Remarks Before the SEC Historical Society
Chair Mary Jo White
June 4, 2015
Good afternoon. Thank you, Linda, for that great introduction and congratulations to you on becoming President.
I was delighted to be able to speak at your annual meeting. This yearly event of the SEC Historical Society is always the right occasion to underscore that those of us who currently have the privilege of serving at the SEC are part of a long and important tradition. The staff of this agency is beyond compare in its dedication, high-mindedness and expertise, making us all very proud to work here.
The SEC alumni are undoubtedly the biggest, most supportive and most enthusiastic group of any government agency or private entity. The SEC’s history is one of important public service and a tradition of protecting investors and bringing confidence to the financial markets. The SEC’s commitment to markets that are both safe and fair, as well as dynamic, has given millions of people the opportunity to share in the growth of the American economy, while facilitating capital formation to fuel the economy.
Those of us here today, who are or who have been part of the SEC tradition, can be rightly proud of our role in shaping a financial system that meets the needs both of visionary entrepreneurs, and those contributing as much as they can to their 401(k) or for their children’s college education.
As a reminder of your service at the SEC, I have been asked to very briefly share with you some of what we are working on – now and for the near future. I think you will recognize in that work the mission that brought you to the agency and which should continue to resonate long after you left your SEC post.
As I said before I arrived at the agency in April 2013, it is critically important for us to complete -- and complete well -- the rulemakings mandated by Congress under the Dodd-Frank and the JOBS Acts. But, it is also important, despite all of the challenges, to also keep our focus on areas of core importance to investors and our markets not encompassed by those mandates.
And just since I became Chair, the Commission has proposed or adopted more than 30 significant substantive rules. These include significant rules directly responding to the financial crisis, like reforms for money market funds, asset-backed securities, and credit rating agencies, rules to enhance the resiliency and integrity of the systems that support the critical market infrastructure of our equity markets, and rules aimed directly at increasing the protection of the funds and assets of investors and securing their information in the custody of brokers and investment advisers.
Finally, we are seeing light at the end of the mandated tunnels and the staff should be very proud of their Herculean efforts to not only complete the many rulemakings, but also to have done so with the staff’s characteristic expertise and with the agency’s core mission as an important lens to be applied even when operating within often prescriptive statutory frameworks.
Enforcement, of course, remains a core function of the SEC.
In fiscal year 2014, we filed 755 enforcement actions and obtained orders for more than $4.16 billion in disgorgement and penalties. Even though these numbers are records, they do not tell the whole story – or even the best part. When you look past the number of cases and the large dollar amounts, you see an Enforcement program focused on violations that cut to the core of our mission and span the range of all market participants.
Changing the no admit-no deny settlement protocol for certain cases has, I believe, strengthened the impact and message of our enforcement program. Admissions can bring about greater public accountability, and that public accountability can boost investors’ confidence and serve as a stronger deterrent. The new protocol will continue to evolve and grow.
This year, you have seen, and will, see significant enforcement cases in all aspects of our program, including significant market structure cases against exchanges, ATSs and broker-dealers; important financial reporting and audit cases and cases involving violations of the internal controls requirements; insider trading cases against traders of all different types; microcap fraud cases against repeat players, including promoters who have spearheaded many schemes and attorneys who have facilitated them; asset management cases, including misrepresentations of fund performance and failures to disclose conflicts of interest, such as the recent action we took against a large asset manager for failing to disclose the conflict of interest of a major portfolio manager; and more cases in the muni markets space, which will continue to receive the staff’s close focus.
Breaking New Ground
In the regulatory arena, we have pivoted towards new challenges that spring from the creativity and dynamism of the markets. Our goal is to encourage that dynamism while keeping the markets safe and stable.
We are focusing on improving our risk oversight of the asset management industry. To do so, the staff is developing a broad set of new initiatives to address the increasingly complex portfolios and operations of today’s asset management industry in ways that we have not done before but which is necessary for today’s markets. Last month, we proposed our first set of these new rules – ones that will improve the data and other information reported to the staff for analyzing risks and crafting appropriate regulatory responses. More will follow throughout the year.
We have begun the important task of raising the standard of care for investment advice owed to all retail investors. This has been an issue that I have particularly focused on and the SEC’s efforts in this area date back many years. Whenever substantially similar services are regulated differently, we should carefully consider whether the distinctions make sense from both the perspective of investors and industry, and if not, what to do about it. I believe that broker-dealers and investment advisers should be subject to a uniform fiduciary standard of conduct that requires acting in the best interests of their clients when providing personalized securities advice to retail investors and I have begun to pursue that path with the Commission.
It almost goes without saying that market structure poses complex issues in both the equity and fixed income markets. We recently proposed a rule to bring active proprietary traders into the jurisdiction of FINRA, and we adopted late last year Regulation SCI (Systems Compliance Integrity), a very important rule aimed at robust and resilient technology at exchanges and other critical market participants. There is a lot of work to do in the market structure area and we have formed an Equity Market Structure Advisory Committee – filled with some of the best minds in this space – to provide input from investors and experts across the spectrum of market participants.
With respect to the fixed income markets, last summer I highlighted several initiatives to improve the quality and transparency of the prices received by investors in municipal and corporate bonds – and we continue to make progress on that front. I am particularly glad to see you today are focusing on municipal securities, today given the importance of this multi-trillion-dollar market and particularly to retail investors.
We are also very focused on our initiatives to promote capital formation. The JOBS Act has provided a solid base for new opportunities for small and emerging companies, but there is more we need to do. As you know, the Commission is proceeding with a pilot program that will widen tick sizes for certain stocks of smaller cap companies. We are also exploring other ideas, such as encouraging the development of venture exchanges to provide more liquidity for smaller companies. The staff is also well underway with its disclosure effectiveness project, which includes a careful consideration of the disclosure requirements for smaller companies.
I will end my brief drive-by tour here. As you can see, there is, as always, a lot on our plate where our resources, as ever, do not match our responsibilities and desire to do even more in furtherance of our mission.
But we have the good fortune to be in a position where we can continue to rely on a tradition that was established more than 80 years ago, with an extraordinarily talented and dedicated team. It is, as always, a significant challenge and important responsibility for the Commission and staff alike. But, as all of you know, the rewards of service at the SEC are more than worth the hard work and inspired efforts that are the daily, year-after-year fare of this agency.
Thank you for being a part of that, for being here today and for your support of the SEC tradition.