Currency, shareholders protections and climate related financial disclosures. This is an hour and a half. Today we will receive testimony from the securities and Exchange Commission jay clayton regarding the work and agenda of the sec. I thank you for your willingness to appear before the committee today, mr. Clayton, your willingness to testify is essential to our oversight of the sec. The mission of the sec is to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation. It plays a Critical Role in ensuring that our nation has Capital Markets that the public can have confidence and trust in and for investors as americans prepare for their futures they may not only have a wide variety of financial opportunities, but they also have the information necessary to make informed investment decisions. Chairman clayton, you came before this committee a year ago and assured us that you would continue to take steps to ensure that the u. S. Capitol markets remain the deepest, most dynamic and liquid in the world. I command you and the sec staff for your actions taken over the past year. Actions worth mentioning include the secs final rule package on regulation best interest, which strikes the appropriate balance of increasing transparency and investors relationships, while preserving access to advice relationships and investment products. The sec also proposed modifying the accelerated filer definition to reduce the requirement. I encourage the commission to move quickly to provide relief to all smaller reporting companies. This summer the sec issued a concept release seeking Public Comment on ways to harmonize the private Securities Offering exemption. Guarding the conception release, i advised to revise the regulation date to allow for general solicitation and advising by sponsors such as Angel Investment groups. The sec should consider expanding the ability for Small Businesses to crowd fund. The definition of an accredited investor should be expanded and modernized to qualify for expertise not simply a monetary threshold and its important the sec update the definition of a Family Office to allow Family Offices and their clients to meet certain thresholds to become accredited investors. This committee has held a number of hearings during my chairmanship discussing the need for the proxy voting process and other aspects of Corporate Governance. I commend the commission for its actions related to the proxy process. In august, the sec issued guidance to assist Investment Advisors in fulfilling their responsibilities when voting proxies on behalf of the clients, and clarified that proxy voting advice provided by proxy firms generally constitutes a solicitation. In november, after numerous round tables and thoughtful efforts led by commissioner royceman, the sec proposed two amendments to proxy voting advice and modernize shareholder proposals. I encourage the sec to move forward expeditiously following the Comment Period. This committee recently held an oversight hearing on audit trail or cap. And the personally identifiable information in this consolidated data base and how it will be protected. In october much 2016, the cap participants requested to use cap customer i. D. Instead of receiving and storing numbers in the cap and asked to star only a year of birth and firm i. D. s instead of full dates of birth and individual account numbers. Chairman clayton, you have previously expressed concerns about the information to be collected and stored cat and stated it can be achieved without the most sensitive pieces of investor information, i encourage you to quickly process the request to use alternative approaches. Finally the sec made modernization a focus this year and i look forward to hearing about your strategic hub for innovation and financial technology. And how the sec has been engaging with initial coin offerings and other cryptocurrency related manners matters. I look forward to receiving updates on these and other sec initiatives including your views on when we can expect final rules in these areas. Senator brown. Thank you, mr. Chair. Welcome chairman clayton, nice to see you again. Over the past few years in this committee weve seen the Trump Administration dismantle, we get a front row view of this, many of the protections that congress put in place after the last financial crisis putting our Financial System and hard working families around the economy at risk. The sec has flown under the radar, but often the agenda has been the same, taking wall streets side over and over, instead of standing with investors saving for retirement or college or a down payment. Taken together, the secs latest actions are making it harder to hold Corporate Executives accountable to investors and hardworking americans. While i appreciate the Enforcement Divisions initiatives, including those to protect teachers and military Service Members from fraud and misconduct and financial advice, youve done so much damage by adopting what you call regulation best interest under that rule, brokage firms can merely disclose, but dont have to eliminate firm level conflict. And investment firms need to work with whom they serve and americans need confidence that the professionals theyre trusting with their hard earned money working for them, not scamming them to line the firms own pockets. You could have simply followed congresss guidance in doddfrank for brokers and advisors, which would be the best way to give investors confidence that their interests come first, but you didnt do that. Thats not the only part of doddfrank youre looking to undermine. Look at the secs Whistleblower Programs one of the most successful from doddfrank. We need workers to stand up to corruption and abuse when they see scamming of people or engaging in other activity. The only way individual workers are able to stand up to powerful wall street firm is in we give them protection. Weve already seen a Chilling Effect from your proposal. Each year, since inception of the program, the number of tips has increased in some years by more by more than 10 . But after your proposal in 2018 introduced a cap on whistleblower awards, the number of tips declined for the first time in 2019. The proposed cap on awards raised so many alarm bells that you had to put out a statement to clarify. I know that whistleblower is a dirty word now days to some in this town, it always is to serial lawbreakers. I dont see how you can make figure changes to a Successful Program like this without understanding the decline in tips is a result of your actions and the environment this administration has created in its talk about whistleblowers attacking, rather than protecting those who speak out against abuse of power. As the sec continues to take fewer actions and hold the largest Financial Systems accountable, we must encourage whistleblowers to identify misconduct wherever it exists and to help uncover complex frauds. The secs recent proposed rules and proxy advisors and shareholders proposals are often clear examples of the administration taking the side of corporate interest over americans struggling to save and invest for their future. Both proposals make it more difficult for shareholders to hold Corporate Executives accountable. The proposal and proxy advisors can make it harder for Institutional Investors to have timely access to independent research and analysis from the proxy Advisory Firms they hire. The proposed rule would give corporations access to Investors Research before the public Retirement Systems and Investment Fund managers and foundations who manage americans money. The sec says the changes are necessary because of errors and inaccuracies, but youve provided scant evidence of the errors and instead would give companies a new tool to intimidate proxy advisors and threaten their independence. The overhaul of the shareholder proposal rule would make it easier to silence shareholders and avoid dealing with important issues critical to investors. The amendments would stop proposals, could stop proposals for votes on issues such as an a disclosure of corporate political spending, separating the rules of board, chair and ceo and nondiscrimination policies. Im disappointed in the directions youve taken on these rules that have for decades, for decades, through president s of both parties, and sec chairs of both parties, allowed investors to hold management accountable all while executives are further entrenching themselves in ignoring workers and shareholders, protecting workers hard earned savings should begin with a simple concept, putting their rights first. I hope the sec will remember that, but over the last week, over the last week, we have just last week and this week, weve had nearly all the financial regulators come before this committee. Weve had the fed, the fdic, the ncua. Today the sec, all defending the same policies, they amount to a wish list for wall street and corporate interests all afflicted with the collective amnesia about what happened in the last decade or so. The president promised to look after ordinary, hard working people, but he and the people hes put in charge of these agencies betray those workers over and over and over again. And mr. Chair, id like to offer for the record this letter from the ohio Public Employment and rules on without objection. Thank you. Chairman clayton, you may make your presentation. Thank you, chairman. Ranking member brown, senators of the committee. I appreciate the opportunity to testify today about the work of the securities and Exchange Commission. I want to start by thanking you for your support of the commission and its people, the dedicated men and women of the commission are our most important asset. With the resources krohning congress provided last year weve been able to lift our hiring freeze with high quality individuals who i believe will serve investors well. Since becoming chairman, the interests of our longterm main Street Investors have been front of my mind. With that perspective, a perspective our staff has long held, i would like to highlight just a few aspects of our work over the past year. First, modernization has been a key avenue for advancing all three aspects of our mission. In june the Commission Adopted a package of rules and interpretations, designed to enhance the quality and transparency of the relationship our main Street Investors have with their brokerdealer or investment advisor. These bring legal duties and mandated disclosures in line with what a reasonable would expect in terms of choice and cost to a variety of Investment Services and products. I am so grateful to our experienced and dedicated staff for bringing long overdue regulatory rationality and clarity to this important area. Were also working to respond to the substantial changes that have taken place in our markets, including that more capital is raised in our private markets than our Public Markets and Many Companies are staying private until they are very large or not going public at all. Weve expanded key aspects of the jobs act to increase the attractiveness, while amend tang or enhancing, increasing the attractiveness of our Public Markets is one side of the coin. Were also exploring whether through Fund Structures or other measures, we could increase the type and quality of opportunities main street investigators have in our private markets. I believe we should strive to ensure individual retirement boat can look like a wellmanaged pension fund with robust protection that reflects the individual nature of the account. This is a challenge. But we are making progress. In many other areas, modernization efforts are making a difference for our investors and our markets. These efforts not only include rule makings, but also the monitoring of market function and market risk. Coming to your inspections and enforcement efforts. I want to highlight our teachers and military Service Initiatives where weve focused additional enforcement and educational resources. My message here is simple. If youre ripping off teachers, Service Members or veterans, we want to catch you, punish you, and get them their