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Speech


 
 

A Conversation with Chair Mary Jo White
Keynote Session
43rd Annual Securities Regulation Institute

Chair Mary Jo White

San Diego, California

Jan. 26, 2016

SEC Chair Mary Jo White participated in a Q&A session with Steven Bochner, Chair of the Securities Regulation Institute. The Q&A was part of Northwestern University School of Law’s 43rd Annual Securities Regulation Institute. The event was held in San Diego, California.

*This transcript was edited for clarity.

STEVEN BOCHNER: It is my great honor to introduce the Alan Levenson keynote speaker and I'm going to read her resume, even though I know most of it by heart, because it's a long, impressive resume and we're honored to have you here, Chair White.

Mary Jo White was sworn in as the 31st Chair of the SEC on April 10, 2013. She arrived at the SEC with decades of experience as a federal prosecutor and securities lawyer. As the United States Attorney for the Southern District of New York, she specialized in prosecuting complex securities and financial institution fraud cases, as well as international terrorism cases. She's the only woman to hold the top position in the 200-year plus history of that office. Prior to that, Chair White served as the United States Attorney and served as the first Assistant United States Attorney and later Acting United States Attorney for the Eastern District of New York. She previously served as Assistant United States Attorney for the Southern District of New York and became Chief Appellate Attorney at the Criminal Division.

She's been a huge contributor to this conference for many, many years, and I think serving on the board for 10 years and chair of the Enforcement Session many times. This is her second Alan B. Levenson keynote address and she twice addressed this group as the U.S. Attorney for the Southern District of New York, once in 1998 and then again in 2001.

So we are honored to have you here and I'm always happy to see you, but especially happy this year because it was quite an ordeal to get out here.

CHAIR WHITE: Little bit of a saga. Little bit of a saga.

STEVEN BOCHNER: Right.

CHAIR WHITE: Honored to be here. Great to see everyone.

We were in New York for the blizzard, which most of you, thankfully, escaped. So at one point I was coming by way of Detroit and Los Angeles to get here and I said to Juliann, one of your fearless leaders, but for her and having known her for these decades, I might've decided not to make the trip. But, seriously, I'm very, very honored to be here.

Juliann also warned me -- "You know, it's cold out here." Compared to what, right? Compared to what? Compared to 23 degrees and 30 inches of snow, it's great out here. So it's terrific to be here.

STEVEN BOCHNER: And as I mentioned, you -- this is your second Alan B. Levenson keynote and you've made some remarks -- I think in the prior one that I heard, you made some remarks about the impact of Alan Levenson on the Institute and the SEC. Did you want to comment?

CHAIR WHITE: Sure. First, you know, Alan Levenson has just a tremendous legacy at the SEC, not only for his accomplishments, but just as a terrific, terrific, colleague. I didn't have the pleasure of actually knowing Alan, but one of the things I actually do when you speak whether in a Q&A or in a keynote speech in honor of someone else, a former government official, is actually take it upon yourself to learn about him or her and their era at your agency and -- in learning about Alan Levenson, it's just kind of head-jerking.

You start with his smarts, I think he was a graduate of Dartmouth, two Oxford degrees, and Yale Law School. So he obviously had all the cerebral equipment. Served as the director of Corp Fin from 1970 to '76 and he was also kind of a co-founder, along with Stan Sporkin, of the precursor to the FCPA, the Foreign Corrupt Practices Act.

I mean, he not only co-founded this Institute, he also was the founder of SEC Speaks, which is a program in [Washington]. You know, great believer in continuing legal education. We reached out to John Huber, who actually worked for Alan and later himself became a distinguished director of the Division of Corporation Finance, said Alan was very practical, very hands-on, and the most important thing was that the division communicate clearly with the private bar about what's required in the way of disclosure and other requirements and to be consistent about that so that you then, as the private bar, can advise your clients and that will improve disclosure.

So I guess tomorrow you will hear from Keith Higgins, the current director of Corp Fin, who I know will represent the staff and the agency extraordinarily well, tell you what we're up to, et cetera, and in the finest tradition of this Institute will be explaining how well we're doing in being clear and consistent with the guidance that we give to the private bar and to issuers. I think maybe shareholder proposals will be one that you'll address as part of that, Keith. So good luck.

