By Sarah N. Lynch
WASHINGTON (Reuters) - A member of the U.S. Securities and Exchange Commission is vowing to defend the regulator's turf against what he said is growing encroachment by the Federal Reserve and a council of financial regulators on everything from asset manager regulation to high-speed trading.
"In its attempt to gain authority over capital market actors, the Fed, through the council, has been ignoring the talent and skills of the hundreds of subject matter experts in each of the SEC's rulemaking divisions." SEC Republican member Michael Piwowar said in prepared remarks on Tuesday.
He was referring to the Financial Stability Oversight Council (FSOC), a panel of regulators that polices the market for emerging systemic risks. Piwowar said the council had been nicknamed the "unaccountable capital markets death panel."
"The prudential regulators on the council have been proceeding as if they themselves are the ones who know securities markets and investment products best ... It would be comedic, if not in such a serious context," Piwowar said.
By "prudential regulators" he was referring primarily to the Fed.
Piwowar's comments, at an event hosted by the American Enterprise Institute, mark his latest verbal assault against the Fed and the FSOC, which is chaired by Treasury Secretary Jack Lew and made up of the heads of all the major regulators, including Fed Chair Janet Yellen and SEC Chair Mary Jo White.
The FSOC has used its power to designate large financial companies including AIG (N:AIG), GE Capital (N:GE) and Prudential (N:PRU) as systemic, a tag that imposes greater regulation and oversight by the Fed.
It is currently weighing whether the activities of large asset managers, which are regulated by the SEC, may also pose risks to financial stability. The council and has ruffled feathers among some SEC commissioners because of its governance structure and because it has been eyeing a number of areas that fall under the SEC's jurisdiction.
In prior written reports, FSOC has also cited other areas in the financial system that could pose risks, such as securities lending by brokerages and high-frequency traders.
Critics including Piwowar have said the council lacks transparency in how it makes crucial policy decisions, and that it gives the Federal Reserve an outsized influence.
"With the council's steady march, led by its self-appointed 'alpha dog' – the Fed – into areas that are solely within the SEC's jurisdiction, I am concerned that our mission to protect investors, maintain fair, orderly, and efficient markets, and promote capital formation is being compromised," he said.
"I am resolved to defend our jurisdiction from the prudential regulators' council-enabled turf war, but the prudential regulators are mounting a coordinated behind-closed-doors assault."
(Reporting by Sarah N. Lynch; Editing by Tom Brown)