SEC Commissioner Kathleen Casey steps down

J.W. Verret —  6 August 2011

Commissioner Casey announced that she is stepping down from the SEC.

SEC Commissioner Kathleen L. Casey announced that she is leaving the agency today, having completed her five-year term on June 5 of this year.

Commissioner Casey was sworn in on July 17, 2006, and has been a staunch advocate of the agency’s mission to protect investors, facilitate capital formation, and ensure transparent, efficient, and competitive capital markets. During her tenure on the Commission, she was actively engaged on international matters, particularly in her capacity as chair of IOSCO’s Technical Committee and as the SEC’s representative to the Financial Stability Board.

“I feel fortunate to have served on the Commission during such a critical time and alongside such talented, hardworking and dedicated professionals,” said Commissioner Casey.

Prior to joining the SEC, Commissioner Casey spent 13 years on Capitol Hill, ultimately serving as Staff Director and Counsel of the Senate Banking, Housing, and Urban Affairs Committee. She earned her law degree at George Mason University School of Law in 1993, and received her BA in International Politics from Pennsylvania State University in 1988.

George Mason Law School should be proud of its distinguished alum.  She has been in the center of every major securities regulatory debate of the last 15 years, applying the law-and-economics toolkit that we specialize in providing our law students.  Few know that she was a student of our own Prof. Ribstein when he was still at GMU.

Commissioner Casey displayed a dedication to the SEC’s mission of protecting investors and encouraging capital formation.  She wasn’t afraid to speak up when the SEC overstepped its bounds, but was also known for her unfailing respect for the SEC and its staff during some very heated debates over the last 5 years.  She is far too diplomatic to say “I told you so.”  But I think someone should say it for her.

Commissioner Casey really hit her stride with a uniquely prescient warning about the SEC’s 2010 proxy access rule when it was adopted:

Let me start with an observation and a prediction. The observation is that it appears that a primary, if unstated, objective of this rule is to put the issue of proxy access behind the Commission once and for all. My prediction is that, paradoxically, the rule that the Commission adopts today virtually guarantees that the Commission will be forced to deal with this issue for years to come. I say this for two reasons. First, I believe that the rule is so fundamentally and fatally flawed that it will have great difficulty surviving judicial scrutiny. Second, an inevitable consequence of this rule, if it survives, is that the staff will be tasked with the unenviable responsibility of brokering disputes and addressing a broad array of issues arising from the operation of this new federal right every proxy season.

She also correctly observed about the proxy access rule:

Unfortunately, the adopting release goes through a jiu-jitsu exercise of purporting to give deference to state law and to increase shareholder choices under state law, when in fact the rules do exactly the opposite. As a result, the logic does violence to our historical understanding of the roles of federal securities law, state law, shareholder suffrage and private ordering, with potentially far-reaching implications. The consequences of this exercise include a series of arbitrary choices that are not tethered to empirical data and a number of internal inconsistencies that make the rules difficult to defend. Furthermore, the rules continue a disturbing trend of empowering institutional shareholders to the detriment of individual shareholders. Finally, the policy objectives underlying the rule are unsupported by serious analytical rigor, and the release fails to fairly and adequately consider the costs and impact of these rules. In this regard, I believe these rules are likely to result in significant harm to our economy and capital markets.

When the SEC adopted rules implementing NRSRO credit rating agency requirements in 2007, she warned:

Credit rating agencies play an important role in our securities markets, and Congress has placed on us the responsibility to ensure that NRSROs meet certain minimum standards, that the disclosure of their policies and procedures, including policies for managing conflicts of interest and handling material nonpublic information, is accurate, and that certain unfair and coercive practices are prohibited. As we move forward, we must exercise our oversight authority cautiously and judiciously. Congress did not intend us to become a merit regulator.

She reminded us in 2009 that much of the “dark pool” controversy was fueled by commentators with little understanding for the operation of the securities markets:

Today’s proposing release concerns the regulation of non-displayed trading interest. These dark pools of liquidity have been around for a long time. Ironically perhaps, the floor of the New York Stock Exchange was the single largest dark pool for many years. Notwithstanding a name that lends itself to sensationalism, there is nothing sinister about dark pools; they exist for legitimate economic reasons. Institutional investors seeking to make large trades have always wanted to avoid revealing the total size of their order. The number of dark pools has certainly increased in recent years, particularly since the advent of decimalized trading, and the way non-displayed stock trading occurs has changed due to technology.

She also wasn’t afraid to challenge the legitimacy of the Enforcement Division’s case against Goldman Sachs on the Abacus deal.

Congratulations to Commissioner Casey on a successful five-year tenure at the SEC.  She will be a tough act to follow.

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