STEVEN BOCHNER: So it was almost three years ago and I think you were scheduled to speak at this conference. In fact, you might've been out here and you then had to be whisked back to D.C. because President Obama nominated you. So it's been three years and it's been I think -- it seems to me a challenging and somewhat tumultuous period in the sense that you took over right as the recession was kind of waning. You had a set of congressionally mandated rulemaking initiatives, first Dodd-Frank, JOBS Act, a whole host of mandates.

I'd be interested to just hear your reflections, what parts of the job met your expectations, kind of what you expected when you agreed to do this, and what surprised you about the job?

CHAIR WHITE: How long do you have? Well, let me start with what was as expected maybe -- in terms of Dodd-Frank and the JOBS Act. Between them, the agency did get about 100 mandated rulemakings, which has obviously led to the most daunting rulemaking agenda really in the agency's history. That really didn't surprise me. I knew that was going to be the case coming in and thanks to our staff, I think we've done a tremendous job at that. So that wasn't a surprise.

I think one thing that maybe exceeded my expectations and not just because a few of them are in the audience, is just how spectacular the SEC staff is, both in terms of its expertise and its dedication. I knew the SEC staff from my prior life as U.S. Attorney and in the private sector, firsthand, I was enormously impressed by them. But when you're in the trenches with the staff [inside the SEC], particularly when you're doing so many rulemakings, a number of them obviously controversial. I have even greater admiration for what they accomplish without any question.

The Dodd-Frank Act in particular was and is controversial. It obviously followed the financial crisis [, and what I didn’t fully expect] was the [continued] controversy from the statute, even though it's obviously the law now; [the controversy] has carried over perhaps more than I expected in terms of its impact on the Commission and our rulemakings as we carry out the mandates. I think it may have at least in part played a role in some of our 3-2 votes.

In terms of the other responsibilities of the SEC, vast array of responsibilities, 25,000 registrants, we oversee FINRA, the PCAOB, and the markets. That's pretty much as expected. It is daunting, but it is very, very exciting as well.

Washington, I won't say what my expectations were going in. It's met my expectations. I think I'll leave it at that. It's met my expectations. Who put the SEC in Washington anyway? And, by the way, the government offices, if you don't know, are closed in Washington still.

STEVEN BOCHNER: The weather is pretty nice out here. Maybe we can move --

CHAIR WHITE: It's great out here. It's great out here. And New York opened on Monday, but passing that -- Edgar's up and running and also our market surveillance folks are on duty and the rest of us are too, even though the offices are closed.

You know, other things I guess the Sunshine Act, which you -- probably most of you know what that is. It's a post-Watergate statute meant to bring -- and it's a good thing -- greater transparency to government agencies so that you know what we're doing and, hear about what the issues are in public. You can hear from the staff. You can hear from the Commissioners.

It's why you see a Sunshine Act notice in advance of our rulemakings because we're doing them as we must at an open meeting. But what that actually means in practice, and the SEC really is quite -- a strict adherent to the requirements -- is that neither I, nor any of my fellow Commissioners, my other four fellow Commissioners, can talk to more than one of each other at a time. So what you see with envy, frankly, at least I do as Chair, is some old photographs with the five Commissioners sitting around a table discussing issues, business, and policy. We can't do that anymore. It's really a lot of shuttle diplomacy, and I think the transparency piece is great and important, but I think it really does, I think -- isn't built for efficiency and clear communications as I -- you'd like to see. So that's been more of an impact than I was anticipating, even though I knew of the Act and its requirements.

What else and I'll stop. I guess the amount of time that I devote to international issues and the time I spend with fellow financial regulators both domestic and international and most of that is very good. Our markets are obviously global, interconnected. We did have a financial crisis. So all that communication and trying to avoid regulatory arbitrage is extremely important.

