WASHINGTON (Reuters) – Congress made a mistake when it stripped away most of the Securities and Exchange Commission’s authority to police the holding companies of broker-dealers for risks, according to the SEC’s newest commissioner.
In his first formal interview with Reuters since joining the SEC late last year, Commissioner Daniel Gallagher defended the purpose behind the now-defunct oversight regime, which gave the SEC a direct window into the holding company operations of major investment banks like Bear Stearns, Lehman Brothers and Goldman Sachs.
That program, known as the Consolidated Supervised Entities (CSE) program, allowed the SEC to voluntarily monitor five major investment banks for capital and liquidity levels.
It was shut down by the SEC in 2008, however, amid criticism that it failed to properly oversee Bear Stearns.
Congress later stripped the SEC of that authority to oversee holding companies in the 2010 Dodd-Frank law and gave the power instead to the Federal Reserve.
Now, the SEC only has some outdated rules on the books that give it an opaque window into the holding companies of broker-dealers.
“As we see it now, … we are out of the holding company oversight regime. The CSE program was the end of it,” Gallagher said last week in the
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