Speech by SEC Chairman:
|These remarks reflect solely the personal views of Mr. Pitt, and do not necessarily reflect the views of the Commission, the individual members of the Commission, or its Staff.|
I am pleased and honored to be with you this morning. The events surrounding this meeting are both a cause for grieving and a cause for giving thanks. The securities industry has been through an extraordinary series of events over the past two months. The terrorist attacks of September 11th inflicted irreparable losses of innocent lives. We mourn our lost friends, relatives and co-workers. Every life lost is irreplaceable; there are no insignificant people.
Those we lost leave gaping holes in our lives and in our communities. Those of us who were spared must carry on. We all should feel and reflect unabashed gratitude for the opportunity to live in our free society. In doing so, we honor the memory of those who no longer can. The terrorists win only if we stop living our lives and imprison ourselves in fear. I refuse to do that, and I know you do, too.
I am enormously grateful for the wonderful efforts of the securities industry, the leaders of our self-regulatory bodies, and my colleagues on the Commission and its Staff. Our experience immediately following September 11th evidenced the extraordinary power of cooperation and partnership between the public and private sectors. As a government agency, our job was to ensure that our markets once again were able to function properly so investors could exercise their freedom to buy or to sell, and so public companies could raise capital in the strongest, deepest, most liquid capital markets in the world. The Commission reached out to all sectors of the marketplace for ideas concerning the best way to ensure that our markets would reopen with the greatest amount of liquidity possible, consistent with the protection of investors and the national interest.
You answered our call, and with your help we crafted a series of emergency measures, such as a temporary broadening of the issuer repurchase safe harbor, that served to create a more stable market environment.
In a remarkable demonstration of elevating the public interest over narrow parochial concerns, all of those with an interest in our markets came together, in partnership and, operating as one, ensured the successful reopening of our equity markets on September 17th. When the markets reopened, investors once again were able to rely upon the strength and soundness of our markets. Investors had the freedom to buy or sell. All market and investor protections were squarely in place. It was a day of record volume, without incident. The message sent around the world was simple, but poignant: our markets are the most resilient in the world, and they represent freedom and a way of life - things that terrorists can never destroy.
I marvel as well at the tremendous cooperation of those in the securities industry and our self-regulatory organizations in providing trading data and backup documentation to our Division of Enforcement and other U.S. and foreign authorities to help the FBI track down those responsible for the heinous attacks. Although any securities law violations are minor in relation to the atrocities perpetrated, we, along with other federal and foreign authorities, must canvass all possible evidence to see if we can identify the perpetrators.
These were not the events that I had expected would mark the beginning of my Chairmanship. But we don't get to choose the circumstances that prevail when we enter the game. Now that the more extreme dislocations of the crisis appear to have abated, I would like to take this opportunity to discuss three broad topics with you this morning - regulatory philosophy, some of the lessons we can learn from the events of September 11th and their aftermath, and the approach we anticipate taking toward issues of market structure. This is a lot to chew off in a short period of time, but I think you are entitled to know something about the philosophical approach of those who regulate your industry.
The securities industry is unique. For one thing, it is the lifeblood of our capitalist system, and the engine that drives our standard of living, corporate competition, and the delivery of all the products and services that make up our free economy. For another, Congress gave it the privilege of regulating itself, in the first instance. This is a rare public trust, bestowed on precious few industries. It is a trust to which this industry must constantly be devoted, and against which it will continuously be measured.
The SEC also is charged with public trust. Although the Commission has broad powers over the securities markets and the professionals who operate in them, we view our role as ensuring that the markets and market professionals act in furtherance of the interests of public investors, and in furtherance of the importance of capital raising. Public investors are the bedrock of our markets - and their interests are a critical touchstone for us when deciding whether regulatory action is necessary or desirable. So, too, is the efficiency of our markets as a means for promoting the ability of companies to raise capital for new ideas, products and services.
That was the way we approached September 11th, and the way we will look at many issues. There undoubtedly will be times when you may think we should step back, or aside, but we will not be comfortable doing so. As long as we maintain a steady dialogue, and foster trust and confidence in one another, areas of disagreement will hopefully be minimized, and you will always understand why we did, or did not do, as you may have preferred. It isn't essential that we always agree, but it is essential that we always be agreeable toward one another.
In the aftermath of September 11th, there will surely be those who may seek to complain about things they think might have been done differently, or even better. I am not one of those people. I think everyone performed remarkably, and this industry and its self-regulators deserve enormous praise for the leadership and patriotism you reflected. But just because I do not seek to look back for the purpose of criticizing does not mean that we cannot or should not look forward, to examine lessons we may need to learn - should the unthinkable, or anything remotely like it, ever recur. In looking forward, we must of course look back; and, it seems to me that certain themes emerge, which I raise for your consideration.
