Mar. 23, 2023
March 23, 2023 I am writing to oppose two sections of the proposed Supplemental Standards of Ethical Conduct for Members and Employees of the Securities and Exchange Commission the section that requires Commission employees, and their families, to divest themselves of Financial Sector funds and the section that will hand over Commission employees and their familys information to a third party. I must also note that the release fails to provide a concrete reason for these proposed changes. There is the vague reason for the first one that it is to, guard against actual and perceived conflicts and appearance concerns. But no evidence or statement that this has been an issue as to these funds. The second change will allegedly, reduce the burden on employees and compliance staff, and improve data accuracy and completeness ... It would also facilitate compliance by allowing the OEC to independently verify employee holdings and transactions. Further, it would reduce the risk of human error or oversight in reporting and reviewing of securities holdings and transactions. Again no evidence that any of these are concerns are based on any actual facts. We also need to admit that, in reality, these rules really are for show only. If an SEC employee was determined to take advantage of his or her insider knowledge, they are not going to report their activities to the Commission nor are t hey going to tell the SEC about the brokerage account they are using to break the law. These proposals are simply designed to give the public the illusion that the Chairman is rooting out conflicts of interest. The first proposal on financial sector funds would appear to be completely ineffective. It would require employees to divest themselves of funds that focus on entities directly regulated by the agency. The reality is that for many years almost every large broker-dealer, those entities directly regulated by the agency, have not been independent public companies capable of issuing stock. The entities directly regulated by the agency are almost all owned by banks or insurance companies. Most financial sector funds are composed of stocks of bank holding companies and insurance company. So, if SEC employees are prohibited from holding any sector funds that focus on entities directly regulated by the agency and none of them do (unless we are now asserting that we directly regulate Bank of America, Goldman Sachs Holding etc.) this rule has absolutely no impact. If I am reading this wrong and it is designed to simply forbid our holdings any financial sector fund regardless of our jurisdicti on then the rule should state that and explain why holding a few shares of a fund that owns shares of a bank holding company that has a broker-dealer could influence our decisions. Even worse is the proposal to outsource the reporting process. The proposal opens a whole host of issues. Our current system is internal with no outside facing access. The information we submit is not in a structured format and we are also able to redact our account numbers. These measures provide staff with at least some semblance of protection for our retirement funds in the event of a system intrusion. As we know, SEC systems are vulnerable to hacking and have been hacked multiple times. Now the SEC wants us to provide a third party with this information. It will be an outward facing system, with multiple parties having access to data that is neatly structured and contains all our account information. When those systems are breached, and they will be, more than just our data could be stolen. Will this system allow hackers to access our accounts? Who will be responsible for replacing our retirement funds if they stolen? The SEC that mandated the system? The third party that we were required to use and will promptly declare bankruptcy)? Furthermore, the rule makes it clear that the staff are responsible to ensure that the filings are correct, \"the broker is acting as an agent of the member or employee in transmitting the information, and the ultimate responsibility for complying with the reporting requirement is that of the employee\". The proposal provides no detail on how an employee would be able to audit the \"third-party automated compliance system\" or view what information it provides to OEC. Without that ability or assurance, an employee would not be able to reasonably rely on the third-party system to fulfill the employee's reporting obligation. What are we to do if our agent refuses to fix a mistake? The SEC does admit that many smaller companies may not have systems to comply with these new requirements. For those companies, they will work out a method outside of the new system. In other words, there will be two separate systems. While necessary, how does this further the goals of this rule? The SEC is already losing attorneys faster than it can recruit new ones, let alone hire more to keep up with the growing demands of the industry. This proposal is only going to make the recruitment process even more difficult and will provide those of us who already work at the Commission with one more reason to leave for better paying jobs with employers who actually respect for their employees.