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Public Statement


 
 

Commissioner Aguilar's (Hopefully) Helpful Tips for New SEC Commissioners

Commissioner Luis A. Aguilar

U.S. Securities and Exchange Commission[1]

Nov. 30, 2015

I have had an interesting and eventful run at the SEC since I was first sworn in on July 31, 2008, which was shortly before the demise of Lehman Brothers and the financial crisis that followed. During my tenure, I have served with four Chairs, a number of different Commissioners (composing six different Commissions), five General Counsels, and at least three different heads of each of the SEC’s major divisions and offices. Through it all, I have come to realize that a single SEC Commissioner can have a lasting impact—hopefully, a positive impact—on the agency, its mission, the capital markets, and investor protection.

When I first walked through this agency’s doors in July 2008, however, I did not find a “how to” guide on being a Commissioner. I did not receive any list of “do’s and don’ts,” a handbook on what I could do (or should do), or instructions on how to get things done as a Commissioner. Simply put, there is no training manual on how to do a Commissioner’s job. For the most part, being an SEC Commissioner is “on-the-job” training.

Each Commissioner largely functions as an independent agent, who is largely left to his or her own devices to determine how to fulfil the role of an SEC Commissioner. To that end, each new Commissioner brings with him or her different skill sets, a disparate knowledge base, and a personal philosophy, and each Commissioner may have wide-ranging styles of management, communication, and leadership. Indeed, the career backgrounds of Commissioners reflect this variety of experiences; bankers, lawyers, accountants, economists, business professionals, career politicians, law professors, and Congressional staffers have all served as SEC Commissioners. In short, there is no archetype for the ideal SEC Commissioner, for they come from a variety of backgrounds.

My goal is to possibly shorten a new Commissioner’s overall learning curve and, at the same time, provide some helpful tips for maneuvering through the role of an SEC Commissioner. To that end, I provide a set of principles, thoughts, and ideas that, while by no means comprehensive, I hope that future Commissioners, and their counsels, may find useful.

What I hope to accomplish is to provide future Commissioners with the benefits of my “on-the-job-training” and provide a high level roadmap—you might call it a set of thoughts from a 60,000-foot perspective—that I would have appreciated receiving on the day I set foot inside the door of this esteemed and proud agency.

Overarching Principles

There are two foundational principles that, in my view, serve as useful guideposts for an SEC Commissioner: First, there is great significance to the oath that each Commissioner must take when he or she enters into office.[1] I am referring not to the oath itself—which you will find in Footnote 1—but rather to the larger and, in many ways, unique significance that the oath holds for a Commissioner. For it represents (at least to me) the solemn belief that the office of an SEC Commissioner is larger than one individual. The oath serves as a poignant reminder of the significant responsibility that a Commissioner has undertaken to serve the American public, and the corresponding duty to place the public’s best interests above all else. It also clarifies that, regardless of your political affiliation, personal goals, professional background, or philosophical beliefs, you are now a public servant—and, hopefully, untethered from vested interests.[2]

Second, there is the SEC’s Mission Statement, which states simply the following: “The mission of the U.S. Securities and Exchange Commission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.”[3] The SEC’s Mission Statement is the agency’s defining ethos. Whenever I run into a particularly thorny issue, or am deliberating on a staff recommendation that could have broader ramifications for the public, I find it helpful to consider the words of the SEC’s mission as a baseline to reaching a decision—particularly, the focus on protecting investors.

SEC Commissioners generally enjoy a great deal of latitude in determining how best to fulfill their role. Accordingly, what follows below is a brief, non-exhaustive list of thoughts and observations that may shed some light on a Commissioner’s work. Future Commissioners are, of course, free to ignore these suggestions.

