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Falling Further Back - Statement on Chair Gensler’s Regulatory Agenda

Dec. 13, 2021

While Chair Gary Gensler’s newly released regulatory agenda[1] is ambitious in scope, we are disappointed with its content. It fails to include any items intended to facilitate capital formation and misses opportunities to foster fair, orderly, and efficient markets and further investor protection. Instead the agenda is brimming with plans to redo recently completed rules, add new regulatory obligations, and constrain investor choice.

I. Facilitating Capital Formation

The Regulatory Flexibility Agenda (“Agenda”) neglects to include a single item designed to help companies raise capital. Indeed, several items listed are poised to do the exact opposite.

One example is the proposal to alter the thresholds at which an issuer is required to register a class of securities with the Commission.[2] In 2012, Congress enacted the bipartisan Jumpstart Our Business Startups (a.k.a., the JOBS Act),[3] which, among other provisions aimed at improving capital access for newer companies, specifically raised these thresholds in order to allow companies greater flexibility in deciding whether and when to go public. This provision has been especially important for pre-IPO companies that use equity as part of their employee compensation arrangements and for startups in industries with high initial capital requirements. Lowering these thresholds may both contradict the express will of Congress and potentially undermine our mission to facilitate capital formation. A likely unintended consequence of lowering thresholds will be to limit the opportunity of employees, smaller investors, and other non-institutional investors to invest in promising businesses.

A second example is the proposed changes to Form D.[4] Federal law includes an exemption from registration for non-public offerings because Congress acknowledged that certain offerings do not require disclosure to the public or to the SEC. Smaller and younger companies often have legitimate business reasons to be discreet about early capital raising efforts. Investors in private companies already receive more information than is included on Form D. While it might be helpful for the SEC to have more information about these offerings, it is odd to consider imposing new requirements on small businesses which are trying to survive in a time of great uncertainty caused by COVID-19, labor shortages, supply chain disruptions, and inflation.

II. Maintaining Fair, Orderly, and Efficient Markets

The Agenda abandons two important endeavors crucial to maintaining fair, orderly, and efficient markets, which had been in progress during the prior administration.

The first is the proposed exemption from Exchange Act Rule 15c2-11 for certain publications of broker-dealer quotations on an expert market.[5] The Commission recently amended Rule 15c2-11 to enhance the requirements a broker-dealer must satisfy before it initiates or resumes the quotation of a security in the over-the-counter (“OTC”) market.[6] While we supported the important investor protections these changes brought, we also cautioned—as did many commenters—that the amendments could have unintended adverse consequences for certain investors of companies that choose not to make disclosures.[7] A key reason we supported these rules was the Commission’s explicit willingness to use exemptive relief for an expert market to ensure that investors in these companies would still be able to sell their shares. We are disappointed that the agency is no longer considering this exemption,[8] despite the overwhelming support of commenters and the adverse consequences investors now are experiencing.[9] Nor does the Agenda include plans to prevent Rule 15c2-11 from being misapplied to fixed-income securities. A rulemaking tailored to fixed income securities would make a lot more sense than trying to shoehorn these securities into a rule designed for equity securities.

Second, the Agenda abandons the much-needed effort to amend Investment Company Act Rule 17a-7, which governs cross-trading by investment companies. In December 2020, with our support, the Commission adopted a new rule addressing investment company valuation practices.[10] Commenters cautioned us that the rule’s definition of “readily available market quotations” risked disrupting investment companies’ ability to trade fixed income securities, which do not often have readily available market quotations, with affiliated funds.[11] To assuage these concerns, the Division of Investment Management issued a request for comment “on ways to enhance the regulatory regime governing investment company cross trading.”[12] Commenters have been nearly unanimous in conveying the importance of funds’ ability to trade fixed-income securities across affiliated funds.[13] Many commenters also have recommended conditions to ensure the protection of fund investors. The Commission’s Spring 2021 rulemaking agenda stated that the “Division [of Investment Management] is considering recommending that the Commission propose amendments to rule 17a-7[.]”[14] Yet now, despite the demonstrated need for such amendments, the Agenda simply drops the planned rewrite of Rule 17a-7. As a consequence, we will not fix a problem of which we are aware—the impending inability of funds to cross-trade fixed-income securities—and we will miss a chance to modernize an outdated rule.

III. Furthering Investor Protection

The Agenda also comes up short on furthering the investor protection prong of our mission by failing to provide more clarity on digital assets. First, the Agenda makes no mention of any regulation with respect to digital assets. In the last several years, this sector has grown in size, complexity, diversity, and investor interest. Rather than taking on the difficult task of formulating rules to allow investors and regulated entities to interact with digital assets, including digital asset securities, the Agenda—through its silence on crypto—signals that the market can expect continued questions around the application of our securities laws to this area of increasing investor interest. Such silence emboldens fraudsters and hinders conscientious participants who want to comply with the law.