money back. Returning funds to harmed investors, weve returned to harmed investors. Ive testified about the legal impediments we face in obtaining funds from bad actors where a fraud is well concealed, such as a ponzi scheme. I very much appreciate the work in congress to address these challenges and welcome the opportunity to continue working with you to ensure that the defrauded investors can get their money back. Finally, i note that we have substantially increased our efforts to engage directly with investors, entrepreneurs and an array of market participants. In particular weve allocated to investors and entrepreneurs that live between the coasts. I believe this type of broad, direct engagement is important. Thank you again for the opportunity to testify today and i look forward to your questions. Thank you very much. Chairman clayton, as i highlighted in my opening remarks, the sec has taken a number of critical steps to modernized guidance and rules surrounding proxy advice. The proxy process and shareholder proposals. This committee has held multiple hearings and the sec conducted round tables on these issues. These rules have not been reviewed by the commission in decades and i commend the sec for taking the thoughtful actions on the staffs expertise based on the staffs expertise to address changes in the markets that have occurred. In your public remarks, youve mentioned that you expect the commission will address proxy and universal proxy. When can we expect to see action to modernize these of the proxy process. If its on the near term agenda we intend to get it done on the year. And those items are on the agenda and staff is working on them and i would hope to move them forward in the coming here. Thank you. And i thank you for the attention youve given to it and strong focus on bringing it to completion. Moving to a different issue, this year, facebook announced its plan to develop a new cryptocurrency libra. As one of those that would have jurisdiction over libra, can you look at how they are sec and others are working to be responsive to market developments and trends like cryptocurrencies . Sure, and i appreciate the question and the question highlights what happened with that announcement. And whether its im not going to speak about the particular product, its not appropriate for me to do so, but the announcement was a focal point for regulators of different types to recognize the digitizization and the digitizization of the plumbing and other aspects of our Financial System including payment transfers, it is coming. The what ill say just the natural economic forces that it unleashes taking fat out of the system for lack of a better term, its happening. Now, we have to recognize that thats happening, recognize our mission, safety and soundness, Investor Protection, fair markets and ensure that as that digitizization takes place were looking at principles. Were not fighting that, if we fight it it will go around us. Well, thank you, that mirrors my feelings on it. And i assume when you say it is coming im sorry, senator, its here. This year its here. I see, its here. Yeah, it is here. And as i have said many times, again, leaving aside the specific proposal of libra, the issue is one which the United States and its allies and friends in the World Community need to lead on and to set the rules of the road on rather than to let it come and develop on its own through other jurisdictions who are not as friendly to the United States, and frankly, through other currencies, than the u. S. Dollar, and so, i encourage you and the other regulators to focus on this carefully. One of the first decisions that the United States has to make is who among our regulators are those who regulate and how will we regulate. As well as what will be the specifics of how we set the rules of the road. So i encourage you to pay very close and careful attention to this. Finally, the sec concept released, seeking Public Comment on ways to harmonize the public securities option exemption is a positive step and includes many key reforms. What are the next steps and timeline for the sec to act . Well, the next steps that are on our agenda, a proposal around the accredited investor definition, in your opening remarks, you highlighted one of the issues with the Credit Investor definition, which its a binary definition based on wealth. Ill say it simply, there are a number of people who have the sophisticated ability to assess investments who may not meet those wealth thresholds and we should do a better job of identifying them. That said, the private markets have risks that are significant compared to the Public Markets and we need to be cognizant of that. Thank you, senator brown. Thank you, mr. Clayton. For a dozen years, wells fargos management recommended voting against shareholder proposals, asking the company to separate the role of chairman and ceo, a Corporate Governance best practice. And the ability for sensible proposals like this would have cut off wells fargo investors after four years of doing that, even though after subsequent years received support from 70 of shareholders and we know separating the chairman and ceo is a sensible proposal because after wells fargo found itself mired in scandal and abusing its employees, it decided to separate the positions and took a victory lap on it. How do you justify a proposal like you made that could limit shareholders from continuing to push for sensible governance reforms . Senator brown, the question that youre asking is, after a shareholder proposal has been put on the proxy, and sent to all shareholders to vote on and garnered less than majority support, substantially less, then how long does it stay on the proxy . Right now, the thresholds are effectively if you get more than 10 of the vote, you can keep it on the proxy indefinitely. You know, that rule has not been changed since the late 50s, early 60s, combination of rules at a time when communications and shareholder engagement were very different. Our proposal looks at increasing those thresholds, weve