In a move to avoid conflicts of interest, the US financial
regulator, the Securities and Exchange Commission, is making more of its staff
who leave the agency for the private sector subject to a one-year non-compete
The SEC's top ethics counsel announced the reform in an
internal memo on August 21, laying out the new post-employment restrictions,
which will be implemented on January 1, 2014, according to Reuters.
The move is timely for industry experts and politicians, who
have been concerned about the SEC's revolving door producing too many conflicts
of interest. Further afield, there have been examples of former senior regulators at institutions such as the UK's old Financial Services Authority moving into compliance roles at banks.
Under the new SEC policy, anyone who makes more than
a year will be barred for one year from appearing before the agency.
Previously, only the regulator's most senior officers, such as division directors,
were subject to the rule.
The expansion of the cooling-off period "places us on
even footing with our peer regulators and adds an additional layer of
protection against even the appearance of impropriety when former employees
take on new jobs," said SEC ethics counsel Shira Pavis Minton in the memo.
Recently, the agency has been subject to concerns that too
many SEC employees leave and work for legal and accounting firms that represent
companies which are regulated by the agency.
Senator Charles Grassley, an Iowa Republican, said in an
email to Reuters on Thursday that "there's good reason to enforce the
cooling-off period. Senior employees could undermine the commission's integrity
if allowed to practice before the commission right after leaving. This is a
common sense move from the SEC."
But the new policy is also drawing criticism from former SEC
attorneys, saying that the move could harm the careers of lower-level employees
and make recruiting tough for the SEC.
"It is one thing for a firm to hire the enforcement
director ... and then pay them a large salary to sit on the bench for a year.
It is quite another thing for somebody to take a line trial attorney, for
instance, with the knowledge that they will not be able to practice their trade
for an entire year," said Toby Galloway, a former SEC trial attorney and
current partner at Kelly Hart & Hallman, to Reuters.
Once implemented in the beginning of 2014, the reform will
a large number of people, seeing as the SEC uses a higher pay scale that other
governmental agencies to compete with Wall Street for experienced staff.
As such, the new cooling-off period is expected to cover the majority of attorneys
in the SEC's trial unit. This has caused concerns that sought-after industry
lawyers may not wish to join the agency once the restrictions are in place and
thereby create an unfair advantage for the well-paid and somewhat less-restricted private sector.