SEC's Gallagher wants more oversight of brokers

Congress then later stripped the SEC of its authority under 17(i) to oversee supervised investment bank holding companies in the 2010 Dodd-Frank law and gave the power instead to the Federal Reserve.

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Now, the SEC only has some outdated rules on the books that give it an opaque window into the holding companies of broker-dealers.

"As we see it now, ... we are out of the holding company oversight regime," Gallagher said last week in the interview.

Gallagher said Congress should have actually expanded the SEC's authority in this space.

"Where we might have netted better tools out of Dodd-Frank, they actually eliminated that program and ceded all of that power to the Fed ... I think that was a mistake," he said

Gallagher, a Republican who was nominated to the SEC by President Barack Obama last year, has insight into the CSE program and broker-dealer oversight in general.

Prior to becoming a commissioner at the SEC, he worked in management positions within the SEC's Trading and Markets Division during the height of the financial crisis and helped oversee the CSE program.

Most recently, he worked as a partner at the law firm Wilmer Cutler Pickering Hale.

Although the CSE and SIBHC programs are gone, Gallagher said there is still at least one remaining tool that the SEC can use to police the holding companies of broker-dealers: a series of antiquated risk assessment rules on the books known as 17h.

Those rules, which are still only temporary despite becoming effective in 1992, require broker-dealers that are part of a holding company with at least $20 million in capital to file certain information about the holding company and its other various subsidiaries.