Some General Observations

Your Personal Staff

  • As soon as practicable, find knowledgeable, experienced, and savvy counsels, preferably individuals who know how the SEC works. Finding counsels who are effective negotiators is also important. The selection of your counsels may be one of the most important decisions you make as a Commissioner, because it will determine how effective you are and how much you’ll get done.
  • Commissioners other than the Chair are allowed to hire four counsels (the Chair has a bigger staff). They can be from either inside or outside the agency. My advice to new Commissioners not familiar with the inner workings of the SEC is to make sure your counsels have that familiarity. Each Commissioner has his or her own strengths and weaknesses. Hire the skill sets you need to bolster the former and mitigate the latter. While most Commissioners’ counsels have traditionally been attorneys, they can be accountants, economists, or any other experts with the expertise you think you need. You are the best judge of what will “round-out” your own expertise and the needs of your office. Generally, however, you will want counsels whose expertise aligns with the SEC’s mission and work flow. These areas include: Corporation Finance (and a working knowledge of the PCAOB and FASB), Trading and Markets (SROs such as stock and option exchanges, ATSs, broker-dealers, the new SBS entities, etc.), Investment Management (mutual funds, money market funds, investment advisers, hedge funds, etc.), and, of course, Enforcement. Expertise in municipal securities and municipal advisors, NRSROs, and clearing agencies can also be quite useful. The most constant work-flow through any Commissioner’s office is enforcement-related matters. Typically, all of the counsels work on those matters, but some Commissioners have been known to designate one counsel to handle all enforcement matters.
  • You also get to hire a confidential assistant. This is a position that really requires someone who is familiar with, and can maneuver through, the SEC’s bureaucracy. The number of obligations on a Commissioner and the amount of documents that flow through a Commissioner’s office can be daunting. You will need a calm, steady hand (willing to work long hours at the drop of a hat) to keep the train moving. Your confidential assistant should also have a strong understanding of your counsels’ portfolios. In addition, it is critical that the person who holds this position has strong communication and interpersonal skills, because she or he is the front person between everyone who passes through, or otherwise contacts, your office. Finally, your confidential assistant will need to be a world-class “multi-tasker,” given the fast-paced environment that is ever present in a Commissioner’s office.
  • Because of the Government in the Sunshine Act of 1975 (the “Sunshine Act”),[4] your counsels will play a key role in communicating with the offices of other Commissioners and with the staff generally. The Sunshine Act generally requires that any time two or more Commissioners discuss Commission business, it needs to be done in a public forum.[5] (Certain enforcement and administrative matters are excluded from this requirement.) The practical impact of this requirement is that it limits informal discussions between Commissioners and leaves much of the communication to take place between and among the Commissioners’ counsels. As a result, you will lean heavily on your counsels to gather, collect, and process information on your behalf, not to mention the “negotiations by proxy” that can take place among counsels on behalf of Commissioners.
  • Ensure that your counsels understand that their principal responsibility is to make an independent assessment of each matter that comes before you. Your counsels should perform their own due diligence in each instance, and cannot be afraid to ask trenchant questions of the Commission staff. In this regard, I have found that those counsels who, for whatever reason, may be reluctant to question staff recommendations are less able to fulfill the role of a Commissioner’s counsel successfully.
  • Make sure that your counsels develop a working knowledge of your positions and your agenda on particular matters. Your counsel can develop this knowledge, of course, through direct and clear communications, and by ensuring that they read past speeches, statements, etc.
  • Work to ensure that your counsels establish a genuine camaraderie in your office. They will spend a lot of time together and need to work as one unit.
  • Consider your counsels as your alter ego. Remember that how they are treated by others is a reflection on how others are treating you. Negotiations with others, including the staff, can become heated at times, but your counsel should never be mistreated. Defend and protect them.
  • Make sure you create a work environment where you and your counsels can take every opportunity to share views and ideas, and not one where you simply express your own views and ideas to your counsels. Make sure you hire good people, and then make sure you listen to them.

