Remarks to the Investor Advisory Committee

Thank you. It is great to speak to the Investor Advisory Committee (IAC). As is customary, I’d like to note that my views are my own and that I am not speaking on behalf of the Securities and Exchange Commission or SEC staff.

Today, the Committee will cover a wide range of investor issues through four panels and three recommendations. Of these seven topics, the Commission recently has issued proposals on five of them. Your input helps us, both through this meeting and through any materials—including reports, recommendations, and transcripts from today’s conversation—that you may submit to the respective comment files on our proposals.

The topics on your agenda get to the heart of our mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation—such as through full, fair, and truthful disclosure, transparency, and market integrity.

For the last 90 years, our capital markets have relied on a basic bargain.[1] Investors get to decide which risks to take as long as companies provide full, fair, and truthful disclosures. We oversee this bargain through a disclosure-based regime. Over the decades, we have updated our rule set to elicit disclosures of information relevant to investors’ decisions.

Today, investors increasingly are making investment decisions based upon factors that include the risks and opportunities related to climate and cybersecurity. Thus, the SEC has issued proposals in both areas to help bring greater consistency, comparability, and decision-usefulness to this ongoing conversation between issuers and investors.[2]

The Commission adopted rules in 2020 regarding human capital, and we would benefit from the Committee’s insight on the current requirements and opportunities for further enhancements.[3]

When it comes to promoting transparency and market integrity, it is crucial that investors can evaluate what stands behind a fund’s marketing. Thus, earlier this year, we proposed a rule enhancing the disclosure requirements for advisers and investment companies marketing themselves using Environmental, Social, and Governance (ESG)-related labels.[4] This would help ensure that investors can see the information that stands behind funds’ and advisers’ claims.

With respect to beneficial ownership reports, the Commission in February proposed to shorten from 10 days to five the deadline for beneficial owners to disclose their significant positions to the public.[5] We have had a rule requiring such disclosure since 1968. Our markets, technology, and modern communications, however, have dramatically changed in those 50 years. I am speaking to you using technology that did not exist five decades ago. I think updating this rule to shorten the reporting deadline would reduce information asymmetries in a manner fit for modern markets.

Our proposal regarding Exchange Act 10B and 9j-1 concerns the transparency and market integrity of security-based swaps, such as credit default swaps and total return swaps.[6] We know well the story of AIG’s collapse. We also know the story of Archegos Capital Management, which collapsed under the weight of significant exposure to total return swaps, among other factors. I think that public and aggregated reporting of large security-based swap positions would help make this previously opaque market more transparent. I also think Rule 9j-1 would help prevent fraud, manipulation, and deception in connection with security-based swap transactions.

Finally, I look forward to the Committee’s discussion on accounting modernization. I welcome your recommendations for ways to enhance, in a manner consistent with the Sarbanes-Oxley Act, the responsiveness of our nation’s accounting standards to changing business practices—including by making the Financial Accounting Standard Board’s accounting standards readily available and searchable for the public at no cost.

I thank the Committee and panelists for volunteering your time to address this ambitious agenda and advocate for investors’ needs.