This discussion is necessarily abbreviated and general, in part because of the need for discretion in these perilous times, and in part because we are continuing to consider what additional lessons we, in partnership with the industry, should consider more fully. We welcome your input on what we could do better and how we can be of further assistance to you. We are fully committed to the principle that government is, and must be, a service industry.
Lastly, I thought I would use this opportunity not only to reflect on lessons learned, but also to look forward at some of the other challenges facing our securities markets. Some of you may have been hoping for a clear articulation of where I believe our markets are headed, or the path that we intend to clear to get us to optimal market structure. But none of us has a crystal ball, and I am not foolish enough to suggest that there are easy answers to these issues. Rather, I would like to share with you my vision, the overarching philosophy, if you will, that underlies my thinking concerning the array of market issues that we must face together.
As I have indicated, I am a passionate believer in the power of free markets. Our markets, and indeed our entire economic system, are the envy of the world because of the tremendous benefits of competition. It is the role of government to provide an environment in which innovation and creativity are rewarded, competition can flourish, and where market participants can compete fiercely but fairly on a level playing field. Through these competitive markets, the investors we protect can take resources husbanded for retirement, illness, education or better living standards, and cause them to continue to grow, and new industries and technologies can evolve, making our lives more productive and more enjoyable.
I believe in a flexible regulatory framework that does not dictate a particular market structure, but rather allows for multiple competing market models, and fosters the kind of innovation and creativity that has been the lifeblood of our economic system. Yet government clearly has a role to play. We can ensure that all market participants operate in an environment in which certain fundamental principles apply. These are the principles that Congress set out for us because of a belief that they would benefit the markets, and our economy, as a whole - fair and orderly markets, transparency, best execution of orders, and investor protection. No one should doubt that these principles have served our markets and America's investors well.
There are many different means to achieve the same desired goals. In general, my preferred approach to any regulatory issue is one in which the government's participation is as limited as reasonably possible, while vigorously ensuring that the public interest is protected. Many in your industry have complained - and credibly so, I regret to say - that it takes too long for innovative products and ideas to receive clearance from our agency. I am painfully aware of those concerns, having been on the experiencing end of that dilemma when I represented market innovators.
If government is to perform its critical role, new ideas and technology must be confident of prompt and intelligent consideration, with government taking an active interest in facilitating new ideas, not evidencing fear or uncertainty, leading to institutional paralysis, in resolving the thorny regulatory problems that often arise when we are presented with new products, new technology and new markets. To be both prompt and intelligent, I believe the Commission must make greater use of technological expertise as well as economic analysis, including cost/benefit analyses, in our policymaking.
To do this, we are in the process of beefing up our economic capacity. This organization and its very wise leaders sent me a letter shortly after my confirmation that identified some significant shortcomings in the nature of our economic analysis. I want you to know that I take the concerns you raised to heart, and we are responding to them. For many years, the Commission has brought principally a legal analysis to issues of market structure. I have nothing against lawyers, of course, although I wouldn't want either of my daughters to marry one! But, I do believe that we need to evidence greater reliance on state-of-the-art economic analysis. Over the next several months, it is my hope that we will appoint a highly respected economist to lead our agency in its economic analysis, and help us beef up our economic capacity.
In the same vein, I believe that we need to create a new position of Chief Technology Officer. As more and more markets reflect wholly electronic communications and interaction, for example, the Commission is in desperate need of the expertise to understand, inspect and review foundational algorithms. You and I both know how far the Commission needs to travel to reach that point of minimal technological competence.
Finally, I believe that our system of self-regulation has served us particularly well, and I would like us to empower SRO's to a greater extent to assist us in our regulatory mission.
This is my overarching philosophy to market structure, and I hope you will agree that it provides a framework in which it is possible, indeed likely, that we will be able to intelligently tackle all of the challenges that we face.
Over the last two months, we found we could work together to help heal the wounds of September 11th suffered by the securities industry, our markets, the American people and our Nation. Healing is a powerful, holistic, and cathartic process, and one we must continue together. This includes strengthening our own relationship. Hippocrates, the Greek physician and author, wrote, "Healing is a matter of time but it is sometimes a matter of opportunity." Faced together with this crisis, we have found an opportunity. We look forward to our joint mission and tasks, operating as partners in protecting the public interest, and promoting our capital markets as the finest and fairest in the world.
|Home | Previous Page||