President Obama has nominated securities lawyer Daniel Gallagher to the Securities and Exchange Commission, but don’t expect it to have much impact on the regulatory issues facing independent advisors.
If the nomination is approved by Congress, Gallagher, a partner in law firm WilmerHale’s securities practice and a former top official in the SEC's division of trading and markets, would fill the seat on the Commission that will be created when Kathleen Casey vacates the position at the end of this month. Gallagher is highly qualified.
Gallagher joined the SEC in 2006, first serving as counsel to former SEC Commissioner Paul Atkins, who is known for his conservative stances, and later as counsel to SEC Chairman Christopher Cox, also a Republican. “In those positions,” according to his bio, “he worked on all of the major Division of Trading and Markets, Division of Enforcement, and Office of Compliance Inspections and Examinations matters before the Commission.” After working for Cox, Gallagher went on to serve as Deputy Director of the Division of Trading and Markets at the SEC, and also served as co-acting director of the Division from April 2009 to January 2010. “During his tenure in the Division, Mr. Gallagher played a critical role in the SEC’s response to the financial crisis,” according to his bio.
Despite his qualifications, Gallagher’s appointment would not change the balance of the Commission. He’d fill the Republican seat on the Commission, which would still be comprised of three Democrats and two Republicans. The Commission is almost always balanced in favor of the party occupying the White House.
Gallagher’s appointment would merely set the stage for a continuation of the long process the SEC must face before it can address the two key issues related to regulating financial advisors: whether to apply a uniform fiduciary standard to registered reps as well as RIAs and whether to name a self regulatory organization (SRO) as the frontline regulator of RIAs. The SEC and Congress have more important regulatory reform issues to decide before addressing financial advisor regulation, including how to regulate Over The Counter derivatives. Resolution of regulatory issues affecting advisors is many months away.