Remarks Before Eighth Annual Conference on Financial Market Regulation
May 31, 2021
Thank you, Kathleen, for the introduction. I’d like to thank the conference organizers for putting on this event: The SEC’s Division of Economic and Risk Analysis; Lehigh University’s Center for Financial Services; the University of Maryland’s Center for Financial Policy; and CFA Institute.
I wanted to take this opportunity to say how excited I am to have Jessica Wachter on board as Chief Economist and Director of DERA. Jessica is one of the country’s leading financial economists, and the SEC will benefit from her work.
Before joining the agency, I was on the faculty at MIT Sloan School of Management. I had the honor of wearing a bunch of hats — teaching, writing, and researching on the intersection of finance and technology.
Technology is always evolving, and markets are always adapting to those developments. That was true of the ticker tape in the 19th century; it’s true of mobile brokerage apps, robo-advising, and artificial intelligence today.
The core mission of our agency, though, is as important today as it was when Congress laid it out decades ago. It’s about protecting investors; it’s about facilitating capital formation; and it’s about what’s between them — fair, orderly, and efficient markets.
As a result, the agency regularly freshens up our rules of the road for modern markets, including issuer disclosure. What does this mean for the 2020s?
Investors increasingly want to understand information about climate risk and one of the most critical components of companies, their workforce. Moving forward, I look forward to staff recommendations on proposing rules regarding issuer disclosure of climate-related risks and human capital. This is one of my top priorities and will be an early focus during my tenure at the SEC.
I believe investor demand should guide our thinking on this work. In March, then-Acting Chair Lee put out a statement welcoming comment, and we are looking forward to hearing from the public on this topic. The comment period closes in June, and I encourage the public to weigh in.
I’m also interested in the research being presented at this conference about how markets have adjusted to climate disclosure regimes. I understand there’s research on overseas markets, where it’s been required, and U.S. markets where it’s been voluntary.
I anticipate that climate-related and human capital disclosures will be the initial steps in our broader efforts to update our disclosure regime for modern markets.
Disclosure underpins much of what we do in promoting our three-part mission. Investors get to decide what risks they wish to take, with issuers required to provide appropriate disclosures. Issuers that are raising money from the public have an obligation to share information with investors on a regular basis.
Experience has shown that disclosure requirements can strengthen economic activity over the generations. This disclosure regime helps capital formation and investors. It lowers the cost of capital. It promotes economic activity. That’s as true today as it was decades ago.
Each generation brings new challenges and updates to our disclosure regime — from the 1930s, when Franklin Delano Roosevelt and Congress established the SEC, to 1968, when the SEC required the precursors to the Management Discussion and Analysis sections that accompany financial statements today.
The Securities Act of 1933, enacted 88 years ago this month, required companies to disclose information about securities, among other stipulations. There’s a reason this Act is sometimes called the “Truth in Securities” law.
Some worried the securities regulations in the 1930s could spell the end of capitalism, and disclosure was a central part of that debate. Of course, that hasn’t borne out, and our capital markets remain the envy of the world to this day.
President Roosevelt realized the benefits of disclosure. In March 1933, two months before the Securities Act was enacted, FDR said, quote, “It changes the ancient doctrine of caveat emptor to ‘let the seller beware,’ and puts the burden on the seller rather than on the buyer. It should give a great impetus to honest dealing in securities and bring back public confidence in the sale of securities.”
Nearly 90 years after FDR took that idea to Congress, that shift — from “caveat emptor to ‘let the seller beware’” — remains the basic arrangement in our capital markets. Issuers have to share complete and accurate information about material topics. That’s as true today as it was then.
Today, investors increasingly want to understand the climate risks of issuers. They want to better understand one of the most critical assets of a company: its people. I’ve asked staff to consider input from the public and economic analysis on these issues, and make recommendations to the Commission, so we can move forward in the 2020s as we’ve moved forward in previous decades.
Issuers benefit from clear and consistent rules about how best to report their disclosures to investors. While disclosure doesn’t fix everything, it is a necessary component of the SEC’s mandate. The American public benefits from the confidence it brings to our capital markets.
Today, investors are asking for consistent, comparable, decision-useful information to inform investment and proxy voting decisions. It’s about time we catch up with them.
 See Securities Act Release No. 6835, “Management's Discussion and Analysis of Financial Condition and Results of Operations” (May 18, 1989), available at https://www.sec.gov/rules/interp/33-6835.htm.
 See U.S. Securities and Exchange Commission, “The Laws That Govern the Securities Industry,” available at https://www.investor.gov/introduction-investing/investing-basics/role-sec/laws-govern-securities-industry#secact1933.
 See The American Presidency Project, “Franklin D. Roosevelt: White House Statement On Securities Legislation” (March 29, 1933), available at https://www.presidency.ucsb.edu/documents/white-house-statement-securities-legislation.