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Hearing of the Capital Markets and Government-Sponsored Enterprises Subcommittee of the House Financial Services Committee - U.S. Securities and Exchange Commission (SEC)


Location: Washington, DC

Rep. Scott Garrett (R-NJ), Chairman of the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, delivered the following opening statement today at an oversight hearing of the U.S. Securities and Exchange Commission (SEC):

"Welcome Chairman Schapiro.

"The intention of this hearing today is to conduct appropriate oversight on the operations and work of the Securities and Exchange Commission--on that front there is no shortage of issues to address.

"From money market funds, to conflict minerals, to the implementation of the JOBS Act, to oversight of broker-dealers and investment advisors, to Title VII rulemaking, to credit rating agencies, to market structure, to accounting and auditing oversight, to muni-advisors and many more--the SEC's current workload touches almost every facet of our nation's financial markets.

"It is because of that breadth of scope that all of the new regulations coming out of the agency must go through a rigorous review of the costs and benefits associated with each new rule. I want to thank the chairman for her recent focus on the importance of this concept with the new formal guidance on economic analysis issued last month to agency divisions and offices.

"This guidance and the newfound consensus on cost-benefit analysis will hopefully rebut some of our colleagues on the other side of the aisle that continue to demagogue cost-benefit analysis as simply a way to undermine Dodd-Frank regulation. This analysis is actually a good faith attempt to ensure that new rules being produced meet their intended goals and do add unnecessary or overly burdensome costs to the private sector.

"I look forward to continuing to work with the chairman to ensure that this new guidance is "binding' on the agency and that the new standard in this document is applied to all rules under consideration. I also hope the chairman will be more supportive of my SEC cost-benefit legislation so that we can ensure future SEC Chairmen are subject to the same appropriate standard.

"Another broader issue that needs to be addressed is the fundamental restructuring of the agency. Section 967 of Dodd-Frank required an independent study to be done and recommendations to be made as to how the SEC should reorganize itself to become a more efficient regulatory agency and achieve better results for the taxpayer money it spends.

"Section 967 also requires periodic reports by the SEC on the status of implementing the recommendations. The explanatory note of the SEC's March 30, 2012, report states; "The Commission was not consulted on the decision to hire the consultant advising as to the MAP project or the cost and scope thereof.'

"I find this statement extremely troubling. Nowhere in Dodd-Frank are you required to spend millions of dollars for an outside consultant to help you implement the recommendations of the independent 967 study.

"I have heard estimates that you have spent as much as $10 million on something that you could have done internally through the office of the Chief Operating Officer. With this type of blatant example of millions of dollars wasted, I find it difficult to sympathize with your request for millions of dollars of additional taxpayer money year after year.

"Finally, I was dismayed in February when you gave a speech on the state of the SEC and specifically omitted "Facilitating Capital Formation' as a primary component of the SEC's mission. It is hard to imagine that this was just a casual oversight given the depth of the ongoing congressional negotiations on the JOBS Act. Furthermore, in your testimony to us here today, you omit it yet again!

"Fortunately, a huge bipartisan and bicameral majority of Congress recognize the importance of capital formation on job creation even if you do not.

"Too many times, the idea of protecting investors is only framed under the umbrella of protecting them from fraud. Protecting investors is also about ensuring investors have places to invest their capital and make a return. It is about providing investors choices and cost-effective ways to conduct their business. Capital formation is a vital and equally important part of your mission, hopefully now you will remember it in the future."

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