The Commission’s Internal Procedures

  • It is important to understand that the Chair alone determines the Commission’s agenda, as well as the content of the recommendations you will be asked to vote on. To this point make sure you familiarize yourself with Reorganization Plan No. 10 of 1950.[6] Prior to it becoming law, all SEC Commissioners were considered equal vis-à-vis the exercise of powers over the Commission, its policy, and its staff. After this plan became law, the Chair inherited increased powers and a greater set of tools that are unavailable to the agency’s other Commissioners.
  • Understand the substantive rules and procedural processes at the SEC, e.g., how rulemakings work, how enforcement recommendations work, how seriatim votes work, etc. Also, learn how various matters are circulated among the Commissioners (via seriatim, advice memorandum, or information memorandum), as Commissioners have different powers depending on how the matter is circulated. Knowing and using the agency’s processes and procedures can be a powerful tool to getting things done and being an effective Commissioner.
  • Take time to understand the SEC’s vast bureaucracy and how to get things done. This is not as easy as it sounds. Good counsels and a good confidential assistant can help, but they are no substitute for personal awareness. The more quickly you can develop relationships with the heads of the various Divisions and Offices the better. You should also develop a good understanding of how the Office of the Secretary works.
  • Matters are often voted “by seriatim,” which means that these matters are being circulated to each Commissioner’s office in turn, Commissioner-by-Commissioner, for his or her vote. The Chair typically votes last, but given that the Chair decides whether to circulate a seriatim in the first instance, it is reasonable to assume the Chair will approve it. Seriatims can be tricky because one Commissioner can hold onto a seriatim (a “desk drawer veto,” if you will). Dealing with this usually falls on the Chair, but sometimes you may have a particular interest in seeing a seriatim get voted and approved. In that case, your only options are either to persuade your fellow Commissioner to “move it along” (even if he or she votes to “disapprove” it) or to persuade the Chair to have it voted on at a public open meeting (or, occasionally, in a closed non-public Commission meeting, if allowed under an exemption to the Sunshine Act). Fortunately, under Chair White this hasn’t been a significant issue.
  • From time to time, you might read in a newspaper about a “Commission action,” and you will have no idea what it is about. So you’ll ask yourself, am I having a “senior moment?” Am I suffering from amnesia? Probably not. In all likelihood, the staff had taken action pursuant to the more than 376 separate rules where the Commission previously granted delegated authority to the SEC staff.[7] These delegations have become necessary and have grown over time because individual Commissioners could not realistically handle the tremendous volume of matters that require Commission action. This is not to say, however, that the Commissioners should not be notified when the staff takes action on particularly important matters via delegated authority. During my tenure, the staff has improved at giving Commissioners a “heads-up” about notable actions that the staff plans to take using its delegated authority. Nevertheless, there are still times when the staff acted based on delegated authority on important matters (or, at least, important to one or more Commissioners) without notice to the Commissioners. Accordingly, you should familiarize yourself with these delegations.
  • For information on delegated authority, you should read 17 C.F.R. Section 201.431 (Commission consideration of actions made pursuant to delegated authority). Among other things, this provision allows a single Commissioner to require the full Commission to review a matter for which the staff has delegated authority. It is one of the few tools that non-Chair Commissioners have to allow them to weigh-in on matters for which the staff has been given delegated authority.
  • Speaking of the staff’s powers, be aware of a number of other areas where the staff has authority to act without prior Commission approval. This authority includes, among many other things, the power to issue “no-action,” interpretive, or exemptive relief letters,[8] and to publish staff guidance, such as Staff Legal Bulletins[9] or Staff Accounting Bulletins.[10] While the Chair may receive prior notice of these actions, the other Commissioners may not. Again, this is an area that has improved over my 7-plus years as a Commissioner, and the staff has become more sensitive to the importance of keeping Commissioners informed as to significant matters. Unlike staff actions taken via delegated authority, however, individual Commissioners have no power to require that these matters be brought before the entire Commission.
  • While the SEC’s enforcement calendar will be the most constant activity in your week-to-week schedule, rulemakings will follow closely on its heels. With respect to rulemakings, read and become familiar with the Administrative Procedures Act (“APA”).[11] Understand how you can use its provisions—and how they can be used against you.
  • I personally believe that the SEC’s use of the APA “notice and comment” process enhances the quality of the agency’s rulemakings and makes them more effective. Because of the “notice and comment” process, the proposed rulemaking stage is the time to make sure all possible relevant issues are raised, all possible relevant questions are asked, and all possible requests for more information are sought. You do not want to be caught flat-footed at the adoption stage trying to insert a new substantive proposition into a rulemaking. If the issue was not initially raised at the proposing stage, you may have to address whether it was properly subjected to the public “notice and comment” period mandated by the APA.

