Mar. 9, 2023
March 9, 2023
My main concerns with this proposal are: the lack of transparency and lack of discussion behind this proposal as well as the unfortunate retroactive nature of the proposal that doesn't clearly mitigate a present and known risk.
This proposal comes under the cover of darkness with its initial notification buried at the end of the staffs daily \"SEC in the News\" email. In addition, to the proposal lacking transparency, staff were not included in an any discussion prior to the proposal nor has the Chair sought to engage the staff in a subsequent town hall to discuss why he believes the necessity of the proposal in its current form outweighs significant employee harm.
Employees affected by the retroactive, punitive, and overly broad attempt to eliminate staff holdings of financial sector ETF holdings should have been notified (they were not) and their particular input should have been sought. Given that none of the reported public harms committed by current or former federal employees non-compliance with holding rules as reported in the Wall Street Journal concerned a sector ETF, this proposal seems designed to not even mitigate a hypothetical risk but instead to appeal to the interests of several outspoken members of the senate and a few members of the public-at-large whereby the four Commissioners and Chair can curry public favor without a commensurate impact on their own personal holdings.
Staff forced to sell their holdings will have to do so in no less than 90 days under the proposal, an unreasonably short time frame, which will likely cause significant tax consequences and also alter the diversity of their holdings. This sets a horrible precedent that should alarm even staff who don't hold an affected position as one wonders if optics are the main consideration for any holding prohibition, when does the Chair and commissioners take the next logical leap and ban all individual stock holdings retroactively. The authors of this proposal have failed to explain after decades of allowing staff to hold financial ETFs, why it is suddenly a problem and staff need to divest these holdings in short order. Further, this risk is already somewhat mitigated as staff are currently prohibited from holding an excessive amount of sector ETF holdings, so even to extent it is arguably a risk, why is this additional, retroactive step necessary at a time when the Commission has had dif
ficulty with staff retention and overall staff dissatisfaction is higher than under other SEC administrations.
It also seems odd and inconsistent to prohibit financial ETF holdings retroactively for all SEC employees, including administrative staff, but allow members of specialized units within a division to hold assets/securities in sectors where they can affect the price. For example, one can be in the Division of Enforcement's cyber unit, which focuses on both cybersecurity and crypto-assets, and hold crypto-assets or can be writing a rule on SPACs in the Division of Corporation Finance and hold specific SPAC offerings. Presumably, that is a risk that should be mitigated but how does someone from an administrative position, the Division of Credit Ratings, Division of Examinations, or the Division of International Affairs holding a small position in a financial sector ETF in anyway affect their daily judgment or how does this individual in anyway influence the price of the ETF?
This was a poorly thought and poorly executed proposal. Please reconsider.