SEC Commissioner Takes On 'Too Big to Bar'

Kara Stein, one of the newest members of the Securities and Exchange Commission, has issued a must-read public statement explaining a dissenting vote she cast that goes to the heart of the debate over how to punish too-big-to-fail financial institutions that repeatedly break the law.

Last week, per its usual practice, the SEC approved a waiver to let Royal Bank of Scotland Group Plc continue doing business as usual. It did so despite the recent criminal convictionof the bank's Japanese subsidiary for manipulating the London interbank offered rate, along with a deferred-prosecution agreement for the parent company, which paid a $100 million fine. The SEC vote was 3-2, with dissenting votes by Stein and Commissioner Luis Aguilar. At least on paper, fraud violations, whether criminal or civil, normally should result in the disqualification of companies as "well-known seasoned issuers," a designation that allows companies to speed up the process for registering their securities offerings. However, the SEC's routine practice over the years has been to grant waivers.