One Commissioner’s View of The Role of a Commissioner

  • When it comes to making decisions, an SEC Commissioner should be wary of simply accepting the status quo. The securities markets are in a state of almost constant evolution, which calls for a degree of open-mindedness and adaptability.
  • I urge you to bring a fresh perspective to the table, and to help identify areas where the Commission could achieve its mission more fully or more efficiently. Do not be afraid to propose new approaches or solutions. This principle applies not only to the Commission’s public activities, such as enforcement actions and rulemakings, but also to the agency’s own internal policies and procedures. Be wary of any pushback you may receive from those who argue that “it’s not the way things are done here.” Things can often be done better.
  • There are always things being worked on in the various agency offices and divisions about which the Commissioners may not be well informed—or even know about. Ultimately, it is your responsibility as a Commissioner to ensure that you are fully informed about what is—or is not—transpiring within the agency. In this regard, I have found it helpful to establish regular meetings with the directors of the various SEC Divisions and Offices to keep abreast of new developments and emerging issues. But be prepared to ask detailed questions about what the staff is working on, as the information is sometimes hard to ferret out.
  • There is no formal mechanism by which you will meet your counterparts at other federal or state regulatory agencies, such as the CFTC.[12] You will need to be proactive and reach out to them directly to introduce yourself and make regular contacts.
  • Your vote is your ultimate power. Treat it with utmost respect. Your vote must be independently considered and cast with a clear conscience. Do not vote just to appease the loud voices or please others. You were appointed by the President, and confirmed by the Senate, to be an independent voice for American investors.
  • Sometimes, at the proposed rulemaking stage, other Commissioners may try to discourage you or prevent you from raising certain issues or asking certain questions. If this is done for ideological reasons, do not listen to them. Conversely, you should be open-minded about the issues and questions raised by other Commissioners. You may learn something.
  • The “bully pulpit” is a powerful tool. You will become a sought after speaker at conferences, meetings, dinners, events, and other public forums, both in the U.S. and abroad. You will not have time to accept all invitations, so choose your speaking engagements wisely, and give yourself sufficient time to prepare. Preparing for these engagements will require a significant amount of time and effort, which represents a substantial opportunity cost for you and your staff.
  • Similarly, you will be asked to meet with all types of people and organizations, from all backgrounds, businesses, political affiliations (some more political than others), and ideological leanings. These individuals are normally pursuing specific agendas, and are typically trying to influence a particular Commission rulemaking or release, whether pending or contemplated, or other issues of public importance. I urge you to remain open to hearing all points of views on matters being considered by the Commission—you may be surprised at what you may learn about particular issues.
  • Being a Commissioner (and a Commissioner’s counsel) is an all-consuming job. You will need to accept the fact that you will need to work—or at least be available—24 hours a day, 7 days a week, 365 days a year. For this reason, you need to be technologically savvy and be plugged into the office all year. To that end, make sure your SEC-issued mobile devices are always fully charged.
  • Always, always, consider the SEC’s mission in every decision you make.
  • Understand where other Commissioners stand on any given issue. Your counsels can help with this through their communications and relationships with the agency staff and the other Commissioners’ counsels.
  • You will receive an extraordinary amount of information electronically. Develop a system for organizing email and work product so that you can access it quickly.
  • In reviewing staff recommendations, focus on how the SEC staff adopts or implements established Commission policy.
  • Practice healthy skepticism: everyone who reaches out to the Commissioner’s office has an agenda, and it is critical that you understand that agenda.
  • From time-to-time, various parties will offer precedent to justify a course of action they want the Commission to pursue. Be sure to dig into these so-called precedents and determine how they compare and contrast to the case or matter you are considering. Some precedents are more “on point” than others and some precedents may have outlasted their time and relevance.
  • If you do not feel very busy—or swamped with work— something is wrong.

Miscellaneous Additional Advice for Commissioners

  • Do your own due diligence and listen to all sides—particularly those whose views may not align with yours. You will become more informed (and wiser).
  • I have found that being an effective Commissioner turns, in large part, on the ability to form and maintain strong working relationships within the Commission. You certainly do not need to agree with everyone else, but you do need to be able to have a frank dialogue with others without burning your bridges.
  • At the risk of preaching (or preaching too much), establishing a reputation for honesty and credibility will make you a far more effective Commissioner. Developing a reputation for honesty can foster trust within the Commission (and the staff), which can greatly enhance your ability to influence the direction of policy. This is particularly important, as you will find yourself negotiating with the same parties time and time again.
  • The staff at the SEC represents some of the most intelligent, creative, and hardworking individuals you will ever have the honor of working with. Work to give them the resources and support they need to do their jobs, and do not hesitate to give them credit for their efforts.
  • Tough decisions will come with both praise and criticism. Do not bathe in the light of the former or wilt in the face of the latter.
  • Do your homework. The American people cannot afford to have you “wing it.”
  • When you know the right thing to do, do it.
  • If you worry about what reporters will write about you—or the so-called “facts” that are fed to them from others who have a different agenda, or that seem as if they are made up—you will do a poor job as a Commissioner. Do not worry about what you cannot control. To that end, resist the temptation to Google yourself.
  • Hopefully, you have a network of close, trusted friends who live “outside the beltway.” Make sure to talk to them frequently. It will keep you grounded.

Quotes I’ve Found Useful

What follows are some quotes that I turn to every now and then when I need perspective, and reassurance, that I am doing the right thing, making the appropriate choices, and living by the right ideals.

“There comes a time when one must take the position that is neither safe nor politic nor popular, but he must do it because conscience tells him it is right.” — Martin Luther King, Jr.

