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The foretwoity was an intent. I think thats something that we should all explore. Thank you. I have worked on legislation. Its a little late in this session under your tenure that would create guardrails and prevent these kinds of failures and abuses. I think your comments were appropriate. We allow companies to still do they have to provide Real Transparency which they dont always. Have to reward workers not just shareholders. Senator brown ill close with a statement. We saw earlier this year the pandemic crashing our families, hospitals, and the economy. How the market seized the up. The s. E. C. s recent report on interconnectedness in the market offers insights but no real policy recommendations. I know that you and vice chair and represent duty pute secretary money market reforms were not good enough. It is clear your successor, the next banking regulators will need to reduce risk from interconnectedness and excessive leverage. The economy may in the future will depend on it. Thank you, mr. Chairman. Senator too manyy. Senator toomey chairman clayton. Welcome back on what i gather is your final appearance before our committee. Let me just take a moment to say i really appreciate the excellent work that you have done antileadership you have provided at the s. E. C. And the leadership you have provided at the s. E. C. In my mind you have clearly advanced the commission that the s. E. C. Is responsible for. Maintaining fair, orderly and efficient markets, facilitating capital formation. I particularly appreciate your efforts to expand Investment Opportunities for average investors. I appreciate the work you have done to create an environment tore its easier for companies to go public. I also want to take a moment to tip my hat to you and your colleagues for the extraordinary , realry extraordinary really extraordinary accomplishment of how we got through the unprecedented period where we shut down our economy. We sort of voluntarily closed our economy. We forbid people from going to work. And yet during that period of time, during the worst of that period of time, after a brief period where they completely froze up but then in response to our legislation, our Capital Markets reopened. They thrived. We actually set alltime records in debt influences across the credit quality spectrum. We had no settlement problems. We had an amazingly efficient in fact, we returned to being the worlds deepest, most efficient Capital Markets by far. We did it with everyone working from home. The s. E. C. Working from home. And while there are a lot of people that deserve a lot of credit for it, i think you deserve your share as well, mr. Chairman. Thanks for all that you have done for your service to the country. Let me ask i got two Big Questions for you if i could. The first is about Companies Going public. As we all know there are fewer of them than there once was. Companies wait longer, they delay going public as long as they can, it seems. It seems that i. P. O. s now are more often a liquidity event than Capital Raising event. We have far fewer Investment Opportunities for investors because we have fewer publicly traded companies. And we have fewer options for Capital Raising on the part of companies that file like thats not a viable option. My question for you, mr. Chairman, just a couple of free thoughts if you have them. Is there more that we can be doing in congress to create an environment where it is more attractive to go public earlier so that that is a viable option for growing businesses and its a viable Investment Option for more investors. What else can we be doing to restore even more vibrancy to our Public Markets . Thank you. Thank you for the really kind words about the work of the commission. I think if the American People saw what the women and men here did in that month of stress they would be extremely impressed. Your question is one that is kind of front of mind for me at all times. We have taken the jobs act, which was a terrific piece of legislation, which did facilitate the move from being a private company to a public company, providing an onramp. We have expanded access to the jobs act to companies. I believe that has made a difference over time and the choice between staying private and becoming public. Im not going to take a victory lap yet, but we are up on i. P. O. s. That may be market driven. Maybe the result of our efforts, a lot of different things. Commissioner clayton im hoping that choice is better. We have to recognize one size doesnt fit you will from a disclosure and regulatory perspective. I have no problem with many of what the people would call burdens, frictions, in our system for large public companies. Can they be adjusted here and there, are we doing that . Sure. But for mediumsized companies, im going to say this, 100 million to a couple billion, or more, the same rigor that applies to a company with a 500 billion market cap just doesnt make sense. We need to recognize that. Senator toomey thanks. Im going to run out of time here, mr. Chairman. I would suggest the jobs act has been remarkably successful. The vast majority of companies that go public actually use the emerging growth that we have created. I think we want to expand that avenue so more companies can take advantage of it. I also think we want to be very careful about the extent to which activist groups are trying to use Corporate Governance as a way to advance a social and political agenda that really ought to be advanced through the accountable elected branch of the government. Thanks for your service. I look forward to continuing the discussion. Senator menendez with us . I think he may have had to go off line for a minute. Lets move on to senator warner. Senator warner thank you, mr. Chairman. Appreciate this hearing. Mr. Chairman, before i turn to questions i also want to take a the chairman nk for his service. , a man clayton has been great working relationship. Can you hear me all right . And while we have not always agreed by any means, i appreciate the partnership that we have worked on on issues like including the s. E. C. Enforcement tools, i really want to zero in on something that i first talked to you as you came into this job and thats the question which i think is fundamental and will be one of your legacy items about Human Capital reporting. I think we all know that we have een even prepandemic a fundamental transformation in Overall Investment strategies. We have seen that companies are investing much less in tangible goods and much more in intangible goods and oftentimes those intangible goods are Human Capital. We talked about the need for ways to impact the accounting, reporting, transition maybe further down the