I, actually, personally represent the agency on the IOSCO Board, which are other securities regulators from around the world, the Financial Stability Board Steering Committee, which is the senior group of the Financial Stability Board, and I am, as the Chair, a member of FSOC, the Financial Stability Oversight Council, and obviously lots and lots of help from the staff in the policy divisions and our economists in DERA, who are just amazing. I think all of these organizations, in addition to trying to identify risks around the corner and really addressing them, need to prioritize their agendas. I think what the SEC brings to the table, among many other things, is our expertise about the capital markets and how banks may be different than the capital markets in those arenas.

I'm sure there are others, but that's kind of a running list.

STEVEN BOCHNER: Thank you. Thank you.

Let's talk a little bit about 2015 and maybe how you would characterize the year and the Commission's accomplishments, the SEC accomplishments, and then maybe move quickly to 2016. Tell us a little bit about how you set your agenda and what you think the priorities for the Commission will be this year.

CHAIR WHITE: 2015 [was] a year of really tremendous accomplishments for the SEC, very proud of not only how much we accomplished, but how well I think the agency [performed]. We finished basically all of the JOBS Act mandates with Regulation A+ and crowdfunding, made great progress on finishing the rest of our Dodd-Frank mandates, and we've already started finishing our FAST Act mandates as well.

We were able to also, and I was very pleased about this, actually propose four major rules for enhancing oversight and the regulation of the asset management industry. We advanced some of our market structure initiatives by way of proposals, including greater transparency for ATSs, very important to do.

I'll stop in a second, but I'm like a broken [record], wind me up and I'll keep going.

Enforcement had a record year. You probably heard about that for two-and-a-half hours from Andrew Ceresney, but I think 807 actions and over $4 billion in orders to return money to investors and in penalties. Our examiners who examine broker-dealers and investment advisers, did almost 2,000 exams, which is a five-year high, and really high-quality, risk-focused exams, so very, very proud of that.

Other divisions and offices in the agency, also really clicking on all cylinders -- some leading reports put out by our economists in DERA, terrific and very important oversight by our Office of Chief Accountant, overseeing the credit rating agencies, the municipal securities markets. So I think a really, really strong year across the boards.

STEVEN BOCHNER: Yeah.

CHAIR WHITE: In terms of 2016, I mean -- I'm sorry. You want --

STEVEN BOCHNER: Yeah. Well, I was going to -- lead you to that as the -- sort of the congressionally mandated agenda hopefully wanes, that maybe 2016 will be a year when you'll have a little more time to think about what should we do as opposed to what --

CHAIR WHITE: Look, [the mandates] have obviously been a challenge, you know, throughout my tenure. It remains a challenge to some degree to also advance the mission critical rulemakings and other initiatives of the agency. Disclosure effectiveness obviously being one where we also made progress last year and will be a priority going forward this year. I hope to carry forward those asset management rulemakings that I mentioned. We've got a couple more to do, market structure initiatives, and none of these that I'm mentioning, by the way, are Dodd-Frank mandates or JOBS Act mandates.

Hope to finalize our very important plan for a consolidated audit trail, which will really be a game changer in terms of regulators' window into the equity markets and others.

I think on the Dodd-Frank front, we've basically finished most of our major Dodd-Frank mandates. We sort of put them in different buckets, but we've done credit rating agencies and we've done clearing agencies and we've done Volcker. We've done private fund advisers, municipal advisors. We've done major reforms in the securitization markets.

And so what's really left in those major categories is to finish Title VII, the over-the-counter securities-based swap regulations. We've proposed all of those rules. In 2015, we adopted a number of them, but we have to finish those adoptions and then the executive comp rules, all of which we did propose or adopt in 2015. So they're on our agenda for 2016 as well as is fiduciary duty for broker-dealers and advisers, third-party exams for investment advisers. There's a lot more. It should be a very busy year.

STEVEN BOCHNER: Yeah. We'll be hearing tomorrow from Division Director Higgins about disclosure effectiveness, but I wanted to see if you wanted this opportunity to talk about your perspective on that and what we're likely to see.

