A revolving door blurs the lines between one of the nation’s most important regulatory agencies
and the interests it regulates.Former employees of the Securities and Exchange Commission (SEC) routinely helpcorporations try to influence SEC rulemaking, counter
investigations of suspectedwrongdoing, soften the blow of SEC enforcement actions, block shareholder proposals, and winexemptions from federal law.The revolving door was on display in 2012 when the investment industry opposed one of the top priorities of the SEC chairman, a plan to tighten regulation of money market funds. Former SECemployees lobbied to block the plan, and an SEC Commissioner who previously worked for aninvestment firm played a pivotal role in derailing it.The movement of people to and from the financial industry is a key feature of the SEC, and it hasthe potential to influence
culture and values. It matters because the SEC has the power to affect investors, financial markets, and the economy.Yet, the SEC
has exempted certain senior employees from a “cooling off period” that would
have restricted their ability to leave the SEC and then represent clients before the agency. Inaddition, the SEC has shielded some former employees from public scrutiny by blacking outtheir names in documents they must file when they go through the revolving door.The SEC is a microcosm of the federal government, where widespread revolving expands theopportunities for private interests to sway public policy.
One academic study suggested that concerns about the SEC’s revolving door are misguided. Butthe academics looked at only a sliver of the SEC’s work. They did
not examine, for instance,
how the revolving door affects the SEC’s regulation of Wall Street,
its granting of relief tospecific companies, its handling of cases related to the financial crisis, or its decisions to dropinvestigations without bringing charges. The study sought to quantify any influence therevolving door might have on SEC enforcement actions, but the subtleties involved do not lendthemselves to such simple measurement.This report,
the Project On Government Oversight’s
(POGO) second on the SEC, is based in parton interviews with current and former SEC officials and thousands of federal records obtainedthrough the Freedom of Information Act.POGO found that, from 2001 through 2010, more than 400 SEC alumni filed almost 2,000disclosure forms saying they planned to represent an employer or client before the agency. Thosedisclosures are just the tip of the iceberg, because former SEC employees are required to filethem only during the first two years after they leave the agency.
report examines many manifestations of the revolving door, analyzes how the revolvingdoor has influenced the SEC, and explores how to mitigate the most harmful effects.