Trump's SEC Pick Criticized Bank Regulators' Efforts to Expand Scope

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Paul Atkins — the man President-elect Donald Trump has picked to be the next U.S. Securities and Exchange Commission chairman — could protect big U.S. life and annuity issuers and asset managers from bank regulators.

Atkins is a lawyer and former SEC commissioner who now runs Patomak Global Partners, a compliance consulting firm.

In 2015, he testified at a U.S. House Financial Services Committee hearing against efforts by the Federal Reserve to oversee the solvency of companies other than banks.

The hearing was about the effects of the Dodd-Frank Act, a 2010 law passed in the wake of the 2007-2009 financial crisis. The act created the Financial Stability Oversight Council, a body chaired by the Treasury secretary that coordinates crisis prevention and management activities for the U.S. Treasury Department, the Federal Reserve Board, the SEC and other financial services regulators.

Atkins blasted the process that FSOC used to let the Federal Reserve regulate solvency at some big U.S. life insurers, by designating those insurers as "systemically important financial institutions."

"If FSOC's cavalier treatment of the insurance industry is any precedent, we should all be extremely concerned that equally misguided and uninformed treatment of the asset management industry is soon to follow," Atkins said, according to a written version of his remarks.

Atkins also accused the Federal Reserve of using an international regulator group, the Financial Stability Board, to work behind closed doors to get oversight over big U.S. life insurers.

"There is no transparency or accountability with respect to official American participation in the FSB process," Atkins said. "These meetings and activities are closed. The widespread suspicion is that the Federal Reserve is using the FSB as a bootstrap to build a framework and momentum to accomplish through opaque, backroom processes what it may not be able to do alone in the United States."

Atkins again attacked the idea of federal regulators applying bank-like rules to life insurers in an opinion article published by American Banker in 2017.

What it means: Trump blocked the financial stability regulation efforts started while former President Barack Obama was in office.

Federal regulators began to try to revamp and revive the financial stability oversight efforts when Joe Biden became president. FSOC has been trying to get more flexibility to act quickly when important companies other than banks look shaky.

Meanwhile, the international Financial Stability Board is starting a program that could help regulators plan for what to do if big insurers look shaky or suddenly collapse.

The board moved Friday to approve a list of "insurers reported as subject to resolution planning standards."

If Atkins gets confirmed as the SEC chairman, nonbank financial services companies might be in a better position to avoid dealing with new capital standards, investment management and reporting rules, but U.S. federal regulators and regulators outside the United States might have fewer tools they could use to stabilize or shut down a company other than a bank that was facing a severe crisis.

Credit: David Paul Morris/Bloomberg