In a move to avoid conflicts of interest, the US financial regulator, the [tag|SEC|]Securities and Exchange Commission[/tag], is making more of its staff who leave the agency for the private sector subject to a one-year non-compete period.
The SEC's top ethics counsel announced the reform in an internal memo on 21 August, laying out the new post-employment restrictions, which will be implemented on 1 January 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, such as Barclays.
Under the new SEC policy, anyone who makes more than $155,440.50 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 last week 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 affect 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.