path than you, on some of those issues, but i really appreciate the fact that you have taken this issue on with a seriousness and rigor and. Eally laid down the first step you did that by putting forward your revised reg s. K. Regulations that finally for the first time, and i would argue for the first time in and needs more to go, requires some level of Human Capital metrics. For companies to report when you talk about your c. E. O. Talks about their assets being their work force, yet there is no place that thats reflected on their Balance Sheet. There is no place thats reflected in their s. E. C. Filings. I think by these revised s. K. Rules, youre starting us down this path toward a more worker centric management structure. My hope is while you, i think, taking this on as the principlesbased approach that we will see both an increase in the quantity of this reporting as well as of the quality. I think its terribly important that we ultimately get enough ta in place where there is allowed to be a base line that will allow some comparison between industries on this important path. I know we had to start someplace and you have started that discussion. I say you noted in your written testimony you believe the principlesbased approach will lead to quantitative disclosure by firms deem the information to be material. Can you talk about how you will see that occurring in practice and then how we make sure that this is just not a nice to have but that more and more firms will actually believe this Human Capital component falls into the materiality category and they will make take it with a seriousness i hope you do and hope well see the whole Business Community move towards . Chairman clayton thank you. I believe that the disclosure requirement that we put in place will facilitate both qual at this tafe disclosure, how do we look at our work force, like you said. In a number of industries it can be the entire company. It can be 30 , 40 of the value on the Balance Sheet. Depending on the industry, i would expect turnover. Turnover in particular areas. To be a metric that people might show. In some industries thats not very relevant. In others, it is. Sector specific within skill sets. Engineers. How many engineers are people actually bringing onboard . Them. Fficult is it hire we should understand what management believes drives the value of the business from a Human Capital perspective. Thats the core requirement. I think thats the way i look at things at the s. E. C. Whats our turnover. And from a topic thats current today, from a Diversity Inclusion standpoint, we are tracking those metrics at the s. E. C. And i have them in front if i were a public company, i would expect to disclose them. Senator warner i appreciate that. Again you had to be the guy that set the framework to get this out of the discussion stages to art having companies putting reporting in place. You have heard my colleagues on this committee, i think we need to go further. I always point out the problem in terms ofp accounting. Company buys a robot, you get a tax credit. Its an asset on your Balance Sheet. The accountants recognize that. The same Company Invests in shoozing human beings to be more efficient than the robot, they are not given the same tax treatment. That investment is not viewed in a category on the Balance Sheet as an asset class. I know you are coming down to your class meeting or so. I dont want to get further out on your skis but i want to push you on this a little bit. My hope would be that you would you are at least open to ongoing engagements. I think the commission has a role of oversees fasb. We open the discussions or start discussions about accounting treatment of investment in Human Capital. I think we ought to look at tax treatment of investment. Human capital. And do you think we are you have taken the first step by having at least the de minimus reporting. I think the next step ought to be tax and accounting review. Use my last minute or two for you on that. You are about two minutes over, senator warner. Senator warner where is your clock . I thought you were going to put a clock up here. I was trying to be brief. I will let chair clayton since we had discussion you take that one for the record. I would love to if you let me help draft your answer so i can share it with chairman crapo and some of the others. Let me just again say, jay, thank you for your service. You have done a great job and looking forward to continuing. The tone i told everybody we were going to play doesnt appear to be working. Senator warner i was waiting for the exit music. Somebody in my ear going thats great question, warner. Chair crapo i guess i have to try something. Well try to solve this. Thanks, mark. Senator scott. Senator scott thank you, mr. Chairman, for my 12 minutes i have now. Thank you so much. Ill use every minute must tims on top of that. Thank you so much. Chair clayton, thank you for your service to our country without any question. Having had the opportunity to work with you, i know that you are focus has been on mr. And mrs. 401k. The average investor in our country through their retirement funds. May not appreciate the way that you have really focused on simply filing some of the language and making it easier for the investor to engage. Mr. And mrs. 401k or the main street investor may not be able to pinpoint exactly which amendment to the 34 act or tweak to the 40 act that allowed them to safely and affordably access the products to meet their investment goals. Im glad you and your team at the s. E. C. Have within so diligently focused on protecting these investors. Thats a really big key. You think about the fact only half of u. S. Households own stock at all. And the average portfolio is about 40,000. That is a really important engagement when the average investor can understand and appreciate in a simplified manner what they are investing in and the rules of the road, so to speak. You take that number and you cut it down by 31 for minority investors. Hispanics, africanamericans that number dropped precipitously. Fortunately technology and innovation have recently improved the availability of simple, lowcost investment platforms that can be accessed by envestors with a smart phone and investors with a smart phone and as little as 20 to see their dream come true. A broad chunk of young and diverse americans are more more engaged in the stock market, including many millions who are doing so for the very first time. Can you, chairman clayton, please discuss the benefits of the increased participation, and if the commissions regulations are keeping up with the pace of innovation . Chairman clayton thank you, senator scott. I believe and i know the people here believe and the pandemic