SEC’s Revolving Door To Turn A Little Slower

Rule sought by nonprofit watchdog restricts ex-employee contact with agency.

Some senior employees of the Securities and Exchange Commission who leave for the private sector soon will be subject to the same restrictions that have long applied to most ex-SEC senior staff on lobbying their former agency.

The new regulation, which takes effect in April 2014, eliminates agency-requested exemptions for certain staff litigators from rules that bar them for a year once they’ve left federal employment from “knowingly making, with the intent to influence, any communication to or appearance before an employee of the department or agency in which he served in any capacity.” The rule applies to senior employees earning 86.5 percent of the rate of basic pay payable for level II of the Executive Schedule. <p>

The Office of Government Ethics published the final rule in the Federal Register on Thursday.<p>

Beginning in 1991, the SEC won exemptions from longstanding prohibitions on former employees’ efforts to influence their former agency, citing recruiting difficulties, and the fact that SEC litigators do not make financial regulatory policy. The governmentwide ethics office routinely reviews the exemptions and worked with the SEC during the past two years to end the exemptions on the premise that they were no longer necessary. SEC spokesman John Nester told Government Executive that “the exemptions are no longer considered necessary and removing them creates parity with other financial regulators.”<p>

Such a change in rules had long been sought by the nonprofit Project on Government Oversight, which noted in a 2013 report that the SEC’s own inspector general had highlighted cases in which former federal litigators had returned to meet with one-time colleagues to examine issues as a representative of a major financial institution. <p>

Michael Smallberg, a POGO investigator, told Government Executive that “by the SEC’s own admission, this loophole is no longer necessary, and we’re glad to see it closed.” The agency had delayed the change, he added, to give itself time to educate the staff, “which makes me wonder how many employees were able to slip through the revolving door while the SEC took its time to finalize the rule.” <p>

Smallberg says the change “puts no unusual burden on SEC employees while putting them on an even keel with other agencies in abiding by revolving-door rules.” And like all such rules, he said, “this only stops people from personally contacting their agency during their first year out, but it wouldn’t stop them from behind-the-scenes lobbying if they go to work for a bank.” <p>

POGO would like the SEC and agencies across the government to “go further in letting the public know when former employees contact them,” including posting such contacts online. <p>