SEC Chief Changed Mind on Rule Because of Concern for Legacy: Reports

WASHINGTON ( TheStreet) -- Departing Securities and Exchange Commission chief Mary Schapiro delayed implementing a planned rule change partly out of concern about her legacy, according to published media reports.

Schapiro discussed her decision in internal SEC emails that were obtained by a House of Representatives oversight panel, according to reports by The Wall Street Journal and Reuters.

The rule change in question would have lifted an existing ban on widespread advertising of so-called "private placement" securities, which are regulated less stringently than public securities.

Removing that ban is part of the Jumpstart Our Business Startups Act, commonly known as the JOBS Act, which is aimed at making it easier for small companies to raise capital, the Journal noted.

The act went into effect in April, and SEC staff recommended to commissioners that the agency issue an "interim final rule" in August, which would have lifted the ban immediately without a public comment period, the Journal and Reuters reported.

But on Aug. 7, Barbara Roper, director of investor protection at the Consumer Federation of America, sent an email to Schapiro's chief of staff saying the consumer group was strongly opposed to the issuance of a final rule with no comment period and that investor groups would voice similar concerns aggressively, the Journal said.

After that, Schapiro sent an email to Meredith Cross, who is in charge of the division tasked with writing the rule with the subject line, "Please don't forward," the reports said.

In the email, Schapiro said she had two worries, according to the Journal. The first was that if investor groups "feel this strongly, it seems like we should give them a comment period." Schapiro's second concern was, "I don't want to be tagged with an Anti-Investor legacy."

In a statement to reporters over the weekend, the SEC said, "Chairman Schapiro strongly believes that protecting investors should be the desired legacy of all SEC Chairmen," according to Reuters. "It is part of our mission and should inform our decisions at all times. She also believes that the agency should not consider investors -- or the groups that represent them -- to be special interests."

But Schapiro's change of mind has come under fire from Republicans who want the ban to be lifted promptly.

Patrick McHenry (R., N.C.), who chairs the House oversight committee that obtained the SEC emails, wrote to Schapiro Friday saying the rule change is "critical to capital formation and the growth of small enterprise," the Journal reported.

In a statement, McHenry also said he was disappointed the measure had been delayed as "a direct result of pressure from one special interest group and the personal agenda of the chairman," the Journal added.

Schapiro is scheduled to step down from her position on Dec. 14.

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