demonstrated this, that being connected to our financial system, having a bank account, having an investment account, is essential to participation in our society. We saw this in the cares act relief. You could get relief faster to people who were connected. We want to increase those connections, preserving investor protection. As you mentioned, driving down costs. Look, we are hellbent to get at fraud and prevent fraud. We have a thousand people in the Enforcement Division, a thousand people inspections thats their job. If we can reduce cost force the average american by 25, 30, 50 basis points over the course of their retirement, the benefits to society are astronomical. And technology should be enabling us to do that. Get connected. Get educated. And get the frictions down. Senator scott chair clay, ill end with this note trying to respect my 1 30 we have left. Access as you just discussed is so critical. It has never been more accessible than it is today. I was talking with my nephew who is a resident, and his friends are now engaging in investments using multiple platforms in a way that was unimaginable, and frankly cost prohibitive, 10 years ago, 15 years ago. So we are moving to a place where the average family, average person will have access to the stock market. And the most important point with that increased access is having integrity in the system. So thank you for spending quality time insulating those smaller investors by making sure that there is lots of integrity. In my opinion integrity in this case would be transparency and digestible. Making sure that the language is such that the average person heard the bell. Senator warner just ignored the ball. Continue to work really hard and making sure that the average investor has confidence in the system and i appreciate your Office Taking the average persons perspective on something that is very complicated. Sometimes hard to understand. With that, i yield back my last three seconds. Chair crapo thank you, senator scott. Senator menendez. Senator menendez chair cloyton, thank you for your service and best of luck as you move forward. Last time you were here we discussed how foreign actors could evade the beneficial disclosure requirement under section 13d and the negative effects that could have on publicly traded companies, particularly in the media and technology sectors. Given the unknowing pandemic, the ensuing economic crisis, we need to continue to be vigilant against any maligned foreign actor that could be looking for an opportunity to purchase a significant stake of a Distressed Company without filing the requisite disclosures. Has the s. E. C. Made any improvements to your 13d oversight as we discussed this last year . Have you identified any statutory impediments that prevent the agency sufficiently monitoring or enforcing potential 13d violations . Chairman clayton senator, i agree with you and i think our friends at the treasury would agree with you that understanding the Beneficial Ownership and whether there is any evasion of 13d is very important. We did take a recent measurement i want to highlight for you. We just put out what i would call guidance, but you can also. Ll it good hygiene foreign omnibus accounts, accounts that mix ownership of different parties outside the u. S. , and then trade through a single pipe into the u. S. , i believe that they have been used to mask ownership. And we need to ensure that the u. S. Brokerdealers, particularly in this guidance comes out in the area of thinly traded and lowpriced securities, are doing the appropriate diligence on those foreign omnibus accounts. What i can do is assure you we are focused on this area and we are we are not just studying it, we are doing things about it. Senator menendez im particularly concerned about media and Technology Companies that are responsible for delivering unbias and objective reporting of Current Events to the american public. And in these times they play a special role in disseminating Critical Public Health information so we can get the pandemic under control. I hope that your success and the rest of the members will continue to prioritize this. I have seen elements of foreign entities purchase things and having significant controlling interests. In and of itself thats not a terrible thing, but understanding the nature of having the disclosure so we know who is affecting these Public Information channels is incredibly important. Let me turn to another topic. Studies have consistently found greater he diversity on executive teams have led to greater profitability and Better Outcomes for shareholders. Mckinsys report found companies with more gender diversity on their executive teams were 25 more likely to have an above average profitability than companies with nondiverse teams. That same report found that companies with the most ethnically diverse executive ams are 33 more likely to rform their pares on peers on profitability. Do you find that is more profitibility . Chairman clayton i looked at that report. Let me just say what we do here at the s. E. C. We do believe and have acted on diversity and inclusion not only as the right thing but as value inand enhancing. I have seen firsthand as we increased inclusion here that its led to better performance. Senator menendez i appreciate that. Id like us to go beyond that. I think that in a marketplace, forgetting about doing the right thing, that simply in a marketplace where you have a trillion plus dollars of domestic spending of the hispanic community, for example, younger by a decade than the rest of the american population, more brand loyal than any other group, and spends more of their disposable income, as a business proposition i would like to be on them like white on rice. Understanding, however, the nature of the community having senior people on corporate boards and Senior Executive management or the bottom line. My final question, section 956 of dodd frank requires the o. C. C. , federal Federal Reserve, and f. H. S. A. And s. E. C. To join the proposed executive conversation rule to prohibit unsafe and unsound compensation plans. During your time as the s. E. C. Chair, have all six regulators sat down together to discuss this rule making . Commissioner clayton yes, we have. If you consider Conference Calls sitting down together. Senator menendez what dwoodo these discussions ultimately lead to. Have you moved forward with the proposed rule . Commissioner clayton ill say it this way. We are advanced term sheet stages. Bandwidth has been constrained in some areas by particularly that kind of coordination bandwidth is constrained by the events of the day. Senator menendez i would just say it seems sometimes the bandwidth on things we dont want to deal with seems the