Second, the Agenda fails to prioritize action on data security amendments for the Consolidated Audit Trail (“CAT”),[15] which will collect and store information about every trade in our markets and the people who make those trades. The Commission proposed these amendments more than a year ago,[16] had planned to finalize them last spring but instead deferred them.[17] Now, this Agenda again defers action for another six months. The CAT database will be massive in size and irresistible to cyber-criminals. Slowing down the adoption of protections around the sensitive CAT data leaves investors’ data vulnerable.

IV. Undermining Precedent

The Agenda makes plenty of room for rulemakings to undo rulemakings that the Commission only recently completed.[18] These include proposals to further amend our rules on proxy solicitation and shareholder proposals;[19] the Resource Extraction Payments Rule;[20] the rules pertaining to the accredited investor definition and the private offering exemption integration framework;[21] as well as our whistleblower rules.[22] Not only are the Commission’s most recent amendments to each of these rules barely or less than a year old; none have been effective for more than a few months. As we said when we initially raised these concerns, we have not seen any new information that would warrant opening up any of these rules for further changes at this time.[23] So, why the rush to revisit them?

We urge the Commission to apply our scarce resources toward better uses than undermining recent precedent and depriving the markets and investors of these rules’ benefits.

[1] See Securities and Exchange Commission, Agency Rule List (Fall 2021), available at (hereinafter “Fall 2021 Agenda”), Agency Rule List - Fall 2021 (

[2] See id (Revisions to the Definition of Securities Held of Record).

[3] Pub. L. No. 112-106, 126 Stat. 306 (Apr. 5, 2012).

[4] See Fall 2021 Agenda (Regulation D and Form D Improvements).

[5] Notice of Proposed Conditional Exemptive Order Granting a Conditional Exemption from the Information Review Requirement of Amended Rule 15c2-11(a)(1)(i) and the Recordkeeping Requirement of Amended Rule 15c2-11(d)(1)(i)(A) under the Securities Exchange Act of 1934 for Certain Publications or Submissions of Broker-Dealer Quotations on an Expert Market, Exchange Act Release No. 90769 (Dec. 22, 2020), (hereinafter “Proposed Expert Market Order”).

[6] See Publication or Submission of Quotations without Specified Information, Exchange Act Release No. 89891 (Sept. 16, 2020),

[7] See Commissioner Hester M. Peirce, “Statement on the Adoption of Amendments to Exchange Act Rule 15c2-11” (Sept. 16, 2020),; Commissioner Elad L. Roisman, “Statement on Adoption of Amendments to Rule 15c2-11” (Sept. 16, 2020),

[8] See Division of Trading and Markets Staff, “Staff Statement on the Proposed Expert Market” (Aug. 2, 2021),

[9] Comments on the Proposed Expert Market Order, supra note 5 are available here:

[10] SeeGood Faith Determinations of Fair Value, Investment Company Act Release No. 34128 (Dec. 3, 2020),

[11] See Division of Investment Management Staff, “Staff Statement on Investment Company Cross Trading” (Mar. 11, 2021), (hereinafter “Staff Cross-Trading Statement”).

[12] See id. See also Commissioner Elad L. Roisman, “Statement on Fixed Income Trading and Investment Company Act Rule 17a-7” (Mar. 11, 2021),

[13] Comments on the Staff Cross-Trading Statement, supra note 11, can be found here:

[14] See Securities and Exchange Commission, Agency Rule List (Spring 2021), available at

[15] See Fall 2021 Agenda (deferring the date for the Amendments to NMS Plan for the Consolidated Audit Trail-Data Security from October 2021 to April 2022).

[16] See Proposed Amendments to the National Market System Plan Governing the Consolidated Audit Trail To Enhance Data Security, Exchange Act Release No. 89632, available at

[17] See Securities and Exchange Commission, Agency Rule List (Fall 2020), available at (providing action date of May 2021 for finalization of rule).

[18] See Commissioners Hester M. Peirce and Elad L. Roisman, “Moving Forward or Falling Back? Statement on Chair Genlser’s Regulatory Agenda” (June 14, 2021), (“Joint Statement on Spring Agenda”).

[19] SeeFall 2021 Agenda (Proxy Voting Advice and Rule 14a-8 Amendments). See also Exemptions from the Proxy Rules for Proxy Voting Advice, Rel. No. 34-89372 (July 22, 2020),; Procedural Requirements and Resubmission Thresholds under Exchange Act Rule 14a-8, Rel. No. 34-89964 (Sep. 23, 2020),

[20] SeeFall 2021 Agenda (Disclosure of Payments by Resource Extraction Issuers). See also Disclosure of Payments by Resource Extraction Issuers, Rel. No. 34-90679 (Dec. 16, 2020),

[21] SeeFall 2021 Agenda (Exempt Offerings). See also Accredited Investor Definition, Rel. No. 33-10824 (Aug. 26, 2020),; Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets, Rel. No. 33-10884 (Nov. 2, 2020),

[22] SeeFall 2021 Agenda (Amendments to the Commission's Whistleblower Program Rules). See also Whistleblower Program Rules, Rel. No. 34-89963 (Sep. 23, 2020),

[23] See Joint Statement on Spring Agenda, supra note 14.

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