“It is not the critic who counts: not the man who points out how the strong man stumbles, or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly, who errs, who comes short again and again, because there is no effort without error and shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself in a worthy cause; who at the best, knows, in the end the triumph of achievement, and who, at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who know neither victory nor defeat.” — President Theodore Roosevelt

“You have enemies? Good. That means you’ve stood up for something, sometime in your life.” — Sir Winston Churchill

“The difference between a successful person and others is not a lack of strength, not a lack of knowledge, but rather a lack of will.” — Vince Lombardi

If you set out to be liked, you would be prepared to compromise on anything at any time, and you would achieve nothing.” — Margaret Thatcher

“Well done is better than well said.” — Benjamin Franklin

“Do not let what you cannot do interfere with what you can do.” — John Wooden

“Whenever you do a thing, act as if all the world were watching.” — President Thomas Jefferson

“It is amazing what you can accomplish if you do not care who gets the credit.” — President Harry S. Truman

“The time is always right to do what is right.” — Martin Luther King Jr.

“Be more concerned with your character than your reputation, because your character is what you really are, while your reputation is merely what others think you are.” — John Wooden

“The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.” — Martin Luther King Jr.



[1] The views I express are my own, and do not necessarily reflect the views of the U.S. Securities and Exchange Commission (the “SEC” or “Commission”), my fellow Commissioners, or members of the staff.



[1] 5 U.S.C. § 3331 (2015). Specifically, the oath requires that each Commissioner say the following: “I, [name], do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter. So help me God.”

[2] Having been sworn in as a newly-appointed officer of the United States Government, a Commissioner has also become subject to specific statutory rules and regulations governing what activities the official can do upon leaving office. For example, certain statutory restrictions on government officials prohibit individuals from engaging in certain activities on behalf of persons or entities after they leave office. See 18 U.S.C. § 207 (Restrictions on former officers, employees, and elected officials of the executive and legislative branches).

[3] SEC Website, About the SEC, The Investor’s Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation (modified June 10, 2013), available at http://www.sec.gov/about/whatwedo.shtml.

[4] See John Crawford, Tim Karpoff, Angela Allen, Nicole Allen, and Michel Margolis, Memorandum Concerning the

Securities and Exchange Commission and the Commodity Futures Trading Commission (Paper prepared for The Volcker Alliance) at 1, available at https://volckeralliance.org/sites/default/files/attachments/Background%20Paper%203_Memorandum%20Concerning%20The%20Securities%20and%20Exchange%20Commission%20and%20The%20Commodity%20Futures%20Trading%20Commission.pdf,

[5] See 5 U.S.C. § 552(b) (2015).

[6] 15 F.R. 3175, 64 Stat. 1265 (effective May 24, 1950), available at http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title5a-node83-leaf113&num=0&edition=prelim.

[7] See 17 C.F.R. Sections 200.30-1 through 200.30-18. The Commission has adopted many rules granting delegated authority to the Commission’s staff. For example, the staff acts on thousands of rule filings from SROs including, exchanges, clearing agencies, and FINRA pursuant to delegated authority (see 17 C.F.R. 200.30-3(a)(12) (Delegation of Authority to Director of Trading and Markets)); the Commission has delegated the authority to the Director of the Division of Trading and Markets to grant exemptions from certain Exchange Act Rules, including, among others, the Net Capital Rule (see 17 C.F.R. 200.30-3(a)(7)(ii) (Delegation of Authority to Director of Trading and Markets)) and rules regarding short sales (see 17 C.F.R. Section 200.30-3(a)(15); the Commission has delegated the authority to the Director of the Division of Corporation Finance to authorize the granting or denial of applications, upon a showing of good cause, that it is not necessary under the circumstances that the issuer be considered an ineligible issuer as defined in Rule 405 of the Securities Act (sometimes referred to as a “WKSI waiver”) (see 17 C.F.R. Section 200.30-1(a)(10) (Delegation of authority to Director of Division of Corporation Finance)); the Commission has delegated the authority to the Chief Accountant in the Office of the Chief Accountant to temporarily suspend a rule of the Public Company Accounting Oversight Board (see 17 C.F.R. Section 200.30-11(b)(5) (Delegation of authority to Chief Accountant)).

[8] See, e.g., SEC Website, Division of Corporation Finance No-Action, Interpretive and Exemptive Letters, available at http://www.sec.gov/divisions/corpfin/cf-noaction.shtml.

[9] See, e.g., SEC Website, Staff Legal Bulletins, available at http://www.sec.gov/interps/legal.shtml.

[10] See, e.g., SEC Website, Selected Staff Accounting Bulletins, available at http://www.sec.gov/interps/account.shtml.

[11] Pub.L. 79—404, 60 Stat. 237, available at http://www.justice.gov/jmd/ls/administrative-procedure-act-pl-79-404.

[12] U.S. Commodity Futures Trading Commission.

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Modified: Nov. 30, 2015