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Regulatory Priorities and COVID-19

April 3, 2020

Together we are all confronting unprecedented challenges posed by COVID-19. I want to express my sincere gratitude to Chairman Clayton, my fellow Commissioners, and, most of all, the staff of the SEC for rising to meet these challenges.[1] While adjusting to altered work and personal routines, not to mention the uncertainty and anxiety we all face, the staff—with great leadership in each office and division—has nevertheless ensured that we are moving quickly and carefully to address rapidly evolving economic and social circumstances. In the near term, we should continue to focus our regulatory efforts principally on the most urgent issues facing the markets and the public as a result of this health crisis.

Accordingly, I want to highlight two considerations that should inform the regulatory approach of the SEC in the current climate. First, we should move quickly and clearly to extend current and recently closed comment periods to ensure that the public has an adequate opportunity to provide full and complete comments on the Commission’s proposed regulatory actions.

Second, we should proceed with great caution in considering whether to take regulatory action outside of that called for by the current dire and pressing public health crisis and its ramifications for the public, investors, markets, and the economy.[2] A careful balancing of interests, including the burdens we all face in coping with the economic and social challenges of protecting ourselves, our families, and our nation, suggests that regulatory action in the near term not related to the exigencies created by COVID-19 would rarely be warranted.

Comment Periods

We should take action now to extend all comment periods by at least 60 days starting with those that closed in mid-March, just as this crisis was beginning to take its toll in the U.S., and continuing through all currently open periods.[3] With respect to those comment periods that have not yet closed, it is important to take action now and not wait until the deadlines loom close or pass. This will ensure that the public can plan around the disruption of professional routines, diversion of resources to crisis management, and added childcare and other caretaking responsibilities.[4]

In addition, we should state with certainty how much additional time the public has to submit comments. The current statement on comment periods provides a date for earliest agency action on the affected rule proposals. The public, however, has no way of knowing how much in advance of that date they must plan to submit comments. By contrast, the multi-agency statement on the Volcker covered funds comment period stated unambiguously that the agencies will consider comments submitted before May 1, 2020.[5] We should provide similar clarity, retroactively and going forward, in our actions and statements regarding the SEC’s comment periods.

Commission Actions

In recent weeks, as the Chairman highlighted in his statement, the Commission has taken action on numerous fronts to address the emerging risks and challenges posed by COVID-19. Those risks and challenges continue to evolve and it is crucial that the Commission continue to devote its resources to the most pressing issues faced by investors, market participants, and capital markets more broadly.

The Commission should carefully analyze each action it takes in light of the altered economic and social landscape. Relevant considerations in that analysis include whether an action is directly responsive to COVID-19; whether an action represents an appropriate use of agency resources at a time when we are routinely called upon to take emergency actions; whether an action will unduly tax the already strained resources of investors, market participants, or the public; whether we can adequately assess the economic effect of an action in light of rapidly evolving economic conditions; and whether an action is otherwise critical to advancing the agency’s mission.[6] None of these factors dictates a specific outcome, but rather each should be weighed carefully and balanced against the anticipated benefits of any action.  

I am confident that we will continue to proceed thoughtfully, effectively, and in a manner that demonstrates the deep commitment of this agency to its mission.

[1] I am especially appreciative of Chairman Clayton’s commitment to placing health and safety first. See Chairman Jay Clayton, Investors Remain Front of Mind at the SEC: Approach to Allocation of Resources, Oversight and Rulemaking; Implementation of Regulation Best Interest and Form CRS, (Apr. 2, 2020).

[2] The staff is of course continuing its examination, enforcement, and other ongoing required business.

[3] Recently closed comment periods include:   

  • Disclosure of Payments by Resource Extraction Issuers, Proposed Rule, Rel. No. 34-87783 (Dec. 18, 2019) (comment period closed March 16, 2020);
  • Accredited Investor Definition, Proposed Rule, Rel. No. 33-10734 (Dec. 18, 2019) (comment period closed March 16, 2020);
  • Amendments to Rule 2-01, Qualifications of Accountants, Proposed Rule, Rel. No. 33-10738 (Dec. 30, 2019) (comment period closed March 16, 2020);
  • Notice of Proposed Order Directing the Exchanges and the Financial Industry Regulatory Authority to Submit a New National Market System Plan Regarding Consolidated Equity Market Data, Proposed Order, Rel. No. 34-87906 (Jan. 8, 2020) (comment period closed March 20, 2020);
  • Use of Derivatives by Registered Investment Companies and Business Development Companies; Required Due Diligence by Broker-Dealers and Registered Investment Advisers Regarding Retail Customers’ Transactions in Certain Leveraged/Inverse Investment Vehicles, Proposed Rule, Rel. No. 34-87607 (Nov. 25, 2019) (comment period closed March 24, 2020); and
  • Proposed Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds, Proposed Rule, Rel. No. Rel. No. BHCA-8 (Jan. 30, 2020) (comment period closed April 1, 2020). 

Currently open comment periods include: 

  • Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, Proposed Rule, Rel. No. 33-10750 (Jan. 30, 2020) (comment period closing  April 28, 2020);
  • Request for Comment on Fund Names, Request for Comment, Rel. No. IC-33809 (Mar. 2, 2020) (comment period closing May 5, 2020);
  • Market Data Infrastructure, Proposed Rule, Rel. No. 34-88216 (Feb. 14, 2020) (comment period closing May 26, 2020);
  • Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets, Proposed Rule, Rel. No. 33-10763 (Mar. 4, 2020) (comment period closing June 1, 2020).

[4] The agency updated its COVID-19 statement late in the day on March 16, the day three comment periods closed, to address comment periods closing in March. At that time, the statement provided that the agency would not take final action on the listed rule proposals before April 24. On April 2, the agency updated the statement to include the multi-agency Volcker covered funds proposal, which comment period had closed April 1, and provided that the agency would not take final action on the listed rule proposals before May 1. I appreciate both statements, but believe they would be of greater assistance if made earlier and with greater clarity as explained above.

[5] See Agencies Will Consider Comments on Volcker Rule Modifications Following Expiration of Comment Period, Press Release, (Apr. 2, 2020).

[6] We are dealing with a rapidly changing landscape and new information pours in daily. These considerations may evolve and change accordingly.

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