most constrained. Thank you. Ood luck in your future. Le chair crapo senator cotton. Senator cotton thank you, senator crapo, thank you, chairman, for your appearance. Which i assume will be your final appearance. Im sure you hope so. I want to thank you thank you for the service to our country at the s. E. C. And thank you for being a good partner to my office when we agree. Especially when we dont agree. And the open lines of communications we have had and representing the people of arkansas. I want to speak today on a topic we discussed in the past at these hearings and directly oneonone. That is the concept of regulation by enforcement. This is something that became infamous under president obama is the act of using Court Rulings or administrative decisions, make changes in rules as opposed to the notice making plosssess under the administrative procedures act. It often means that they are based on things that regulators may or may not like. Things that remain opaque and sometimes even unknown to regulated players in the market. Do you agree that enforcement action should only be taken when an actor in the market violates rules, rules that have either been written by congress in law or passed into regulations by an agency like yours . Commissioner clayton senator, i do. I want to qualify that by saying some rules rely on facts and circumstances application. But to the extent you are asking authority orexpand Regulation Without going through notice and comment, no, we shouldnt. We should do that. Senator cotton i think its a fundamental principle of the rule of law which in some way predates the concept of selfgovernment that its hard to have an ordered Society Without clear and stearned rules established rules known in advance that all citizens can obey and uphold. Irrespective of whether or not you agree with the laws or not. So vital that we have established written rules in advance. One example we discussed, i want to discuss here today, is the s. E. C. Share class selection disclosure initiative. Under that Initiative Several firms are partly because they didnt list three items in the disclosure. One, a Firm Received 12d1 fees. Two, the same fines were available. And three that will fund shares that paid the fees and were available would adversely affect the clients return. These may be best practices for financial disclosures, but thats not what we are talking about here. We are talking about having clarity in advance of any enforcement decision. Can the s. E. C. Write a Public Document where all three of those elements were listed in advance of any of these enforcement actions, mr. Chairman . Commissioner clayton i dont have a document like that to hand. I understand the issue very well. This was an Investment Advisors engaged in their clients. They have a duty to those clients not to put the Investment Advisors interest ahead of the clients. They also have a duty of candor. This let me give you the stark case, you tell somebody im going to put you in the best option for you, from a cost perspective, you have two choice, one has a hire cost, one lower, the others are exactly the same, there is no doubt that thats a violation of that obligation. Im also comfortable that the Enforcement Division pursued having that g and belief based on rigorous analysis they were on the right side of the law. I very much take your point that we should not, you know, use or uncertainties in the law to our advantage. Me cotton let [indiscernible] action in this that something commissioner pierce said. T was never tried before a judge. Precedent that they violated [indiscernible] and they the rulemaking through ather than rulemaking. I take it you disagree with commissioner pierce on that point . Mr. Clayton i agree part of what she said. Sing our administrative courts for matters like this, we need to do so cautiously, if at all. Precedent were in article 3 court. Were hearing bells evening. Angel is getting ts wings when a senator goes over. Chairman crapo im having a tone rung at 30 seconds at the of five minutes. Some senators dont seem to be the clock on their screen. With that, senator warren. Mr. Or warren thank you, chairman. The s. E. C. Is ensuring investors have the basic information they to make good Investment Decisions and thats why the publicly traded companies to disclose things pay outstanding lawsuits or for top executives. If a Company Looks like a bad investor can decide to put their money somewhere else. Now, in order for the s. E. C. To that Companies Stay honest, Disclosure Rules have to eep up with changes in our economy. And one of the biggest changes bearing down on our economy is change, extreme weather events, rising sea levels, resources. Y scarce these all pose huge risks that must navigate. Policies moving us toward clean onrgy will have a big Impact Companies who are still dependent on dirty energy. Gotten the crisis has worse, the s. E. C. , under your has done nothing. And thats resulted in multiple problems. The just want to go over list i thought we might do this together. Climate tandards for risk reporting. S. E. C. N clayton, has the established a mandatory for reportingdard on climate risk so that nvestors can make can compare companies headtohead . Mr. Clayton if you mean a dard mr. Clayton if you mean a standard metric, a carbon across our 6,000 whatever the number is . Mandatory ren a uniform standard, have you got a mandatory uniform standard . The extent to climaterelated risks are material to the companys and prospects, they have to be disclosed. We have outstanding guidance to guide companies. Senator warren i understand you have that guidance. I read that guidance. T does not establish a standardized framework. Im asking about mandatory uniform standard and i think your answer here, one word, yes or no . Mr. Clayton depends on what you we do have a material you dont know what a mandatory uniform standard is . You have no uniform standards for reporting. What about mandating that Companies Report something . Chairman clayton, has the s. E. C. Andated that all publicly traded Companies Report so thing about climate risk that investors can compare those companies headtohead . Extent its to the material to an investor. Senator warren thats not what i asked. Asked about requiring all publicly traded companies to report something. Decide to report that they have no risk at all. But do you require that . Do not require that. Senator warren ok. We have these huge gaps in the s. E. C. s disclosure allow a t basically company, either to conceal or to risk for limate investors from investors. How do the investors feel about that . The Pension Funds and University Endowments that are trying to make longterm or socially responsible investments feel about the