back tested them. Still, if you were able to garner more than one in four shareholders in favor of your proposal, the proposal would be able to stay on the proxy. Well, you say that. That sounds good, but commissioner jacksons office studied data for a decade and a half from 2004 to 2018 and found the proposed rules would have excluded 35 of the proposals for an independent board share, 50 of Board Diversity proposals and 40 of political spending disclosure proposals, these are all areas where corporations need to do better and i hope you will consider that as you think this through where we ought to go. Let me talk about whistleblowers. You recently tried to clarify your proposal to amend the Whistleblower Program and saying it would not create a cap on awards. And can you commit the final rule would be consistent with statutory requirements and not create a cap . Absolutely, and any characterization of our proposal as a cap is completely misguided and completely misreads. And the statutory mandate is for the commission to decide between 10 and 30 how much the whistleblower should be entitled to. I can tell you that what our proposal was intended to do was to make it clear how we make those decisions, particularly at the top end and bottom end of the spectrum. I believe in transparency in how those decisions are made and i believe that Congress Gave the commission the discretion between those to make those decisions and i want to say personally, im not speaking for the rest of the members of the commission, i think the program has been extremely beneficial to investors and i support it. Well, again, you say that you support it. I believe you, that you do. But ive also seen that the proposal you made has had a Chilling Effect. Weve seen the numbers change in the past year. When people mischaracterize things and they have a Chilling Effect i set to clarify them and i did. I guess youre arguing the Chilling Effect is gone because you clarified it . I hope so. Well, and we have you cited the 5,000 number, the 5,000 tip number which is slightly down from last year after a long upturn, but our tips and complaints and referrals, people identifying issues for us, we had under 17,000 of those and i think we investigate, try to target investigate them at least initially within the first week theyre received. Let me be clear, anybody sees a problem, let us know. All right, let me close, mr. Chairman, with a comment from senator grassley. He wrote a letter to the commission, he said in establishing the whistleblower award program, congress was not concerned about a reward figure being too big, if anything the legislative history shows that congress was more concerned about potential whistleblower awards being too stingy. So, let me do one more well, go ahead, i yield back. Thank you. Senator cotton. Mr. Clayton, i want to talk today about the collapse of wework. That company just laid off 2400 people at christmas, due almost entirely to the incompetence, and they were investigating weworks for mr. Newman, and is the sec investigating mr. Newman . We do not comment whether we are investigating or not investigating. I thought that might be your answer so let me put it another way. Hypothetically if the Real Estate Company and wife and nephew had been chief impact and head of wellness which kind of sound like phony madeup jobs to me, might that be something that the Secs Enforcement Division would look into . Let me. Hypothetically speaking. Im going to take a step back and say transactions between the principles of companies, family members, other interests, are something where transparency is essential. If the ceo of that same company sat on the Compensation Committee letting him determine his own salary, would that be something the sec might want to look into . We are very interested in the the types of issues youre identifying should be transparent to investors in all of our Public Companies. If the ceo had trade marketed a common word like we, and sold it to the company for 6,000 and might be something of interest to the sec. Those types are disclosed if the ceo had been credibly accused of trance parting drugs in a private jet and spending millions of his company on lavish parties and deejays and don julio tequila would that be governance . Let me say our disclosure announcements around the character and background and activities of directors and officers of companies that would make those people make the judgments. Let me say this, i want to commend you for your work in the wework public offering. They sent the prospective for you for review and your lawyers caught many discrepancies in it. Like for instance, they claimed that they could assume a 100 occupancy rate of all of their buildings, or some financial metric known as contribution margin for Community Adjusted ebitda, whatever that means. And its good that the sec caught this. Its unfortunate caught it at the last minute. But unfortunate it wasnt sooner so many workers were injured. And all of the things that newman did or accused of having gone and at least one transporting Illegal Drugs across international boundaries, i hope is for the justice for crimes and i hope the Enforcement Division of the sec is investigating adam newman, despite that today, hes a billionaire, 1. 