law again with a unanimous prosecution.
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