CHAIR WHITE: Yeah. This is one of our -- it's really my -- and I'm sure Keith would share this as well -- most important priorities. Obviously, this is not mandated by anyone other than one wants to have what is our probably most important set of powers be as optimal as they can be, and so I mentioned that– our first tangible product was issued [in 2015] and there are lots of work streams that are quite active and ongoing in this initiative, but we put out a request for comment on some revisions to S-X, very complicated in terms of financial statements provided on others than the issuer, remarkably clear, by the way. If you really have insomnia one night and you want to be entertained, you actually will understand it all. So really a very, very good job on that.

I think next in the flow in terms of the order of things in the short term probably a concept release on S-K, the financial and business issues raised there. We're also doing some technical amendments of our rules primarily related to financial statements -- addressing some redundancy, some overlaps, perhaps some contradictions with what's required by U.S. GAAP. So that will be happening. We're focusing on the industry guides, particularly Industry Guide 7, the mining and the bank holding company industry. That's [Guide] 3, as well as 7.

Then, one of the other things, just sort of stepping back for a second on disclosure effectiveness, we've urged and gotten a lot of comments from all kinds of constituencies -- preparers and auditors and investors and others who really have put in some very, very useful comments. We urge more and they do begin to grow, but what you basically have among the comments are also some thoughts about where there should be greater disclosure perhaps than under our current rules.

I think foreign tax disclosure is one the staff has looked at as to where [there may need to be more] -- where we may need better and greater disclosure, not just eliminating redundancies and it's really about optimal effective disclosure, not eliminating but making it better.

Other issues that have been raised, for example, are where we don't have line item requirements, for example, in cybersecurity, for climate change, other things of that nature. What the disclosure effectiveness review gives us is the opportunity to look at the current state of disclosure really in all areas, see what it is, and see whether there is room to improve it in either direction really in terms of adding or subtracting.

STEVEN BOCHNER: So there may be some combination of, perhaps looking at line item disclosure may be more qualitative and then I know you've made comments in the past about encouraging disclosure that's not even elective in connection with shareholder relations.

Do you suspect it's going to be greater or lesser on any of those fronts or too early to --

CHAIR WHITE: I think it's too early to tell that. I think it really is a very active, deep effort to just make our disclosure system as best as it can possibly be.

STEVEN BOCHNER: Okay. There's been a dramatic change in my practice certainly, probably the biggest change I've seen in my career in just the number of exemptions, ‘33 Act exemptions. We're going to talk a -- we've talked already about it. We're going to talk a little bit more about it on the corporate finance panel tomorrow, but wanted to get your reflections just on the flexibility now that issuers have.

You know, Reg A+, crowdfunding. We've got proposed changes to 147 and 504. We have general solicitation in the context of private placements. That's something that's been talked about for decades and now is with us and, you know, it obviously gives issuers a menu of different choices and flexibility and I think it was last year, it was either here or New York, I can't remember, but you mentioned that you were going to pay close attention to kind of how these rules were implemented, particularly general solicitation, how it was used, kind of keep a watchful eye, and I'd be interested in your perspective on that landscape.

CHAIR WHITE: Yes. It's a big landscape, obviously changing recently and fairly rapidly. I think it's an exciting landscape, that does present real new opportunities for capital raising and flexibility for issuers. It also, puts in very stark relief for the SEC and others to make certain that investors are optimally protected in those markets, and I think I maybe mentioned this in New York --one of the things that I decided to do, given all these changes and how significant they are, is to form interdivisional working groups at the SEC, which is Corp Fin and Trading and Markets and Enforcement and OCIE, examiners, our economists play a big part in this, to really monitor these markets as they come out of the gates.

And so, for example, general solicitation, the ban on general solicitation for Rule 506(c) was lifted and effective September 2013. So rather than to wait two years or so and say, how has it worked and somebody just gave us a tip on this fraudulent activity. Again, as you know and may well remember from -- particularly when we adopted -- lifted the ban on general solicitation mandate -- as mandated by the JOBS Act, there was a lot of concern about whether there would be pervasive fraud because of permitting general solicitation, even though one could sell only to accredited investors, and so part of the purpose was how's the market working, how might we adjust it to make it work better, more efficiently, and also be right on top of any fraud that might be occurring.