s. E. C. s failure to require full and consistent reporting of climate risk . Ell, this summer, 40 major investors who collectively manage over 1 trillion in with nonprofits, businesses, and former regulators in sending you a arguing that the Climate Crisis is material and a syst threat to our economy and asking the s. E. C. To mandate orporate climate risk disclosure. The hen, just last week, Federal Reserve National Stability report stated that, increased transparency through measurement and isclosure could improve the pricing of climate risk. In other words, more information good. Mate risk is so chairman clayton, how do you investors, hese these businesses, these nonprofits and even your fellow that they are somehow better off with less information about Climate Change . Mr. Clayton well, thats not what i would say to them. With y youre better off good information. I can tell you i was up early this morning for a lengthy with my iosco friends, mark carney and others, ongoing as to how to actually address im federal e of the reserves report address this meaningful way. Senator warren let me just ask. Letters from investors asking climate risk information. Itiously theyre not getting or else they wouldnt be asking. Letters been getting from climate from people represents over 1 trillion in sent ments, have they public letters asking you to shield them from getting climate risk information . No. Clayton they asked me to get them good information. Good who say arren those they dont want to no. Clayton what people is want is useful information. Thats why they ask you i have a bill with casten that would force you to do your job and companies ly traded to disclose information about climate risk. The s. E. C. Doesnt have to wait law. Ongress to pass a you already have the authority to require companies to provide youve ormation and refused to ask. Hairman clayton, climate risk Climate Crisis is an existent al risk. Existential risk. We need a chairman that will put agency. The top of the thank you, mr. Chairman. Chairman crapo thank you. Chairman. Ou, mr. First chairman clayton, let me egin by saying, congratulations, on the upcoming end of your tenure as chairman and thank you for all the hard at you did while serving the s. E. C. Youve accomplished a great deal positive n but one development that id like to highlight is the s. E. C. s of people and entities as accredited investors under the regulation d. Senator rounds i was pleased s. E. C. Expanded regulation d to include native american tribes. Hese reforms will make it easier for tribes to participate opportunities. Also put native american tribes on equal footing with market participants. In considering the changes to regd, particularly as it relates native american tribes, are there additional ways the s. E. C. And congress can help level the regulatory Playing Field for tribes . Short answer is yes. This is an issue i wasnt aware arrived here. I had a nice meeting with representatives of a number of and realized they werent under our ed fairly accredited investor definition and some of the other definitions that provide access for pportunity Institutional Investors. In short, they should be treated like any other Institutional Investor like a pension fund or like. And i believe were going to be doing that Going Forward. Rounds right. Look, i appreciate that. Know the tribes in south dakota have an interest specifically regarding that. Appreciate the work youve done. Im also sure youve been losely following the conversations in state legislatures and City Councils a financial g trading. On tax on concerns is could hurt main Street Investors and investors like the south dakota retirement fund. Tax. Dakota is a low id like to say to any of the businesses that may fall victim financial transaction tax youre rnible] whether an exchange in manhattan, a data center, commodities trader in chicago, youre welcome in south dakota. Clayton, how do you see our Securities Market evolving f one or more state and local jurisdictions impose a financial transaction tax . Couple ton you know, a things just to highlight to think about. One is that transaction taxes, financial yre in services or other places, the falls on the gely end user. In our case, the investor. Are some tions of the frictions are be a soareded by intermediaries. Of the day it shows that. They should approach that with the that the tax falls on person who uses the investor at the end of the day. We other thing is, if have if we do have a piecemeal approach to transaction tax, youre going to have Critical Infrastructure response. Tax policy causes adjustments. If we have our critical nfrastructure moving from one jurisdiction to another for more favorable tax treatment, from my that creates operational issues that we need to think about. Senator rounds thank you. With regard to proxy advisory discussions s been about their impact, whether or ot there should be more disclosures. Just in broad terms in the time i have left, whats your regarding any regulatory activity that should improve proxy Advisory Firms . Where are we at right now, in your opinion . Are there other issues . There concerns that youd like to express to this Committee Regarding the firms, they have and whether or not additional regulatory activity should consider regarding them . This at on let me try a perspective Going Forward. Sorry aim im not going to process. N the the proxy process is designed to quintessential shareholder meeting. If you have somebody at that is eholder meeting soliciting votes one way or nother, you want to know their interests. Just what weve done in our rulemaking is apply that concept proxy Advisory Firms and say to the extent you have material, d, again, material conflicts that could could reasonable person believe would affect your advice, you should tell them. Think with that paradigm, you shareholder one. Ng is lets have engagement so shareholders can hear boats and make an informed decision. Thats how i look at it. Senator rounds thank you. Your service. Thank you, mr. Chairman. Chairman crapo thank you. Shotts. Shotts shotts senator shotts our engagements have always been good and respectful and sometimes we even find areas of ground. I want to follow up a little bit conversation about climate risk. Last year we discussed the enforcement of its 2010 risk ce on climate disclosure. Senator schatz you and senator warren had a brief exchange ago. 15 minutes where is the division of Corporation Finance on the enforcement efforts . Can you give me an update . Clayton heres where we are, senator. Want to make it clear that this is an area where for certain where for certain and certain companies, you know, we all believe required, is different sectors, different ways. Weve been