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Speech by SEC Commissioner:
Remarks at “The SEC Speaks in 2011”


Commissioner Elisse B. Walter

U.S. Securities and Exchange Commission

Washington, D.C.
February 4, 2011

Thank you so much, Meredith. I know that you have often referred to your work on Dodd-Frank rulemaking as a “sprinting marathon.” And, I know that you have sacrificed countless hours of sleep developing the multitude of recommendations that the Commission has, and will, consider. I am so grateful that we were able to convince you to return to the Commission, because I know that you will reach the finish line and in fine form.

Today marks my third appearance at SEC Speaks since I, like Meredith, returned to the Commission. Being here with you is a great honor.

I know that you will hear plenty of details throughout the program about our current regulatory and enforcement initiatives. So, I’d like to take the next few minutes and take a step back to talk with you a little about regulation itself.

Before I go any further, however, I of course must tell you that the views I express today are my own and not necessarily those of the Commission, my fellow Commissioners, or anyone else at the SEC.1

I’d like to share three observations about regulation:

One: Kvetching is good.

Two: Checking the box has value, but it should not become a mindset.

Three: There are no real solutions in regulation, only improvements.


Let’s start with kvetching.

As some of you may know, I drink a lot of coffee. And, over the years, I’ve grown quite fond of one particular coffee mug.

It’s oversized, with brightly colored rainbow stripes, and, on one side, in a not-so-small, and not-so-unassuming font, it says “No Kvetching.”

If any of you don’t already know what kvetching means — and looking around this room, I can’t imagine there are many of you, Webster’s dictionary defines it as complaining habitually.

The funny thing is that, although I love my mug—indeed, it reminds me of frequent childhood warnings by my mother -- I actually believe that kvetching is good. And, it is good not only for the soul, but also in a number of pragmatic and productive ways.

Kvetching can help connect us to each other, even when we come at a common complaint from completely different viewpoints and even when our complaints differ decidedly.

Complaining can be liberating. Getting your pet peeve off your chest can help you move on to address the next problem.

And, even more important, collective grousing can allow us to come together to think of creative ways to address our problems.

Let’s face it — many of us lawyers were born to kvetch. It’s simply part of our DNA.

Since I returned to the Commission in 2008, I have been encouraging others —both inside and outside the Commission -- to come in and talk with me about their concerns.

Of course, I wouldn’t mind hearing from those who want to tell us we’re doing a good job. That’s always nice to hear. But, I maintain an open door, and open kvetch policy, and encourage all of you to reach out. I welcome your complaints, your worries, your guidance, and your ideas — these are all fundamental to the soundness of our policymaking processes.

I am particularly grateful to all of you who do take the time to prepare thoughtful and well-reasoned comment letters, but I also value honest conversation. Listening to others’ views helps me hone my own and keeps me from losing perspective. And, to me, perspective is the name of the game when it comes to understanding how best to address any particular problem.

Having welcomed your views, I’d like to briefly speak out about one of my own deeply held concerns and give you my perspective. With the passage of Dodd-Frank and the focus now on its implementation, I am very worried that some, maybe even many, are starting to lose their historical perspective.

It bears repeating that, in the fall of 2008, this country faced the worst financial crisis we have seen since the Great Depression. Investors suffered trillions of dollars in losses. Businesses that were too big to fail nearly brought down our entire economy. In their wake, small businesses struggled to survive. Millions of Americans lost their jobs. The global financial system was at a crossroads.

Forgive me for being overly simplistic, but, in a way, our nation had two choices — we could either do nothing and risk financial ruin, or we could take steps to rescue our faltering financial system and shield it from a repetition of that history.

I, for one, am thankful that Congress took action last summer, adopting the Dodd-Frank Act. All of us want a strong financial system, even if we disagree around the edges about how to get there. And, I hope that no one wants a regulatory structure with gaps and opacity, where market participants can, and are sometimes even encouraged to, step over the line and behave in irresponsible, imprudent and even illegal ways—to take actions that harm our investors and markets.

Our financial system must be stable and strong; we must have markets in which investors feel confident to invest and an environment where all businesses can prosper.

Dodd-Frank addresses many complex problems that exist in our financial markets today. And, the full impact of the legislation will not be appreciated until the Commission and other regulators implement its broad range of initiatives. Dodd-Frank is not perfect, but its goal is absolutely essential.

My main plea is that we don’t forget what brought us here in the first place. While I will not offer up a personal analysis of the causes of the crisis, I do believe that, collectively and individually, most of us shoulder some responsibility for what happened. We need to remember that and not return to business as usual; instead, we must strive to do better, and be better than we were before. I worry that our memories are growing shorter every day.

Of course, I am disappointed by Congress’ decision not to provide the SEC with a self-funding mechanism like most other federal financial regulators have. But, having made that decision, Congress should provide a level of funding that permits the Commission to do its important work, work that will further the long-term health of our capital markets. Cutting or freezing the Commission’s funding in the face of markets that are continuing to grow in size and complexity, especially when the SEC generates enough revenues through transaction and registration fees to fund itself, puts markets and investors at risk.

Box Checking

Now, let me turn to box checking.

Lately, I’ve heard rumblings that the changes being implemented under Dodd-Frank will do little more than create a “check-the-box” mentality for directors, managers, and their advisers. I understand that similar concerns were raised about Sarbanes-Oxley and the rules that we and the exchanges adopted after that. I’ve heard that there are worries that Dodd-Frank exacerbates that problem.

While I am very interested in learning more about why some believe this to be the case, I view these concerns initially with a great deal of skepticism.

