The Washington Wrap is a weekly look at regulation, news and chatter from the Capitol. The next edition of the Wrap will publish Jan. 4, 2019. Send tips and ideas to email@example.com and firstname.lastname@example.org.
At the SEC
Wall Street's top regulator will soon start taking recommendations about the quarterly earnings reporting process.
The U.S. Securities and Exchange Commission recently issued a request for comment about earnings releases and quarterly reports, the latest sign that the agency is considering altering the decades-old regulations requiring publicly traded companies to disclose financial information every three months. The Dec. 18 announcement came four months after President Donald Trump tweeted that he had asked the SEC to study the impacts of moving from quarterly to biannual reports.
It remains unclear whether the SEC will ultimately overhaul the quarterly reporting framework, however.
In a statement, SEC Chairman Jay Clayton said the agency's rules ought to reflect the need for "high-quality, timely information," as well as the "need for companies and investors to plan for the long term." Clayton has previously signaled an openness to altering quarterly reporting regulations for smaller companies.
The agency could explore shortening the 10-Q filings that companies are required to craft every quarter in hopes of reducing the amount of repetition between those disclosures and the companies' earnings releases as well, Mayer Brown Partner Anna Pinedo said in an interview.
"[The request] seems quite exploratory," Pinedo said. "It is clear that the SEC wants more information and wants to understand better how companies are using earnings releases or how investors and analysts use earnings releases."
The SEC has finalized its transaction fee pilot in the latest blow to major U.S. stock exchanges, which have protested the experiment since it was proposed in March.
On Dec. 19, the regulator approved the pilot, which will last for up to two years and include both stocks and exchange-traded products. The program will force the likes of Intercontinental Exchange Inc., Nasdaq Inc. and Cboe Global Markets Inc. to tinker with the fees and rebates they use to attract trading activity to their venues.
The SEC's pilot will create two groups of 730 securities, one that will trade with a fee of 0.1 of a cent per trade versus the current cap of 0.3 of a cent and another that will trade without any rebates.
The pilot comes as the regulator continues to weigh potential reforms that could resolve industry members' concerns that the rebates exchanges pay to some traders can create conflicts of interest.
Throughout 2018, the SEC has taken a harder look at exchanges' business models. In October, the SEC sided against the major U.S. exchange operators in a landmark case over their market data businesses, a decision the exchanges have since appealed.
At the CFPB
A little more than a week into her time as the Consumer Financial Protection Bureau's director, Kathleen Kraninger has halted an effort to change the agency's name.
In an internal memo to staff, Kraninger wrote that while she understands the push to use the agency's legal name — the Bureau of Consumer Financial Protection — there are a variety of factors to consider in thinking about the name. The comments starkly contrast the campaign to change the agency's name that was spearheaded by Mick Mulvaney, who previously served as acting CFPB director and was Kraninger's boss at the Office of Management and Budget.
"I care much more about what we do than what we are called," Kraninger wrote in the memo, which she tweeted out Dec. 19. "But this issue is an early priority because of implementation decisions that need to be made in real time."
While a name change may not appear to be monumental, an official switch to the Bureau of Consumer Financial Protection would have cost companies under the agency's purview more than $300 million, according to a report from The Hill.
On Dec. 17, Sen. Elizabeth Warren, D-Mass., sent a letter to the inspector general of the CFPB and the Federal Reserve Board, Mark Bialek, asking for an investigation into Mulvaney's attempt to change the name and the costs it could have incurred. On Dec. 20, the incoming head of the House Financial Services Committee, Democratic Congresswoman Maxine Waters of California, sent a letter to Mulvaney saying she plans to investigate a "litany of actions" that took place at the CFPB under his supervision.
At the Fed
The Fed opted for a fourth rate hike Dec. 19, lifting its benchmark interest rate by another 25 basis points.
In a press conference, Fed Chairman Jerome Powell said he wants to maintain an open mind during upcoming discussions with fellow members of the central bank's board over whether the Fed should enact the countercyclical capital buffer. The board, which will meet in January 2019, can use the tool to force large banks to hold onto more capital at times of elevated risk.
The comments signal a potential shift in the chairman's thinking as Powell said he saw vulnerabilities in the system as "relatively moderate" in September, according to a research report from Capital Alpha Partners analyst Ian Katz.
Powell also reiterated the central bank's focus on tailoring regulations for community and regional banks, versus global systemically important banks, or G-SIBs. The Fed has received a handful of requests to relax a related capital surcharge that applies to G-SIBs, such as JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America Corp.
The chairman has not ruled out changing that surcharge but said in the press conference that reforming regulations remains a "big focus" for the Fed so that rules are appropriate for smaller, less complex organizations that would not pose a huge economic risk if they were to fail.
Comptroller of the Currency Joseph Otting has been tapped to lead the Federal Housing Finance Agency as acting director when Director Mel Watt's term ends Jan. 6.
Otting, who will retain his position at the OCC, has been considered the front-runner to lead the FHFA on an interim basis for months and will likely hold the agency's top position until the White House's nominee, Mark Calabria, is confirmed, according to a research report from Compass Point Research & Trading Analyst Isaac Boltansky.
A bipartisan piece of legislation has been introduced into the U.S. House of Representatives that its creators hope will resolve lingering questions around digital tokens.
Congressmen Warren Davidson, R-Ohio, and Darren Soto, D-Fla., introduced the Token Taxonomy Act, which aims to define a "digital token" and clarify when securities laws apply to companies using the blockchain.
Davidson called the bill an "essential first step" for the U.S. to compete with blockchain initiatives in countries including Singapore and Switzerland, where he said the burgeoning industry is "aggressively" growing.