Aug. 29, 2023
Capital markets are being shaped by innovation and new technologies. Many of these developments will enable greater access to capital markets. They also bring new financial products, business models, and competitors into the markets. At the same time, however, this dynamic places additional demands on SEC resources—not only in examinations and enforcement matters, but also in new rulemakings and policy areas. Transaction costs have come down, and efficiency and fairness have increased in many markets. However, increased use of, and reliance on, technology has introduced new risks and, in some cases, amplified better-known market risks. For example, cybersecurity threats to the complex system that helps the markets function are constant and growing in scale and sophistication. Similarly, markets are more interconnected and interdependent than ever. They function on a 24-hour cycle and cut across geographic barriers. Information from one market travels to others in fractions of a second. Trillions of dollars of capital flow across markets each day—amounts that would have been unimaginable only a few decades ago. These developments create regulatory and oversight challenges as the operations of large investment firms extend well beyond U.S. borders, and new entrants to U.S. markets seek to avoid or evade U.S. securities laws. The need for coordination with fellow financial regulators, including foreign regulators, will continue to rise. 2.1 Update existing SEC rules and approaches to reflect evolving technologies, business models, and capital markets. The ongoing movement of assets into private or unregulated markets, the continual creation of new financial instruments and technologies, and the challenges of increased globalization all require the agency to rapidly update and evolve. To do so, the SEC must enhance transparency in private markets and modify rules to ensure that core regulatory principles apply in all appropriate contexts. To maintain the integrity of the markets, the SEC needs to develop specific regulations to ensure investors remain informed and protected via a broad-based disclosure frameworks. The agency must also continue to focus on supervising global entities appropriately. Inherent in the interplay with international markets is the challenge of protecting sensitive information when coordinating with other regulators. Consistent data protection policies are essential for this effort. 2.2 Examine strategies to address systemic and infrastructure risks faced by our capital markets and our market participants. Future market volatility driven by market or external events such as the pandemic, the evolution of markets without subsequent strengthening of agency authorities, and the rapid growth in crypto assets all represent evolutionary risks. To be better prepared for, and more agile in, its response to such risks in the future, the SEC must pursue new authorities from Congress where needed, continue to effectively collaborate with other regulators, and engage more proactively on digitization initiatives. 2.3 Recognize significant developments and trends in our evolving capital markets and adjust our activities accordingly. To help ensure a systematic, timely, and collaborative response to market developments, the SEC must continue to apply its three-part mission holistically, not in isolation. Investor education and outreach must continue to focus on diverse and underserved communities as well as on emerging and popular investment topics. These efforts should reflect input from stakeholders, including retail investors, via proactive outreach, roundtables, and field hearings. The SEC must also continue to enhance its expertise in, and devote increased resources to, product markets beyond equities—including crypto assets, derivatives, and fixed income—and maintain a nimble and flexible approach to address market changes expeditiously.