Financial Services Committee Targets SEC Enforcement Activity

House Republicans of the House Committee on Financial Services have proposed several bills to limit the enforcement authority of the Securities and Exchange Commission. The Subcommittee on Capital Markets hosted a hearing on Tuesday to discuss the bills and SEC enforcement practices.

One bill, currently unnamed, would modify the definition of “violation” in the securities laws such that SEC fines are reduced—targeting what is often billions of dollars worth of fines for any given year. The bill does this by effectively consolidating many individual violations into groups that arise from “a common or a substantially overlapping originating cause;” “the same misstatement or omission;” or “a continuing failure to comply.”

By reducing the number of violations, the punitive fines imposed by the SEC would thereby also be reduced. Andrew Vollmer, a senior affiliated scholar at the Mercatus Center and former SEC deputy general counsel, testified at the hearing that “excessive penalties are a problem because of ambiguous statutory language.”

Vollmer also recommended to the subcommittee that defendants in SEC proceedings have an “unqualified” right to have their case heard before a federal judge. H.R. 6695 would allow for precisely that, and there is another bill pending before the Committee. The bill, if passed, would enable someone charged by the SEC to decide whether they want to be tried before a court or the SEC’s administrative law judges, whose constitutionality is currently being considered before the Supreme Court in the case SEC v. Jarkesy.

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A third bill would require the SEC to limit disgorgement to “net profit” only, as opposed to all ill-gotten gains, without subtracting related business expenses.

Though none of the bills have been brought to or scheduled for a vote, they appear to have very little support from the Democrats on the subcommittee. Many Democratic members praised the SEC during the hearing, especially for its enforcement actions against crypto securities and other digital assets.

Representative Bradley Sherman, D-California, argued that a “disproportionate amount of the SEC’s enforcement actions are against the crypto industry—that’s not a coincidence.” Sherman said further that “crypto is a garden of snakes,” and the SEC should lead on crypto enforcement because it is “best at regulating assets that are intangible.”

Tags: SEC

U.S. corporate chief financial officers are upbeat about the economy’s prospects long-term and even more so about their own companies’ outlooks, according to a new survey. While last year’s fears of an imminent recession are fading, the CFOs nonetheless had plenty to worry about, from still-high interest rates to geopolitical tensions, the poll showed.

The findings from this survey of 2,030 finance chiefs, by U.S. Bank, strike a heartening note for investors. Although the report didn’t delve into earnings and revenue expectations, its upbeat prognosis sparks hope for continued stock market increases, a key concern for allocators.

Challenges, of course, loom. Company finance chiefs “face higher inflation and interest rates, political uncertainty in the U.S. and abroad, a difficult-to-forecast short-term economy and incredible pressure to make the right technology investments their firms will need to compete,” said Stephen Philipson, head of global markets and specialized finance at U.S. Bank, in a statement.

For the country’s economy over the next 12 months, the survey showed CFOs are slightly more optimistic than pessimistic: 37% are positive and 33% are negative. Over the next three years, though, the findings are much more upbeat, with 58% positive and 15% negative. The survey takers asked respondents to give one of three answers: positive, negative or neither.

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Regarding their own business’ fortunes, the forecasts are even more sanguine. Over the next 12 months, the positive-negative breakdown is more pronounced, 45% to 23%; and for three years, 61% to 14%.

Each industry has its own challenges, to be sure. In the automotive sector, the survey found that only 37% are positive about the next 12 months, but 63% are optimistic over the next three years. Autos logged an estimated 5.6% sales increase in the U.S. in this year’s first quarter, although some problems cropped up such as slowing electric vehicle sales.

Talent shortages were viewed as the top risk to companies’ success (per 41% of respondents), for the third straight year. This means difficulty finding skilled employees. In sector terms, CFOs in manufacturing (47%), hospitality and leisure (46%) and technology (46%) named a dearth of talent as their top risk. For all sectors, the second biggest risk was the pace of technology change and digital disruption (38%). Cybersecurity and data breaches ranked third (28%).

The CFOs named geopolitical tension and war as the fourth-biggest risk (26%), up from 10^th place in 2023. Over the past three years, armed conflicts have broadened—Russia invaded Ukraine in February 2022; and the Israel-Hamas hostilities began in October 2023, with the Hamas attack on Israeli soil, launched from Gaza.

Cost control is finance leaders’ top priority, with 44% indicating that cutting costs and driving efficiencies in the finance function was the paramount imperative, which is up six percentage points from 2023 and almost double the proportion in 2021. But their preference is to trim costs through greater efficiency, not layoffs.

That said, 39% said they are not sure about their capacity to manage and reduce new risks. The CFOs surveyed reported that help will come from artificial intelligence: Fifty-one percent are prioritizing investing in AI in the finance area, and risk management is their primary objective.

This report is U.S. Bank’s fourth annual CFO survey, with the first appearing in 2021, as the nation began to emerge from the pandemic’s economic disruption.