7 billion dollar pay day to walk away from this smoking rubble of his company. Or as he preferred to call it not a company, a state of consciousness. He was able to extract that payout because the Corporate Governance structure gave him 10 votes per share, a kind of super voting stock able to hold his company hostage until the other investors paid him just to go away and stop destroying its value and hes even on a fouryear consulting contract at 185 million in case they need tips on deejays or other kinds of tequila. A billion dollars is a lot of money for any executive, but certainly a scandal for someone who presided over the ruin of his company. Leadership requires strong character and accountable and that includes corporate leadership. Thats where it was absent in this case with adam newman and what he did to the workers of his company. Aided and abetted i would say by some of wall streets biggest banks and law firms. A lot of us often lament polls that show younger americans have doubts about capitalism and are open to socialism, for good reason given the brutality and poverty that social inflicts on its people. But people like adam newman and what he did to wework lead people open to socialism. Senator reed. Im tempted to ask you to respond to mr. Cottons question. Youve proposed two major rules, one was in effect, a proxy Advisory Firms and other related to shareholder proposals. These are rather complicated rules and i presume youre going to receive significant numbers of letters of comment that have to be clearly analyzed and rather than expedition, i would urge deliberation, very careful deliberation, i think that senator browns comments have reflected some of the potential pitfalls in adopting these rules. I think also, too, just looking in the Council Institute of investors have conducted a study that since 2016, the median number of days that the sec rule has been promulgated and adopted has been more than a year and those are some innocuous rules. What i would ask is that you would commit to be very deliberate, very careful, particularly analyzing the comments that are coming in and do that in a way excuse me, its 413 days, i want to be correct. Very, very careful in review of these rules, consequences could be significant, can we get that commitment . Yes, and you mentioned, i believe, i have on my calendar for tomorrow. Were open to engagement on this. I want to hear from people of all types. Very good. Let me turn now to the issue now of the status both legal, institutional and cultural of some of the big accounting firms. Earlier this year the sec assessed a 50 million penalty to a Major Accounting Firm for in the words of the sec, altering past audit work after receiving stolen information about inspections of the firm that would be conducted by the Public Accounting oversight board. And find that numerous auto professionals cheated on internal training exams by inproperly sharing answers and manipulating test results. In addition to the fine against the firm, a principal in the firm, the second ranking individual was convicted of wire fraud and other crimes. These proceedings suggest there may be problems cultural within the big accounting industry, on top of that Financial Times last month did a very lengthy article about the behavior in these firms in which i think youre probably aware of. You read it, i presume, in which whistleblowers, the term arises again, came forward with experiences of harassment, bullying, discrimination, it was a very toxic article and very unflattering to all of the industry. So, first, do you see these issues as significant . And second, and i hope you do, what two or three specific actions do you anticipate taking this year with respect to the issues . So, yes, senator reed, i do consider them very significant. High quality Financial Reporting that people can rely on is the bedrock of our Capital Market system and Audit Quality that people can count on Audit Quality is essential to that. On a regular basis its an International Issue and weve asked the chief accountant to take on the role to try to ensure highquality Audit Standards across across the globe. U. S. Investors should understand that Audit Quality iss not uniform and, in fact, i dont believe that it is as high quality in many places outside the United States as it is here. The only thing to do is try to lift it and were trying to do that. So i can tell you we are engaged on the number of fronts on improving Audit Quality. Thank you, mr. Chairman. Thank you, mr. Chairman. Senator cassidy. Thank you, mr. Chairman. Good morning, tread too. I want to talk to you about the Public Company accounting oversight board. I think the acronym is pclob. Yes. Whats that more do . Well, they oversee the pclob thathe really has three functio. Standardsetting, inspections and enforcement. Basically a they review the auds of Public Companies, is that right . Yes. And brokerdealer. To make sure the elements are accurate and fair and honest. We have about 156 companies from our friends in china on u. S. Exchanges, as i appreciate it, big market cap, about 1. 2 trillion. How many of those companies if you know are owned by the Chinese Government . Trying to come up with a precise number to that question would be a fools errand. Sure. Ill say i am certain that the Chinese Government has a Significant Interest in many of those companies. The stateowned companies are under president xi jinping are becoming more and more prominent in five of them companies. How many of those Chinese Companies are complying with the work of, how many of the audits of this Chinese Companies are working with the pclob to let the pclob review the audits . The pclob request workpapers from the companies that it audits, and with respect to those companies, access to those workpapers has generally not been available. Right. So basically our friends in china are eliciting companies on american exchanges listing they had Companies Audit their companies, but our pclob is not able to review the audits because the Companies Say no, is that right . Thats correct, and its a problem. What are we doing about . We are trying to remedy that directly. Recently because remedying that directly is taken in my view too long, the chairman of the pclob and i sat down with the heads up our big four audit firms who are generally involved through affiliates in those audits to ask what theyy are doing to ensure and give us comfort that the audit work theyre doing is of the same quality as the audit work in other jurisdictions. Has that helped . I dont t know yet. Thats not a onetime dialogue. I expect to engage with them again and i wanted to make sure that they understood how m important this is so engaging that at the level of my office and the head of the pclob. Well, i mean, we want to encourage companies from all