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Opening Remarks at the Emerging Markets Roundtable

July 9, 2020

Good morning, and welcome to everyone who is joining us today. Thank you to the panelists who are participating virtually and a very big thank you to the SEC staff for organizing and hosting this event. Today’s agenda covers a wide array of issues that affect the work of many SEC divisions and offices, as well as the functioning of several different parts of our markets. The issues we will discuss today are not new, but have arisen in separate contexts for many years. I am happy that we have a forum to focus on these topics altogether, convening experts from different areas of our markets to share their perspectives.

The world economy is growing ever more interconnected—a development which bodes well for wealth creation for investors around the world, including for U.S. investors. Promoting investor access to potentially lucrative investments is something I advocate for regularly. However, I never suggest that such investment opportunity should be provided without regard to investor protection, and it is clear that these growth prospects come with certain risks. Different jurisdictions implement different regulatory regimes in their markets, making for a complicated and constantly shifting landscape in which investor protections may be uneven. We at the SEC must continually consider how this agency can best protect U.S. investors as they encounter these new opportunities.

A question that comes up in several of these areas is: How can we protect investors from false and misleading financial data? U.S. regulatory requirements surrounding accounting and audits provide essential safeguards; but issuers base their operations in many countries, including those with emerging markets. This extraterritoriality can pose serious challenges to effective due diligence and enforcement efforts. U.S. investors should be aware of the risks that these oversight challenges create. I will be interested to hear panelists’ thoughts on how the SEC—and PCAOB—can best ensure compliance with both financial reporting and audit requirements, as well as inform and protect U.S. investors (especially retail investors) who are interested in these securities.

Relatedly, the SEC directly regulates other entities who play important roles in keeping investors in our markets informed and protected. For example, our national securities exchanges act as gatekeepers to companies entering our public markets. Exchanges that list securities of emerging market companies, or funds containing securities of emerging market companies, must ensure that listing standards recognize the unique risks posed by these companies. Our retail investors have come to expect that a company that has received listed status has been subject to a consistent level of due diligence—not only upon initial listing, but also on a continuing basis. I hope to hear from our panelists what further efforts our listing markets can take to better meet these expectations and thereby provide investors with a consistent experience when transacting in listed securities, irrespective of the issuer’s home country.

Similarly, investment advisers to funds that have economic exposure to companies based in emerging markets also have responsibilities to inform their investors. Extraterritoriality can make it more difficult for such advisers to conduct the same level of due diligence for emerging market companies as for domestic companies. Yet, do investors in these advisers’ products—active and passive—understand that risk?

I want to conclude with a strong belief I have: It is a privilege to be a public company listed in the United States. The benefits of this privilege include not only access to our retail investors and their hard-earned money, but also the association with our rigorous regulatory regime. Where this regime confronts challenges from companies that operate in emerging markets, I am interested to hear ideas about how we can address those risks. Can we find market solutions? Or will further regulatory—or even Congressional—action be necessary?

Thank you again for convening to discuss these important topics. I look forward to today’s discussion and your ideas.

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