Wall Street’s fundamentally important role in our nation’s economic life is jeopardized if finance becomes an end in itself—a baroque cathedral of complexity dedicated to the limitless compensation of its own in the short-term, and impervious to the long-term risk it imposes on others that can threaten the entire nation’s sustenance and growth.
The remarkably rapid pace of change in the global capital markets has also placed new importance on international coordination. American investors simply cannot be protected any longer without a highly integrated approach that closely involves regulators in other jurisdictions, because so much of the fraud directed at investors is international in scope. We have witnessed over the past year the impacts of the deep connections between financial markets around the world. The same phenomena affecting our domestic markets are roiling markets abroad. For all of these reasons, the deep relationships that the SEC has built with foreign regulators in recent years will continue to be a priority in the years ahead.
In redesigning the regulatory structure, we must bear in mind the advantages of market forces over government decision-making in allocating scarce resources—including capital—throughout an economy as vast as America’s, as well as what we can and cannot leave to the market alone. Government intervention, taxpayer assumption of risk, and short-term forestalling of failure must not be a permanent fixture of our financial system.
In redesigning the regulatory structure, we must bear in mind the advantages of market forces over government decision-making in allocating scarce resources—including capital—throughout an economy as vast as America’s, as well as what we can and cannot leave to the market alone. Government intervention, taxpayer assumption of risk, and short-term forestalling of failure must not be a permanent fixture of our financial system.
At the same time, we know from 75 years of experience that transparency and accountability, in the form of disclosing important information to investors and empowering them to buy, sell, or hold on the basis of that disclosure, is remarkably effective. That proven system of transparency and accountability must be enhanced and strengthened. The regulatory seams and varying statutes that treat economically similar financial products and services differently undermine the objectives of transparency and accountability, and so reconciling them has to be a central aim of legislative reform.
An equally important change to the marketplace in recent years, from the standpoint of investor protection, is the enormous growth in trading activity and financial products that lack transparency to the broader market. We have seen how bilateral contracts between private parties can profoundly hurt investors and impair capital formation when the collective scale of such activity is as significant as it has been. The SEC of the future will have to be given the authority and the tools to deal with these developments in ways that achieve the agency’s complementary goals of investor protection, orderly markets, and capital formation.
In redesigning the regulatory structure, we must bear in mind the advantages of market forces over government decision-making in allocating scarce resources—including capital—throughout an economy as vast as America’s, as well as what we can and cannot leave to the market alone. Government intervention, taxpayer assumption of risk, and short-term forestalling of failure must not be a permanent fixture of our financial system.
At the same time, we know from 75 years of experience that transparency and accountability, in the form of disclosing important information to investors and empowering them to buy, sell, or hold on the basis of that disclosure, is remarkably effective. That proven system of transparency and accountability must be enhanced and strengthened. The regulatory seams and varying statutes that treat economically similar financial products and services differently undermine the objectives of transparency and accountability, and so reconciling them has to be a central aim of legislative reform.
An equally important change to the marketplace in recent years, from the standpoint of investor protection, is the enormous growth in trading activity and financial products that lack transparency to the broader market. We have seen how bilateral contracts between private parties can profoundly hurt investors and impair capital formation when the collective scale of such activity is as significant as it has been. The SEC of the future will have to be given the authority and the tools to deal with these developments in ways that achieve the agency’s complementary goals of investor protection, orderly markets, and capital formation.