doing like i said, i just got off a long Conference Call this morning iosco top group task force. How do we drive the standards that are meaningful . And i think were all gravitating toward the view need to be sect sectorspecific. Its hard. Its forwardlooking information. Sorry im taking so much time. I need to say this. To make forwardlooking disclosure over time. E need something to disclose against and whether thats Carbon Neutral by 2050, you get my company Carbon Neutral by 2050 . Something to disclose against. We are working on that. Example, the property and casualty industry and in certain ndustries you can start to see metrics where people who ravitate toward as regulation changes. But this is a veksing issue. Vexing issue. We are on it. Schatz senator schatz these risks for material, the s. E. C. Does not additional statutory to require disclosures and we need uniform platforms and Disclosure Requirements so its not their own ntending disclosure technique either by sector or by individual companies. A fair amount of Common Ground here. As you know the u. K. Announced would require companies to disclose the financial impacts of climate on 2025. Businesses by this is where we may have disagreeme disagreement because its not against potential regulation. Its whats currently happening. Both. Ayton its what we see now and what we see in the future. This is not z about regulatory risk, political risk. This is about financial risk to farms, to aviation, be. Ourism, whatever it may the question i have for you, how deeply are you engaging with your International Counterparts on their plans . I think its fair to say other regulators d other are a little further along there. I dont want to get wrapped the axle on that question. How deeply are you engaged with your International Counterparts and whats the next step with the s. E. C. . Mr. Clayton deeply as in we if not weekly at a very we tantive level because need to be humble about this. A financial ou comparison. Backlog. Company discloses backlog. Forecast as to how much they will be able to sell in the next two years. Backlog numbers usually prove to somewhat ful but inaccurate. We need to try and get disclosure. Recognizes thats forward looking. Gives you an assessment of the held but people wont be to precision. They wont be held to metrics. Nd thats a very important way to approach this. This is not how did you do last uarter or what were the effects. Its what are you thinking about Going Forward . Believe we will get better disclosure and move this forward if we have a safe harbor that you cant lie, you cant do those things. People need to know if they miss theyre not in a goodfaith way. We need that forecast information. Deter it with, you know, you know what im saying. Schatz i do get what youre saying. Ill close with this. Moved along pretty nicely on this question. Point we can he agree this stuff is highly technical. Theres work that needs to be through the network, inancial system, bank of england all of this stuff is not easy. But where we were three to five because this stuff is difficult, its therefore to put the risk at zero. The risk may be difficult to of tify, even if terms ranges, but Everybody Knows that the risk is not zero and so we to paper and do the hard work and i appreciate your partnership on this. Thank you. Apo senator tillis. Senator tillis thank you, mr. Chairman. Clayton, thank you for being here. I want to first thank you for what i think has been excellent tenure and my staff have high regard for the people theyve had an opportunity to work with over there. Efore i ask you a few specific questions, when you were first moving into this role, i was to emphasize regulators were going to go out, organization, the of the t size some either Regulatory Guidance requirements that your articular agencys responsible for. Can you tell me a little bit what youve just done internally, what youve taken on yourself and things you are most happy with under your tenure . Its nice of you to ask that question. We have looked across the our rules and seen which ones have not been touched tried to modernize them and bring rationality to them. Increased s weve regulation. Broker dealers when they deal with customers significantly. Cases we cut red tape. The patchwork system that is our exempt offering framework that was built up over 30 years, you we we made the seams etween the patches a lot less rough. You dont need an army of how to getfigure out clearly qualified investors into investment. Senator tillis well, i for one a great job. Done there are some specific things you and i had more conversation over. The one in particular was the rule back in excuse me in july over proxy advisors. Can you explain why you think worthwhile and important to people who may be watching this . Think any well, i time you have a participant in who is etplace providing votes or it investment advice, iserstanding their conflicts important. Material conflicts. I think thats very important. To the extent youre shareholder in a meeting, you want that engagement at a shareholder meaningful as s possible. In many ways we codified best brought transparency and i hope it will lead to etter decisionmaking by investors. Senator tillis i want to touch a little bit more on the shareholder process. Appreciate the work you did there. Youve also worked on updating regarding shareholder proposal process. Can you mind expanding excuse me on the steps the s. E. C. Has taken under your leadership on this issue . Mr. Clayton sure. Hat process parts of that process material parts of that process has not been 1950s. Since the so almost 70 years ago. That was the days of the mails the like. And so what we did was on the process, we looked at what a demonstration of a meaningful stake in the company up the timecan take and attention of the other shareholde shareholders such that this an amazing system. You can be one shareholder having 2,000 or more and if you our new rules, you held it for three years, you can take the time and attention of ll other shareholders on your proposal. You know, that is thats part of our system. To is the amount you need do to demonstrate the level of commitment that allows you to and attention e of the other 20,000, 30,000, 50,000 to go through the proxy . Mum 0, thats a good tlesh minimum threshold. You held it less, you need a of a financial commitment. Youre proposing changes for the term, you should demonstrate youre in there with your other shareholders. Resubmission e thresholds, they were outdated. It was that if you you could than 10 of shareholder more than 90 voting against it, you still opportunity to resubmit. If you got more than 10 after a you could submit it for lack of a better term into perpetuity. Tiered those, but