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U.S. Securities and Exchange Commission

Speech by SEC Chairman:
Remarks at the CCOutreach National Seminar


Chairman Mary L. Schapiro

U.S. Securities and Exchange Commission

Washington, D.C.
February 8, 2011

Good morning and let me add my welcome to the 3rd SEC and FINRA Broker Dealer CCOutreach National Seminar. It is a pleasure to be here with you again. Thanks to you, Carlo, for that generous introduction. And thanks to all of you for taking the time to be here today.

Although it’s popular to paint regulatory bodies and private firms as rivals, I don’t think that picture truly reflects reality. More often than not, the public and the private sector share common goals. We believe that our system works best when companies are well-run, marked by responsive governance and compliance with appropriate regulation. We all support stable financial markets which attract the capital of confident investors. And our ultimate goal is a growing economy driven by those well-run companies and fueled by those confident investors.

The SEC’s primary contribution to that formula for growth is our mission to protect those investors. And we share that mission, as well — a mission important to you and your firms, and one that neither compliance officers nor regulators can accomplish alone.

It’s this sense of shared purpose that underscores the respect and appreciation that we at the SEC have for you and for all compliance professionals. And it’s why I, personally, am always pleased to participate in events like this, and to encourage other agency efforts to support the work that you do.

Year in Review

It’s been a busy 12 months since I last spoke with you, so let me take just a moment to bring you up to date.

Since we last met:

  • The SEC continued to implement important internal reforms that are making us more agile and effective across the agency. Some of the most important changes are coming from OCIE — which has restructured and is enhancing its ability to prioritize examinations based on risk. I’m sure Carlo will have a lot more to say about these and other developments in a few minutes.
  • Since we last met, new leadership across the agency has helped a growing culture of collaboration to flourish — and even continue beyond the agency’s walls, building on events like this and allies like you.
  • We continued to pursue an investor-focused rulemaking agenda aimed at making our financial markets more secure, providing investors with more and better information, finding ways to make securities markets less volatile and more transparent, and promoting effective corporate governance.
  • After May 6th; the SEC collaborated with exchanges and FINRA on steps that will diminish the chance of similar events in the future.
  • And, as I’m sure you noticed, we’ve embraced our important new responsibilities under the Dodd-Frank Wall Street Reform and Consumer Protection Act. As soon as it was signed into law, we hit the ground running. Already, we’ve proposed 24 rules, adopted 6 final and 2 interim rules and approved 2 proposals from self-regulatory organizations. We’ve submitted significant reports to Congress, hosted public roundtables focused on key issues, and reviewed thousands of public comments.

This has been one of the SEC’s most productive periods since the New Deal. And, just as it I am sure it was in the 1930s, it is a fascinating and rewarding time to be a part of this agency.

Our Shared Mission

But, there’s another important parallel, as well. The SEC was created as part of an effort to protect investors and to make their capital available to innovative companies and a growing economy. Recently, as nervous investors pulled billions of dollars out of the markets, we were reminded once again how important that role is.

It’s a tremendous responsibility. And, especially today, the SEC is working to leverage third parties who can help us in our mission of investor protection. At the SEC, 3,800 staff are charged with overseeing more than 30,000 entities — including five thousand broker-dealers. We simply can’t be everywhere at once.

Obviously, our partners at FINRA play a critical role, protecting investors and bringing confidence to our markets, and we are deeply appreciative and supportive of their efforts.

But even together, federal regulators and SROs can’t provide the level of protection investors deserve and markets demand unless investment professionals are committed to investor protection as well.

You are the conscience that ensures that commitment. You extend our mission into your firms, making compliance part of their DNA and their day-to-day operations. Your work is vital to investor protection and — by extension — to the financial health of your firms and the long-term growth of our economy. And so we are eager to provide the insight, tools and advice you need to succeed in your efforts.