What we've seen in that -- and, again, it's too early to make any real judgments on that, but on the fraud/misconduct front, we do have some open investigations in several categories. One is actually in the area that is regulated, which is the reasonable efforts that issuers have to make to determine that who they're selling to are accredited investors and either just not doing it at all or doing a job that clearly doesn't pass muster. There are certainly, as you have in any market, some instances of fraud, but what we don't see yet and hope we don't, is evidence of rampant fraud in that market, obviously something we have to stay very vigilant about.

In terms of use of 506(c), it's being used, but it's not being used perhaps as much as some would have thought it might be. 506(b) where there isn't general solicitation is a hugely vibrant market, continues to be. I think I'm right about this. From 2013, when 506(c) became effective, through 2015, you had about $2.8 trillion sized market for 506(b) and about a $71 billion market for 506(c). So that gives you a sense of the difference in the use of those exemptions.

One thing we've seen this year, and again, not to over conclude from this, is that the size of the 506(c) offerings are getting bigger by size, not in numbers, but in size.

So, Steve, bottom line is that we're always watching the offerings public and private for both, how effective they are, are all these new measures just substituting for a different method of raising capital or are we actually getting more capital raised, looking at the investor protections. Some of those lines between -- which used to be a little starker, I think, between private and public offerings, are blurring a bit because you have different requirements in different ones of these exemptions. You compare Reg A+ to crowdfunding, there are lots of different kind of moving pieces. You worry about, again, as a regulator the differences in liability for issuers and that kind of thing.

So it's something that presents excitement, I think, but also bears a lot of vigilance and a lot of study.

STEVEN BOCHNER: Thank you. A related topic would be the accredited investor definition and I think it could have a very large impact on how the exemptions are used, because to the extent you raised the threshold for the accredited investor definition and it may make exemptions like the proposed 147 or small issuer exemption more attractive because you raise the threshold and those investors are harder to reach, the thresholds are harder to comply with. And [I’d] be interested -- we'll probably talk about this tomorrow in a little more detail, but at your level, what do you think is likely? Can you give us a glimpse into your thinking and what do you suspect is likely to happen there on accredited investor?

CHAIR WHITE: -- You'll know this and you'll talk about it some more [tomorrow]. The staff actually published its review and study in December on accredited investors. Actually one of the 30 mandated studies under the Dodd-Frank Act, but it's obviously an issue absent the mandate that the Commission and many others, our advisory committees and you have been studying for a long time because of how important it is and it's even more important now with these other changes. And, again, what I -- and we've gotten -- it's obviously open for comment. We urge you and your clients to comment on this. We are very interested in all the comments.

Going in, my own views on this, is I think the rule needs changing. I don't think, at least alone, that the net worth and income criteria by themselves are a very good or at least not optimal proxy for who doesn't need the protections [of the Securities Act], who can fend for themselves in the marketplace. There are number of alternatives that are discussed in that study that are being considered as, again, proxies for sophistication and being able to fend for yourself depending on your background, your professional qualifications, how much you have been involved in investing.

I think investment limits is a very interesting concept in this space, obviously being used in A+ and crowdfunding, but I think ultimately it will result in a rulemaking.

STEVEN BOCHNER: Yeah. And, of course, it'll have implications not only for issuer side capital raising, but secondary transactions as well with the RAISE Act first to the accredited investor definitions.

CHAIR WHITE: Absolutely.

STEVEN BOCHNER: It'll impact both primary and secondary offerings.

Well, let's talk about a related topic that you alluded to a moment ago, which is just the development of platforms, the use of technology. You know, we've all seen, perhaps partially as a result of Sarbanes-Oxley and Dodd-Frank and market forces, issuers that are going public are bigger for the most part and particularly in the technology sector where I spend a lot of time, and there was a comment yesterday on a panel, $100 million in revenue to -- at or near it to be a public company these days, and so that's kind of created a lot of interesting changes in the market from who's participating in late stage capital to the need for secondary liquidity as employees need liquidity because it takes longer to get public.

I'm just curious about your perception about all of those activities and how big for the most part, how large IPO issuers are. How does the Commission kind of view all those developments?