we didnt say youre out forever. A timeout. Need i think we did a very good job. Senator tillis and just a final question. Some other ones i may try and submit for the record. Whats next . What else should we expect in your remaining weeks on the job . R. Clayton well, continue focus on covid and the integrity of our markets. More rule makings on our [indiscernible] its usual. S as senator tillis well, again, chair clayton, i appreciate the work youve done. I especially appreciate how been. Ible you have im sure i join the majority of my colleagues thinking its been a great run. Your service. Te you. Clayton thank chairman crapo senator van hollen. Thank you, hollen mr. Chairman. I want to start by thanking you, chairman clayton, for your for the open lines of communications that weve had, whether we agree on issue or disagree on the issue. I want to talk about a couple where i think we agree but i have been, you know, havent made t we more progress recently and maybe items for alltion of us, including the s. E. C. Forward. And these are all designed to do what i think we all want which to provide accountability or nsiders and Corporate Executives and transparency for investors. The issue of accountability and making sure that insiders are not exploiting unfairly information they have. S. E. C. Tioned already the rule 10b5 which allows executives an affirmative trading if nsider they essentially provide a for their stock sales. But weve seen a number of ncidents recently which at the ery least i think undermine Public Perception that people are not using insider information. Pfizer ently was the time stock, the c. E. O. Of pfizer, you know the stock sale the very same day that they announced their covid19 gh on a vaccine. That stock sale had been in august when the c. E. O. Changed their plan, their sales plan. And i heard you mention earlier, putting guardrails up against this maybe three months, six months. Need to act. K we we also saw a similar situation ith moderna where after announcing their progress vaccine, covid19 their stock sale their stock price increased and certain executives changed their 10b51 plans and as a result additional 4. 8 million in profit. Again, this is currently legal undermines ieve it Public Confidence in the system. And i want to know if you agree whether you would encourage s to work to put uptighter guardrails against potential abuse and certainly a public that undermines confidence. Mr. Clayton so i want to be very clear. On any commenting particular case. I as a general matter, agree. It, think that how we craft you know, there are people that have different views. Just say it this way. Or Senior Executive officers using the 10b51 selling stock cooling down time until the first transaction is appropriate and whether thats months so you cover a full quarter or its six months. Arguments for either. I do think we should do it. Senator van hollen i appreciate that. Well, senator fischer and i have a bipartisan bill we introduced encouraged the s. E. C. To look at this and do a rul making. It passed on rulemaking. On a bipartisan basis in the house. I will ask chairman crapo to it at it and maybe pass before the end of this year. Let me ask you a question regarding transparency and by country reporting. Ecause you stated at a hearing in the house on june 25 that, it i want to be clear youre referencing countrybycountry reporting becoming an increasingly important part of how investors looking at companies, end quote. And weve seen that 100 of total of 2naging a trillion in assets who weighed in with the Financial Accounting standards board urged the board to include countrybycountry the gap on gap. S this an area where you also would agree more transparency would help investors . Mr. Clayton yes. Me say this. I am not sure i can give you an absolute or specific answer as i last one. To the extent that management in the board room, people are on a g at drivers countrybycountry basis. Ndna sectionin the of disclosure that companies be disclosing that to their investors. Its part of a companyspecific issue but, yes. Areaor van hollen another where theres legislation to provide that kind of transparency, which it seems to to argue rd [indiscernible] provide nvestors with that useful information. Mr. Chairman, i will follow up with a question for the record regarding something that senator brown raised regarding stock buybacks and insider trading. Clayton with chairman about this issue before one of former colleagues, commissioner jackson was this. Ed in lenoir e his findings, at the Roosevelt Institute very a paper finding it clear correlation between stock insiders tivity and selling their own shares. I think this is another area we Going Forward. Maybe after you leave public mr. Clayton, we can work with you on that and get your advice. Thank you. i love markets. I love investors. Happy to help. You. Or van hollen thank thank you, mr. Chairman. You. Man crapo thank senator kennedy. Enator kennedy thank you, mr. Chairman. I am in a Judiciary Committee hearing. Of course, were in the middle a vote. This ust wanted to use opportunity rather than to ask uestions to make a short statement. Pecifically to chairman clayton. I want to thank you for your chairman. R. Indiscernible] you will be leaving your post at the end of december. Want to just give you my point of view. Best been one of the s. E. C. Chairmens our country has ever had. Youve been fair. You clearly care about investors. You also care about the investments. You have exercised power materially. Y and responsive. S been ou have been frank with all of us. If you think our ideas have merit, you say so. If you think our ideas dont merit, you say so. Way. Very tactful and were going to miss you, mr. Chairman. Want to say that it is a genuine onor and a privilege to serve with you. And best wishes to you s you go back to the private sector and soar through im sure many opportunities there. Clayton thank you, senator kennedy. Working with you and your staff tremendous. In particular, i want to thank the want to people to engage with us to get back. Ing youre too nice to say it here ut we didnt do a good enough job for them but it wont happen again. Senator kennedy thank you, jay. Brown thank you. Masto. Cortez senator cortez masto its not n easy task under the current environment. We havent always agreed on policy. I, too, appreciate your service to our country. Ask a question. I know youre leaving at the end of this year. Change in to have a the administration with new president elect biden. What is it that you are preparing for right now with that transition . Type of ndertaking any work with the Transition Team or them in any with way whatsoever and if you are, can you talk specifics . Mr. Clayton