Dodd-Frank Rulemaking

Today, I’d like to talk about two aspects of Dodd-Frank that will be particularly important to CCOs, and which will be the subjects of important future rulemakings: fiduciary duty and whistleblowers.

And in the spirit of collaboration, I’d like to begin by talking about process, and about making you a part of our efforts.

When Dodd-Frank was signed, and we looked ahead at over a hundred rulemakings, we recognized that SEC efforts alone cannot bring optimal results. And so we established channels for communication between stakeholders and the agency that exceeded legal requirements. We invited input and public comment many weeks and even months before individual rulemakings — and the legal comment periods — had begun. I asked staff to meet with stakeholders as often as possible, and to seek out viewpoints that hadn’t been heard as the process moved forward. And, along the way, we posted on our website the comments we receive and meeting memos listing participants and issues discussed.

All this is designed to ensure that we hear from you, men and women on the front lines of compliance efforts, how we can most efficiently reconcile investor protection and business imperatives.

Fiduciary Duty of Conduct

Establishing a uniform fiduciary standard of conduct that is no less stringent than the standard applicable to investment advisers, is one area in which we will benefit from your insight.

I have long believed that retail investors deserve a fiduciary standard of conduct regardless of the title printed on their financial counselor’s business card.

We know that the difference between an investment adviser and a broker-dealer is often lost on an investor. What is hard to explain is why there should be a different standard of conduct for the two roles — especially as the once-bright lines between the two professions grow dim and the same or substantially similar services are involved.

Last month, the SEC submitted to Congress the staff’s Study on Investment Advisers and Broker-Dealers that Section 913 of Dodd-Frank required. This study reviewed the broker-dealer and investment adviser industries, the regulatory landscape surrounding each, issues raised by stakeholders who commented during the preparation of the report, and other considerations.

The report recommended that the SEC “adopt and implement…with appropriate guidance, the uniform fiduciary standard of conduct for broker-dealers and investment advisers when providing personalized investment advice about securities to retail customers.”

The report also recommends that regulatory harmonization combine the best elements of the two regimes as they exist now. And, it further states that we should “minimize cost and disruption and assure that retail investors continue to have access to various investment products and choice among compensation schemes to pay for advice."

I believe that — as we seek to maximize investor protections, while minimizing “cost and disruption” — your input and support will help us balance that challenging equation.


In the weeks ahead, we’ll also be finalizing rules that will allow us to leverage the resources of whistleblowers.  These individuals often have a front row seat from which to observe fraudulent activity, and can be an invaluable source of information to our enforcement and inspection efforts.  

I believe our rules must send a clear message that whistleblowers play a critical role in protecting investors, and that we value their useful insight. At the same time, I recognize that such a program must complement, not circumvent, existing compliance regimes.

That is why, for example, the proposed rule encourages employees to take advantage of their own companies’ compliance programs before turning to us. It prevents individuals — including lawyers, auditors and internal compliance personnel — from using their positions to reap rewards. And, the proposed rule would clarify that no award will be provided to people who mastermind the very crime they are reporting.

As the commission considers the final rule, we are very much taking to heart comments from compliance professionals — and working hard to craft regulations that further the mission we all share, to protect investors and strengthen our economy.


William O. Douglas, one of the founding fathers of the SEC, was both an architect of the strong and effective agency that emerged out of the New Deal, and an advocate of a collaborative system of self-regulation. In fact, he helped create such a system, reshaping governance of the New York Stock Exchange to increase focus on investor protection, and bring nervous investors back to the market. “The aims of this government and the objectives of business,” he said at the time, “[are] wholly compatible.”

Now, I realize that that view has been tested often over the years. But, it contains a tremendous amount of truth.

And so, in the spirit of compatible objectives and of collaborative effort, I want to thank you once again for your support as we work to protect investors and strengthen the economy. I hope today's discussions will provide information and insight that will help you in the mission we all share.

Thank you.

And now I'd like to turn the meeting back over to Carlo and FINRA CEO Rick Ketchum.

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Modified: 02/08/2011