Chairman Mary Jo White
U.S. Securities and Exchange Commission
April 10, 2013
Good morning. This is an open meeting of the United States Securities and Exchange Commission being held on April 10, 2013.
Commissioner Walter is participating by telephone conference, and Commissioner Aguilar is participating by video conference.
Today, the Commission is considering whether to issue final rules to help protect investors from the risks of identity theft. The rules, required by the Dodd-Frank Act, would be issued jointly with the Commodity Futures Trading Commission (CFTC).
Under the rules, certain businesses regulated by the SEC and CFTC would be required to adopt and implement programs to detect and respond to indicators of possible identity theft.
Identity theft is a type of fraud that robs millions of Americans of their hard-earned money. Current estimates are that about five percent of American adults fall victim to identity theft fraud each year. It is a risk for everyone, and as technology continues to advance, the risks increase.
These rules are a common-sense response to the growing threat of identity theft to all Americans who invest, save, or borrow money. Any person who entrusts money to a financial institution or who receives money on credit can be vulnerable to those who may falsely pose as the individual and divert the money to a third party. The costs to victims can be great, including loss of individuals’ money and significant damage to their credit history.
In 2007, six federal agencies jointly adopted identity theft rules under the Fair Credit Reporting Act. Those agencies were the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration, and the Federal Trade Commission. Their rules applied to business entities that qualify as “financial institutions” or “creditors” under the Fair Credit Reporting Act and offer or maintain certain types of accounts.
However, neither the SEC nor the CFTC adopted those identity theft rules in 2007, because the laws at that time did not authorize either of the Commissions to do so. Instead, entities that the SEC and CFTC regulate such as broker-dealers and futures commission merchants were covered by the rules of the six agencies.
The Dodd-Frank Act changed this approach by transferring rulemaking and enforcement authority for identity theft rules to the SEC and CFTC for the entities we regulate.
The SEC rules, if adopted, would apply to entities such as broker-dealers, investment companies, and investment advisers. The CFTC’s rules would apply to entities such as futures commission merchants, commodity trading advisors, and commodity pool operators.
If these rules are approved, both Commissions will issue them in one joint adopting release.
The rules the SEC is considering today are substantially similar to the rules that the other six federal agencies adopted in 2007, but they also include examples and guidance to help the relevant businesses determine how to comply with the new rules. I look forward to the issuance of these rules and to the protections that these rules will afford investors against the growing threat of identity theft.
Before I turn to the Commission staff, I would like to say one personal word about today’s meeting. This is my first public meeting as Chair of the SEC. It is my privilege and honor to join today in these important efforts to protect investors and to ensure the strength, efficiency, and transparency of the securities markets. I look forward to working hard with my fellow Commissioners and with the dedicated staff of the Commission. I would also like to specifically thank my predecessor in this office, Elisse Walter, who has been so helpful in welcoming me to the agency and in providing strong leadership to the agency.
I would like to thank the Division of Investment Management and the Division of Trading and Markets for bringing this rule recommendation before us today. From Investment Management, I would like to thank the Director, Norm Champ, and Diane Blizzard, Hunter Jones, Thoreau Bartmann, Andrea Ottomanelli Magovern, and Amanda Wagner. From the Division of Trading and Markets, I would like to thank Acting Director John Ramsay, Jim Burns, David Blass, Joe Furey, and Brice Prince. I am also grateful for the important participation of the Commission’s economists in the Division of Risk, Strategy and Financial Innovation, in particular Director and Chief Economist Craig Lewis, Jennifer Marietta-Westberg, Matthew Kozora, and Stephen Lenkey. From the Office of General Counsel, I would like to thank the General Counsel Geoffrey Aronow, Meridith Mitchell, Lori Price, Cathy Ahn, Jill Felker, and Mykaila DeLesDernier.
And now let me turn the proceedings over to Norm Champ, the Director of the Division of Investment Management, and John Ramsay, the Acting Director of the Division of Trading and Markets, who will tell us more about the rules we are considering today.
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