CHAIR WHITE: Yes. I mean, lots of issues in your question that are presented, which we very, very closely watch. Secondary liquidity for investors on the private side is something that our advisory committees, the Commission, lots of folks are attending to. Technology has made it possible to bring buyers and sellers together on various kinds of alternative trading platforms. We're looking at -- there have been venture exchanges before as a means of increasing secondary liquidity. They haven't yet worked that well.

I think in general [there are] a couple things going on there. One is I think the marketplace has not yet found the solution or the optimal solutions for providing enough secondary liquidity -- on the private side. I think we still need to work at it. One of the things we're doing at the Commission is we want to modernize our rules so that we're not presenting obstacles. If you think we are, we want to hear about that. For the most part, I think our rules have quite a bit of flexibility and certainly we are receptive and are talking all the time to market participants about new proposals and ways to increase liquidity.

In terms of the public-private [issue], there's a lot of different kinds of debates about that. I think, as you might expect as a regulator, I'm always more comfortable when our staff has a broader window into more information and there are greater investor protections, but also, inherent in our mission, is to facilitate capital formation obviously with investor protection fully in mind, whether that be by a public offering or private offering. So we need to be focusing on those issues across the board.

I mean, the kind of the late stage private investments, pre-IPO that have gotten so much attention in the press, that's something we look at closely there. One take away just at a high level is you've got pretty sophisticated institutional investors who ought to know the right questions to ask and have the leverage to be able to get the information that they need. They ought to have the resources to be able to do the due diligence they need to do, the leverage to basically negotiate favorable terms.

Now, obviously what you've also seen are the differences in private-public valuations, and again, what does that mean? It could mean a lot of things, but I think, one thing it may mean is no matter how good you are and how professional you are at investing, investing is hard and there's risks inherent in every investment. I -- maybe it's even a plug for -- on the public side, registration and our disclosure rules may be a better price discovery mechanism.

Concerns that come out of that clearly -- there's a lot of excitement about the unicorns and some concerns that have been raised in that space. When you come to individual investors, all the things I just said about sophisticated, large institutional investors may well not, usually don't apply to individual investors who may get very excited from an article or a blog and invest their money, and so you worry about them not getting sufficient or accurate information. Any time you've got that kind of excitement in a space, it can attract and does attract fraudsters, who will basically say look, I'm investing in these -- the latest hot unicorn, pre-IPO and they're not [doing that] at all. So that's kind of garden variety fraud that kind of comes with it.

There may be some implications for our swap rules depending on how some of these are structured. So, basically, we're keeping a very close eye on it, but those are some of the issues.

STEVEN BOCHNER: Yeah, a lot more flexibility for issuers, though.

CHAIR WHITE: Yes.

STEVEN BOCHNER: There may be some changes coming with the accredited investor definition and we'll see technology changes these markets.

We spent a lot of time in the prior sessions talking about particularly enforcement directorates. Ceresney talked about the Newman decision, but did you want to comment at the Commission level kind of what the impact of that and how the Supreme Court has agreed to look at another insider trading case? Is that kind of changing your thinking about what cases that the SEC should bring and --

CHAIR WHITE: I think the bottom line given the case that the Supreme Court has taken and what's presented in it, which is basically the personal benefit issue is really kind of teed up pretty -- pretty cleanly. There's a little bit of stay tuned in terms of how, it might impact our insider trading program, but I think -- and Andrew and I didn't consult, so we may be giving different answers on this, but Newman has had some impact certainly on our program within [Newman’s] four corners, less impact than I think commentators have largely suggested. It's had more of an impact on the criminal side than it does on the SEC civil side because we have different burdens of proof that make it somewhat easier for us even under Newman to go forward.

So we've [since Newman] brought I think over -- Andrew probably gave you the stats, but I think over 30 insider trading cases and most of them involving a lot of insider trading cases, by the way, don't involve the issues in Newman in terms of the tippees knowledge and personal benefit kinds of issues. I think over the last six years we've also brought -- well over 600 insider trading cases. So it's a very important area of our enforcement program.

