Opening Remarks to the Investor Advisory Committee
Chair Mary Jo White
Jan. 21, 2016
Good morning and thank you all for being here. Happy New Year. I would like to take a moment at the outset to welcome the newest member of the Investor Advisory Committee, Susan Wyderko. Susan is now the President and CEO of the Mutual Fund Directors Forum and previously served at the Commission in several senior capacities for many years—including as director of the Office of Investor Education and Assistance—an experience that will also be very useful for this committee. So thank you, Susan, for your willingness to serve.
The Commission has continued to be quite busy, so let me give you my customary brief update since your last meeting on October 15th.
At the end of October, as you know, the Commission approved our last major JOBS Act rulemaking when we adopted final crowdfunding rules. Regulation Crowdfunding becomes effective in May and funding portals can begin to register with the Commission later this month. The Commission also in late October published for public comment the FINRA rules that will enable funding portals to begin operating. I want to thank the Committee for its very helpful recommendations, which were considered in developing this final rule and are addressed in the release or the rule.
Also at our meeting in October, the Commission proposed rules to amend Securities Act Rules 147 and 504. The proposal for Rule 147 would modernize this rule for intrastate offerings by establishing a new exemption to facilitate capital formation through local and regional offerings. The proposal for Rule 504 of Regulation D would increase the aggregate amount of securities that may be offered and sold in any 12-month period from $1 million to $5 million and would disqualify certain bad actors from participation in such offerings. The proposed rules are designed to enhance especially smaller issuers’ ability to engage in local and regional offerings, including through state-based crowdfunding laws, while maintaining investor protections.
In November, the Commission addressed another important topic—alternative trading systems (ATSs). The Commission issued a proposal to update our regulation of ATSs that trade equity securities listed on national securities exchanges. The objective of this proposal is to facilitate much needed transparency, for investors and regulators alike, about how these ATSs operate and the potential conflicts of interest that may be present when the business interests of the broker-dealer operator compete with the interests of market participants that access the ATS.
In December, the Commission considered and approved proposals on the use of derivatives by investment companies and on disclosure by resource extraction issuers.
Also in December, as you know, the staff published its report on the accredited investor definition, a subject on which this Committee has made very helpful recommendations. The review, mandated by the Dodd-Frank Act, analyzes various approaches for modifying the definition. I look forward to receiving comments on the report, which will help inform the Commission as it considers possible changes to the definition.
Also in December, Congress enacted the FAST Act which contains a number of provisions relating to the federal securities laws. Last week, the Commission approved interim final rules to implement two of those provisions – those allowing smaller reporting companies to incorporate future filings by reference on Form S-1 and, those permitting emerging growth companies to omit certain historical period financial statements from a registration statement if the information would not be required at the time of the anticipated offering. The FAST Act also contained provisions related to reviewing and revising disclosure requirements in Regulation S-K, which we will be evaluating in connection with our ongoing work on disclosure effectiveness.
I will mention one other year-end action – our staff’s published analysis of the events of August 24th. As I noted at your last meeting, we are closely reviewing how ETPs trade in the secondary market with a keen focus on the events of August 24th as an important "case study" for evaluating our equity markets under those conditions. On December 29th, SEC staff issued an analysis of the events of August 24 providing an overview of the performance of broad market indices, a comparison of the trading of corporate stocks and exchange-traded products, and an evaluation of certain aspects of the opening and reopening processes at primary listing exchanges. The staff analysis also examines the operation of the limit-up limit-down plan and the associated self-regulatory organization rules, as well as exchange-traded products and their idiosyncratic trading characteristics. The publication of this analysis is intended to inform the continuing public discussion on equity market structure, which the Commission, this Committee and the Equity Market Structure Committee continue to study as we consider potential enhancements.
Obviously, we continue to welcome your attention and perspective on these issues.
Your agenda today, as usual, is focused on a number of important topics. One item that is particularly critical is the discussion regarding fixed income market structure and pre-trade price transparency. As you know, the Commission, FINRA and the MSRB continue to consider policy reforms in the enormously important corporate bond and municipal securities markets.
Your agenda today also includes a discussion of outstanding FASB proposals emanating from its disclosure framework project related, in part, to materiality and other disclosure issues. Since FASB’s proposals are out for comment currently and they are continuing their due process, it would not be appropriate for me to comment on the proposals. But I am glad to see that the FASB plans to hold a roundtable later on this year on their various outstanding disclosure proposals. Further discussion, to ensure that all perspectives are fully considered should be helpful as they continue their work on these subjects.
You are also discussing a recent NASDAQ request for comment regarding shareholder approvals for various corporate actions – another important topic for investors which I am glad the Committee is considering. The Commission, of course, carefully reviews proposed changes in listing standards for consistency with applicable requirements as part of our mission to protect investors.
I will stop by thanking all of you for your service and assistance to the Commission. It is deeply appreciated.