Remarks to the Investor Advisory Committee
Chair Mary Jo White
Dec. 8, 2016
Good morning and welcome to this year’s final meeting of the Investor Advisory Committee. This Committee has been a tremendous asset to the Commission during my tenure as Chair and it is worth reminding ourselves of your critical purpose as we are ending this calendar year.
The Committee was established to advise and consult with the Commission on a range of issues, including on our regulatory priorities, the regulation of securities products, trading, fees and disclosures, initiatives to protect investors, and initiatives to promote investor confidence and the integrity of the securities markets. You have taken this responsibility very seriously and have a worked hard on many issues. Thank you for your dedication and for making time in your busy schedules for this important work.
Recent Commission Work
I know that a primary focus of today’s meeting, as it should be, is on investor protection priorities for 2017, and I look forward to that discussion this morning. Before we get to that, as has been my custom, let me briefly recap some of the Commission activities since your last meeting in July. As usual, we have been quite busy.
One area of major rulemaking was in asset management. The Commission, in August, adopted rules to enhance reporting and disclosures by investment advisers, including information about separately managed accounts and their use of derivatives and borrowing. Then, the Commission, in October, adopted extensive reforms to investment company reporting, which will give both the Commission and investors a greater ability to understand the activities of funds through new monthly reporting about complete portfolio holdings and new annual reporting about census-type information. At the same meeting in October, the Commission also adopted very important new rules that will promote effective liquidity risk management across the open-end fund industry, enhance disclosure regarding fund liquidity and redemption practices, and permit certain open-end funds to use “swing pricing.”
In a different area, also in October, the Commission proposed rules to require parties in contested elections to use universal proxy cards that would include the names of all board of director nominees. At the same time, the Commission proposed amendments to existing proxy rules to ensure that proxy cards specify the applicable shareholder voting options in all director elections and to require that proxy statements disclose the effect of a shareholder’s election to withhold its vote. The comment period on this proposal closes on January 9, 2017. As you know, universal proxy was the subject of one of your recommendations shortly after I arrived at the Commission, and your input and advocacy on this issue will continue to be important.
On the same day in October, the Commission adopted rules to facilitate capital raising through intrastate and regional securities offerings by amending Securities Act Rules 147 and 504 and adopting a new exemption as Rule 147A. These rules will become effective next year and the staff will be monitoring the use of the rules as issuers begin to rely on them for offerings.
In the past few months, the Commission has also continued its consideration of the staff’s work on both the Disclosure Effectiveness Initiative and the implementation of the FAST Act mandates. In August, the Commission issued a proposal to require the use of hyperlinks for exhibits filed in registration statements and periodic and current reports. Just two weeks ago, the staff issued a report on modernization and simplification of Regulation S-K as required by the FAST Act. I know this is an area that you are keenly interested in, and you will be receiving an update today on our work to implement the FAST Act provisions. I would expect the Commission’s broader work on disclosure effectiveness to actively continue in 2017.
These projects – disclosure effectiveness and FAST Act implementation, universal proxy, and the rules for intrastate and regional offerings, as well as so many others – were driven by the Division of Corporation Finance, expertly led by Keith Higgins. Keith will be here this afternoon for the FAST Act presentation. As you know, Keith announced that he will be leaving the Commission shortly. He has done a tremendous job as Director of the Division, and I want to thank him for his leadership, expertise, and for being an exemplary representative of the staff in his many public appearances to explain the work and priorities of the Commission.
Since your last meeting, the Commission also continued its significant work on Title VII of the Dodd-Frank Act. In July, the Commission adopted the remaining security-based swap transparency rules, which clarified the reporting obligations for platform trades and clearing transactions, among other things. In August, the Commission adopted rules to facilitate security-based swap data repositories sharing of data with regulators.
Clearance and settlement was another area of important recent activity. In September, the Commission approved critical rules that will enhance the governance and risk management functions of our nation’s systemically important clearing agencies and proposed a rule that would extend those same requirements to all registered clearing agencies. At the same time, the Commission issued a proposal to shorten the U.S. settlement cycle to T+2. Obviously, the length of the settlement cycle is the subject of one of this Committee’s recommendations, and I am pleased that the Commission has begun the process of shortening the cycle and soliciting input regarding the benefits and costs of a T+2, T+1 or T+0 standard settlement cycle.
Finally, we continued our work on equity market structure, both with respect to immediate improvements and to assessing potential broader changes. Right before your last meeting in July, the Commission proposed important rules for institutional and retail investors that would enhance the transparency of their broker-dealer’s order handling practices. And last month, the Commission approved a final plan for the consolidated audit trail, a critical initiative that will provide regulators with faster, better access to the information they need to protect investors. The Equity Market Structure Committee also continued its regular meetings, producing a number of well-considered recommendations for the Commission’s consideration, including a detailed proposal for a pilot on access fees and the so-called “maker-taker” model. So, that is the update. Let me say just a few words about the importance of this Committee in 2017 and beyond.
The Importance of the Committee in 2017 and Beyond
Less than a decade ago, this country experienced the worst financial crisis in recent memory. Americans lost jobs, watched their savings dwindle, and were forced out of their homes. Financial reform was imperative.
The core reforms implemented by the Commission since the crisis are indispensable for investors and our markets: comprehensive oversight of the massive swaps market; stronger foundations for the clearance and settlement infrastructure; registration and examination of private fund advisers; fundamental reforms to credit rating agencies; transparency for the asset‑backed securities market; and others.
It is inevitable and entirely appropriate that these reforms be reviewed, incrementally improved, and made more efficient as we learn from their operation in the market. But, in my view, it would be a grave mistake to weaken, let alone dismantle, these core post‑crisis reforms.
So, too, it would obviously be a mistake to dust off our hands at the Commission and declare our work complete. Much remains to be done. Over the last few years, the Commission has sought to enhance investor protection through our core programs, many of which were not a subject of the Dodd-Frank Act or the JOBS Act. These include our work on money market funds and asset management reforms; our work on equity and fixed income market structure and disclosure effectiveness. Our recent progress in all of these areas has been critical for investors, and so too will further enhancements in the years to come. It is important that the Commission and the Committee continue to work together to address the issues facing investors in these and the many other areas under the Commission’s jurisdiction. More than ever, the Commission needs your strong voice for investors in your recommendations, in the comment files, and in your dialogue with our stakeholders.
Thank you again for your commitment to investors and your work on this Committee. Your contributions have been – and will remain – invaluable. If I do not get a chance to say it later, have a wonderful and safe holiday season.