Wall Street lays out its wish list for SEC reforms for public companies

By Sarah N. Lynch

WASHINGTON (Reuters) - Executives that represent Wall Street interests pitched ideas on Tuesday about ways to scale back securities regulations that they blamed for stifling the market for initial public offerings.

In a congressional hearing before a House Financial Services Committee subcommittee, officials from the New York Stock Exchange, the U.S. Chamber of Commerce, biotechnology firm aTyr Pharma Inc and a free-market advocacy group urged Congress and the Securities and Exchange Commission to loosen rules on a wide variety of areas, from auditing and shareholder proposals, to proxy advisory firms.

"Like straw upon a camel's back, the burdens and reporting requirements associated with being a public company have steadily accumulated over the years," said Tom Quaadman, an executive vice president at the U.S. Chamber's Center for Capital Market Competitiveness, in prepared remarks.

For years, corporate interests have called for scaling back a variety of rules for public companies with little success.

But now, their hopes have been renewed after President Donald Trump nominated Wall Street deal-making attorney Jay Clayton to lead the SEC.

Clayton has said he plans to look for ways to ease compliance costs and disclosure burdens that may be deterring companies from going public, or incentivizing them to stay private longer.

In testimony Tuesday, New York Stock Exchange President Thomas Farley urged policymakers to do away with a Sarbanes-Oxley-era rule requiring public company auditors to attest to the effectiveness of internal controls over financial reporting.

"Public companies are devoting more time and resources than ever to grapple with administrative procedures and controls," Farley said.

Executives also called for rules to restrict shareholder proposals and limit the powers of proxy advisory firms Institutional Shareholder Services and Glass Lewis, which help large institutional investors weigh how to vote on issues like board elections.

"Proxy advisory firms should be more transparent and open to input in their standard-setting processes, particularly with regard to issues unique to small businesses," said John Blake, a senior vice president of finance at aTyr Pharma.

Although the bulk of Tuesday's hearing focused on proposals to scale back the SEC's rules, one witness cautioned against going too far.

J. Robert Brown, Jr., a professor at the University of Denver Sturm College of Law, warned that efforts to eliminate auditor attestation rules could lead to more accounting errors.

"Studies indicate that companies not subject to the attestation requirement have a higher rate of restatements," he said.

(Reporting by Sarah N. Lynch; Editing by Phil Berlowitz)