Most directors, managers and advisers want be part of high-caliber companies that perform well. Most prefer working with and for companies with healthy financials and good reputations.

To get there, directors, managers and advisers should be strategic thinkers, and I believe that many of them are. They evaluate opportunities — opportunities to improve corporate performance and to improve value for investors.

To me, checking the box does not have to result in a “check-the-box” mentality that stifles strategic thinking. Of course, turning off and tuning out after a box is checked on a compliance checklist is neither good compliance nor good business

But, let’s not underestimate the value of rational and thoughtful box checking. Box checking, like kvetching, can be an important component of doing the right thing.

The right kind of box checking strengthens process.

And, process helps companies deal with difficult problems and comply with complex regulations. For example, process enables companies to compile and assess the sometimes vast amounts of information necessary to produce accurate, reliable, and timely financial statements.

Process is also essential to ensuring that companies know exactly where they are and where they are going. A complete and thoughtful process should encourage thinking about collective decision points from legal and strategic vantage points. Does what you’re doing comply with the law and applicable regulatory requirements? Does it serve the company and its investors well? Does it make sense? These are the types of questions a thoughtful compliance checklist should generate.

And, dispensing with process can be very costly.

I am not foolish enough to believe that process, in and of itself, will be sufficient to eliminate wrongdoing. Instead, what process should do, is make wrongdoing more difficult to carry out and more apparent. Process should help companies deter wrongdoing on their own.

The Reality of Regulation

So, now that I’ve waxed a bit philosophical about kvetching and box checking, what about the essence of regulation itself?

A wise securities regulator and my dear friend, David Becker, once said:

[W]e need to remember that there are no solutions, only improvements. We are, after all, dealing with shaping human conduct. Until they come out with a better model of human, we will be stuck with doing better, not doing perfectly.2

The legislative changes adopted by Congress seek to ensure that we don’t repeat the mistakes that got us into the financial crisis in the first place. But, the truth is that all of us can strive to make improvements on our own, without Congressional action or for that matter, Commission rulemaking.

I’d like you to consider the following:

First, advise your clients to do the right thing before a regulator asks them to. Take disclosure. I’ve heard tales— and I hope they are tall tales— that some companies wait until after the Division of Corporation Finance staff issues comments to make certain disclosures because they hope they’ll only get futures comments and not have to change their disclosure.

Is that doing the right thing? I don’t think so. The company is responsible for the accuracy and adequacy of its disclosures. This is true before, during, and after the Corp Fin comment process and even if the staff determines not to review a filing.

Second, engage. To me, engagement means, among other things, having clear conversations with a company’s investors about how and why a company’s decisions are made—honest conversations that foster an environment of trust and inclusion.

As our Chairman, Mary Schapiro, reminded us in her speech last fall to the National Association of Corporate Directors, “engagement is a two-way street.”3 Just as investors can benefit from open and honest communications with boards and managers, so too, can the companies they own.

Third, talk to your regulator. Seek advice when you need it. Self-report your problems. Tell us whether our rule proposals will work and whether our adopted rules are working. And, don’t just tell us whether our proposals will work or not work —analyze. Give us alternatives to paths you don’t like, analyze your potential alternatives, and help us understand why your alternatives will be more efficient or more effective than what we propose.

That is equally true after our rules are adopted. Tell us about your experiences with our rules and give us your feedback. Rules can be, and often are, amended.

Although I have made a few points today that I’d like you to consider after you leave SEC Speaks, I want to also tell you how much I value the vital role that you play in our capital markets. Never has your job as counselors been more important to our financial system than it is right now. Your views are critical to our rulemaking initiatives. And, you have the opportunity, indeed the obligation, to advise your clients in ways that foster compliance with our laws and regulations. I am counting on you to avoid check-the-box advice and to foster an environment that values doing not only what is required but also what is right.


I would like to close my remarks today by taking a moment to recognize the unprecedented level of commitment, excellence and sheer perseverance demonstrated by the SEC’s staff in recent months. Dodd-Frank has set an exceptionally demanding schedule for us — and most of this burden falls on the staff’s shoulders. With 25 proposing releases outstanding and many more to come, we certainly have miles to go before we sleep.

Of course, despite our unfortunate budget situation, we also have our regular workload, our business-as-usual, which has in no way diminished in size or importance since our Dodd-Frank rulemaking commenced. Investor protection is not on hold at our agency pending Dodd-Frank implementation, but it is being affected by our budget.

I simply want to say thank you to the SEC’s staff for carrying out the Commission’s responsibilities with intelligence, unstinting devotion and good grace. As always, you have remained steadfast to our mission.

I thank you for everything that you do to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.

Before I let you go to lunch, I would like to return briefly to the wise regulator I quoted a few minutes ago. As you undoubtedly have heard, David Becker will soon leave the Commission. David’s wise counsel, wit, breadth and depth of knowledge, and humanity will be dearly missed. I’ll kvetch to him privately about his departure.

I want to thank all of you in the audience today. It has been a pleasure to be here with you today, and please remember that my door and telephone lines are always open.

# # #

1 The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publications or statements by any of its employees. The views expressed herein are those of the author and do not necessarily reflect the views of the Commission, other Commissioners, or the staff.

2 Speech by David M. Becker: Remarks at the Glasser LegalWorks SEC Disclosure, Accounting & Enforcement Conference (May 2, 2002), available at http://www.sec.gov/news/speech/spch556.htm.

3 Chairman Mary L. Schapiro, Securities and Exchange Commission, remarks at the NACD Annual Corporate Governance Conference, October 19, 2010, available at http://www.sec.gov/news/speech/2010/spch101910mls.htm.



Modified: 02/07/2011