Newman itself depending on what other courts do with it -- [so far,] I think most of the decisions have been pretty favorable to narrowing [Newman] from our point of view. But we have to stay tuned on the personal benefit issue obviously.

STEVEN BOCHNER: It'll be interesting to see what the -Supreme Court says, whether it's going to kind of go back to the SEC versus Stevens reputational benefit --

CHAIR WHITE: Right.

STEVEN BOCHNER: -- what actually is the benefit. I guess we'll get more clarity - on that.

CHAIR WHITE: -- yes, and it's really around the close family, close personal relationship space where I think it'll make the most difference.

STEVEN BOCHNER: Yeah. Well, let's switch gears here and talk a little bit about I guess one of the last remaining Dodd-Frank provisions, at least impactful in my world, is the clawback provisions and we just had the accounting panel and talked about the new revenue recognition standards which are looming and it looks like the clawback provisions in the revenue -- and I think somebody commented that something like 80 percent of companies weren't ready for that and you look at the clawback provisions, which are going to be much broader and fiercer than the Sarbanes-Oxley clawback provisions.

Can you give the audience any sense of the timing of that and actually, it seemed like the statute was quite prescriptive and you didn't have a lot of flexibility, but curious about your reaction.

CHAIR WHITE: I'm glad you said that. The statute -- as in many of these Dodd-Frank rulemakings -- is pretty prescriptive. I mean, one of the big challenges we had on crowdfunding was to try to make it workable, but also obviously carry out the [statutory] provisions which was a huge challenge. In terms of clawback, hedging, and pay-for-performance, they're all 2016 priorities. You heard me talk a moment ago about how many of those [2016 priorities] we have, but we're obviously going to move as many of them as we can.

On clawbacks specifically, yes, the statute was pretty prescriptive. Some of the most frequent criticisms that you hear -- we've gotten a lot of comments in on this on lots of issues, frankly, really are in the statute or the legislative history and the plain meaning of the statute. No fault, is [an example] -- you can just the read the statute on what that says.

In terms of who does it cover, which is another issue that a lot of folks have commented on, NEOs or broader than NEOs. Again I would refer you to the statute.

[There are other issues --] what compensation is covered? How much board discretion should there be? I mean, lots of comments on those issues. Should FPIs be included/excluded? We're working through all of those issues, but, again, I would urge people as they're commenting and thinking about this to understand what our statutory baseline, for want of a better way to describe it, is to begin with. There some issues we have more discretion on than others, clearly.

STEVEN BOCHNER: Yeah. And I'd like to also point out I came up with a -- we collectively came up with a list of questions for Chair White and she didn't duck any of them. I thought she was going to sort of pick and choose and say, "No, no, no," and she agreed to talk about every one of them. So thank you so much for that.

CHAIR WHITE: It's because I'm from New York. You know, we just don't know when to stop, right?

STEVEN BOCHNER: Yeah.

STEVEN BOCHNER: We have a few more minutes. Maybe talk a little bit about something that the next panel's going to touch on as people get their lunch in a few minutes here, which is kind of balancing shareholder rights with the domain of the board. I mean, that seems to be one of the topics of our time here and there's just been -- since Sarbanes-Oxley dramatic change in shareholder rights, which has caused shareholder activism and a lot of is it a good thing/bad thing? The answer is probably somewhere in the middle, but proxy access, I think people know that history here.

What's your view of how to strike that balance, the Commission's role in it? How do you see that particular debate playing out?

CHAIR WHITE: Yes. I think at its core it's not for the Commission to take sides in the debate. I can sort of explain what I mean about that a little bit. I mean, we obviously have rules that govern various acts of activism if we want to phrase it that way. We have rules that require disclosure. We're focused on everybody, obeying/adhering to those rules, so investors get the information, shareholders get the information that they need to have. And so, I think that's, one kind of important bedrock principle in that to the extent that I've said this before, I don't think activists are a seamless piece. I think they can fall into different categories and they can be seeking different things and they can use different methods, which presumably means issuers may want to be responding differently depending on exactly what's in front of them.

