SEC Commissioner Issues Scathing Dissent From Ruling, Elizabeth Warren Echoes Concern

Securities and Exchange Commissioner Kara Stein on Monday denounced the regulator's decision to continue providing special benefits to a big bank after its conviction for manipulating interest rates.

The SEC spared Royal Bank of Scotland Group from losing its regulatory status as a well-known seasoned issuer on Friday. The bank was criminally convicted earlier this year for manipulating the Libor benchmark interest rate. The bank's crimes, Stein said Monday in a dissent to the SEC decision, harmed individuals, businesses and governments worldwide.

The SEC issued a waiver to another well-known seasoned issuer after criminal misconduct last fall. Stein said the regulator was wrong then, and "compounded that error when it granted a waiver for another criminal wrongdoer" -- Royal Bank of Scotland Group.

"The arguments in both instances implicate a structural problem with our policy, whether dealing with criminal or civil misconduct," wrote Stein, who was appointed to the SEC by President Barack Obama . "They rest largely upon the notion that the triggering conduct is insignificant when considered in the context of a large financial institution with global operations."

Stein faulted the commission for repeatedly waiving disqualification provisions set out by Congress and the SEC at the risk of harming investors and markets. The SEC reserves the well-known seasoned issuer tag for companies that raise large amounts of capital and are widely followed in the market, according to Reuters. Benefits include allowing companies to raise money immediately from securities offerings without waiting for SEC review of documents.

"We need to step back and think broadly about what these provisions are intended to accomplish, and ask ourselves -- are we achieving the intended goals? Are they being fairly applied to all firms and individuals? Large institutions should be treated no differently, neither better nor worse, than small and medium-sized issuers," she wrote.

Sen. Elizabeth Warren (D-Mass.) echoed Stein's concerns in a statement to The Huffington Post, calling for an end to regulators' special treatment of big corporations.

"When the SEC waives automatic penalties for criminal misconduct by the largest banks, it sends a dangerous signal about how weak it is in its enforcement of the law," Warren said in the statement. "We are still paying the price for a financial crisis that was caused in part by regulators looking the other way while big financial institutions broke the law. Big corporations should not get special treatment when they break the law, and the SEC needs to learn from its past failures in oversight, to demonstrate no one is above the rules, and to show some backbone."