in terms of chair and to a new the like, let me just say this. Will be available. My predecessor was available to me. Of the ongoing work of he commission, were very transparent. We have four other commissioners. We have an agenda thats transparent. When the time comes, in terms of legal restrictions and folks, to engage with well do so. You. Or cortez masto thank thank you for that response. Clearly it sounds like no transition is happening until legal through the restrictions set by this current administration. Et me ask you about 13f, the proposed rule that has been very controversial. S the s. E. C. Planning to finalize this rulemaking prior to you leaving . By the end of the year . Mr. Clayton the short answer to that is no. Me elaborate. This proposal has taught us something. There to 13f which was for a market integrity point of view. Lets find out how much in itutional investors have particular stocks and how it changes from quarter to quarter nd whether theres a market integrity. Its an outdated way to do it. We looked to modernize the found was ut what we people were using 13f for two intended for. t one was so companies could find their shareholders. Incredibly inefficient way for that to happen. O we need to fix our proxy system. Our obo, nobo. Intermediariesgh systems to make Companies Access shareholders. Other thing is to track Peoples Trading strategies. Z fund manager. Someone looks at their 13f eports and track their strategies. Two things. Im not sure we want regulation that is there to facilitate strategy tracking. Thats proprietary. Maybe we do it. Maybe we do. Certainly wasnt the intent. But if we do, 13f is a pretty it. Ficient way to do its there. Into technical things. Investors need to understand if 13f as a robust trading strategy, in many cases not. Senator cortez masto let me mine. O a concern of i understand senator scott asked. Committee meeting as well. Sophisticated investors. To the issue of too many young people being able to trade kind of in this kind of environment where t is trading on platforms, no fee. Really kind of gamifies the stock market into a playful environment. Have seen horrific coverage of a young man, College Student on Online Platform online trading on an platform due to the pandemic and a negative cash balance of 730,000. Nearing financial ruin, i understand from the reporting, that he was so distraught he committed suicide. Is horrific. This is an area where we need to understand what is happening and really latforms young adults who are not sophisticated enough to be on these platforms and thinking some sort of a gameful environment going on. So my question to you, what has to avoid such financial devastation for investors and what are you doing to respond to some of these platforms that are no fee online of incentivizes that gamified kind of environment . Mr. Clayton yeah. Let me say this. Direct long allowed assets for investors to have sales directed accounts. Its been that way for a long time. Ut to the extent what i would Say Technology has facilitated that and then people home with you have people what i would say is trading, not investing. Risks go up. Nd in particular [indiscernible] or complex products. One specific thing weve done put out is we have guidance, Commission Guidance at other ways to o that to tell people not only brokerdealers, nvestorsadvisors, people trading those instruments have he understanding with those instruments. You shouldnt be playing around in leverage investments and your s where you can lose shirt unless you can clearly understand them. Cortez masto there needing to be education and adults. Bility for young i think more needs to be done, definitely. Again. Ou, i know my time is up. I appreciate your service. See or brown i still senator crapo on the floor awaiting the second vote to start. Line are eople in senator moran is is he here, by chance . Or senator jones . Or senator smith . Is anybody here who wants to ask a question . Do. Nt know quite what to et me greg, if you would respond somehow to me whether i should wrap the hearing up or like to rapo would return. Assume there are a couple of members. Lets do this, chair clayton. Anybody that didnt get to ask will send the votes you questions in writing, as we always do. Thank you for always being that. Sible with youve been a good public official and Public Servant with that. Then probably we should up. The hearing and i will just i will close it up. To i had one short statement i wanted to make. Cant find now. I guess i wont be able to find. Me about 30 seconds. A me just close with statement and then we will wrap clayton. Ing up, chair sorry its you and me. Sometimes these things happen. Agenda, in my view, has limited transparency and hurt protection. The increase in the shareholder proposal thresholds will result in less shareholder engagement management, accountability. New requirements of investors for raise cost Institutional Investors. And make proxy voting harder. Best interest that we talked about earlier in my earlier comments and statement wall street customer doesnt put main street customers first. Enables sal unregistered finders to act without oversight. Shut down al to ransparency reports from are 90 of Institutional Investors will lead others in the dark. Ignoring calls for climate isk in response to a couple of questions. [indiscernible] ignoring for ignores what investors have been asking for. I know you and others will argue is more and all these rollbacks and improvements but less is, well, just less. So thank you, mr. Chair. Of ks for coming in front our Committee Many times. Good luck as you pursue your sector. S in the private this committee [captions Copyright National cable satellite corp. 2020] national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] and the house now taking a break before beginning work at noon eastern. Members today working on the National Defense authorization issues. Ng other any requested votes will take rais after 6 00 place after 6 00. Off the floor, republicans are voting for their leaders in the congress. Democrats will collect their elect their leaders later in the week. They gavel back in at noon eastern. Let you know, House Democrats are meeting with the press today was set to start at 11 30. It is coming up shortly. You there live when they start here on cspan. Right now, though, a conversation from this mornings washington journal. Is the chair of joinings the biotechnology innovation organization. Lets begin with defining biotech. Good morning to you, thank you for having me on. Ability to take the biological structures of a cell and make it work for you. 1973 with the first tools that were developed to what led to

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