One of my favorite anecdotes is, I gave a speech on a lot of this at Tulane, at their corporate governance [conference], and the two immediate press readouts from what I said, one said, "White supports activists." The other one side, "White trashes activists." So I think I struck the balance right that day. [Later, they wrote about differences] between me and your opening speaker yesterday. On shareholder proposals, obviously our rules, since 2011 have provided for qualifying shareholders to make proposals.

Proxy access, clearly 2015 was a pivotal year. I think there were a lot -- I think ISS has said over 120 shareholder proposals. I think 90 plus of them made it to a ballot. Sixty percent of them if I'm right, I think got majority support, and then I think there were 118 companies who actually in 2015 adopted some form of proxy access, names everyone knows --GE, Microsoft, Goldman Sachs, Morgan Stanley, Bank of America, and many other companies. And I saw one figure recently where I think there are 20 percent of the S&P -- I think it's 100, not 500 now have some form of proxy access. If you look back in 2013, it was 1/2 of 1 percent.

So, obviously there's been a lot of activity in that space. I expect, by the way, there'll be more activity this season in that space too.

The other piece of this -- free associating a little bit -- is, the uptick in what I call direct shareholder engagement that boards and companies are doing and shareholder proposals aren't in that category. I'm really thinking of the outreach that's being done. I think that's all to the good. I mean, that's something I really think is quite constructive.

STEVEN BOCHNER: Yeah. Well, why don't we end on a topic that I know is important to you, which is diversity and you've been a director of a public company. You've been a federal prosecutor, Chair of the SEC. You've worked in a law firm, so you've seen it from about every side and I know it's something you care deeply about.

CHAIR WHITE: Diversity on boards I think is enormously important -- diversity everywhere I think is an enormously important topic. I think it adds value. I think you've seen in terms of the board context really study after study showing that greater diversity on boards adds value. I mean, it makes your board function better and adding value to your company obviously correlations -- but start with that, and yet the numbers [on boards] really are not bearing that out in most companies.

I think on the gender side, it's 16 percent women [on public boards] and I think GAO just put out a study in December saying that it'd take about four decades to get parity if you had an equal number of men and women, for example appointed to boards.

I don't think it's a want of supply either. I think there are plenty of highly qualified diverse candidates. There are resources to find them if your nominating committee needs resources to find them. I think I would urge boards to kind of start there. Where are you looking for your board candidates? If it's that old traditional network where everybody's come from for the last 50 years, you may have more trouble getting to highly qualified, diverse members of your board.

Obviously [I am] speaking [personally] from my various perspectives. When it comes to the SEC's regulatory space, we don't tell you who should be on your board and we don't generally talk about even board qualifications. You know, a couple of exceptions to that, we do have disclosure rules on directors and their experiences and backgrounds and diversity. Those rules have been the subject of some conversation as to whether they are strong enough, whether they really are giving [enough useful information to] investors who are interested, and many are, in the racial, ethnic, and gender diversity of boards. They don't require that disclosure. What they require is if a board considers diversity, say so and how, if it does. If you have a policy on a diversity as you're locating and nominating directors how is that implemented and how do you judge its effectiveness?

In that rule we don't have a definition of diversity because obviously diversity can mean a lot of things. In addition to gender, race, ethnicity, all kinds of qualifications, rightly so, fit into that concept.

We have a number of petitions pending that raise the issue of -- wouldn't this be more meaningful if you actually defined diversity in your rule, SEC, to at least include ethnicity, race, and gender, in addition to whatever other qualities, fall under that category and require disclosure of those facts And I think those concerns, from my point of view, are well-founded and I've asked the staff to study basically what the disclosures are currently under our existing rule, what they've been over time with an eye towards -- with these concerns that I share, whether we need additional guidance or rulemaking.

STEVEN BOCHNER: Thank you. Well, with that, I think we're out of time. Thank you for being here. Thank you for braving the snowstorm, shoveling your driveway.

CHAIR WHITE: Thank you.

STEVEN BOCHNER: Please join me in thanking the Chair.

CHAIR WHITE: Thank you.

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Modified: Jan. 27, 2016