over the world, including from china to raise capital and the United States because our markets are very efficient. But theres a reason and that is to make sure when they are audited they are telling the American People and other investors and the Chinese Companies dont seem to be cooperating. And it doesnt seem to be Getting Better so a lot of investors they are basically flying blind and of course we have had troubl tripled in the t with auditing companies. I would like to take a look at the act and it basically says they have three years to cooperate with the pc aob. There is one issue and i will look at it. Just because a company is the listed doesnt mean that u. S. Investors will not continue to invest. Let me put it another way it will get the attention of the companies, will it not . It will get the attention of investors that those things are valuable. Not all of them but many of them will be born again and start. Thank you mr. Chairman. Im increasingly concerned about the ability of the four factors to manipulate u. S. Companies particularly in the media and technology sectors. In 2017 the Economic Security review commission highlighted this issue when it recommended congress modified the fcc regulations to require Greater Transparency regarding the government ownership of Media Outlets and by labeling of media content sponsored by the Chinese Government. And i offered a positio provisie risk review modernization act to make sure its requiring the state owned companies to disclose their attempts to purchase companies. But they also have a role to play. Section 13 of the Securities Exchange act of 1934 requires investors to become the Beneficial Owners of more than 5 of an issuers Equity Securities to report certain identity to be coke identifying information. It could undermine the free flow of information to the American People so my question is how do they monitor the markets to make sure the Foreign Investors are not accumulating significant shares in the Public Companies especially without following the requisite disclosures . Your question is a really good one. The only ones i ever ask our. [laughter] they have control over a Public Company. Thats something that the markets investors need to know about. The rules that essentially trigger over 5 off just for an individual holder but concerned efforts i think are extremely important to the investors. We do try to monitor and look for violations of the rules. But i want you to know, and i am not going to get into too much detail in our ability to track who. Its very robust. Sometimes when investments occur through overseas accounts, it isnt as robust. And thats what im concerned about, so i appreciate your acknowledgment of that. Would it be fair to say that you do not have the ability to independently verify the information in the 13 filing or more importantly whether they should have filed a title but failed to comply with the law . Im not going to go so far as to say we dont have the ability. Im looking for ways to enhance the ability. Let me ask about that. Given the need to know if the media is being funded by Foreign Investors, would you agree they should monitor . By looking where you find the wrongdoing would it be of value to know which sectors the violations are taking place . They are noticing whe when you find a suspected violation under what penalties are the assessing. We have seen violations in different contexts. Its different from others. Im aware of the public filings of a long Radio Station but ultimately found the Foreign Ownership because of litigation they didnt know who the creditors were but found it exceeded the cap. They brought that to the attention under their due diligence. Then there should have been a 13 d. Filing, but there was not. So the question is in circumstances like that, here you have a foreign entity, a group of creditors abroad that are now owning an access of the percentage permitted under the fcc who didnt make a filing which is the only way that a company would no whether or not they have that ownership existing in the publicly traded stocks so then the question is what happens to that entity. If we are to have teeth at the end of the day to try to protect ourselves against Foreign Ownership that exceeds the allowable entity under the law we need to have some teeth in the process and i really hope that as the chair you will look at that because it comes to the essence of our information we are all making decisions on based on the Public Information of the media but when its controlled by a foreign entity you have to wonder whether or not its an investment or an attempt to ultimately make influences. Understood. Thank you for being here i think you and your team are doing a great job. I did want to touch on something youve had a discussion over as a proxy adviser i know youve put out amendments i think on november 5 and i appreciate that you are taking this seriously moving forward with guide in him the potential amendments. Im particularly interested in making sure the proposed rules given text to companies and opportunities to consult with advisers and address any potential errors and conflicts of interest but as you look forward how do you think that the proposed rule can help ensure they continue to play an Important Role in the marketplace but also balance out some of the issues that weve talked about in the conflicts of interest . Proxy Advisory Firms like this play an Important Role. Its very efficient to crunch the data on a collective basis and provide that information. They can provide other services. With thbut the proposals are lot is three things one is to make it clear that the antifraud rules apply in the material misleading statements something i think we should address. Conflict disclosure if you have conflicts to the extent that they would be material to the investor you should disclose them and then the last one and frankly the more tricky one is to try to improve the accuracy and completeness of the information investors from all areas on which to make that decision. I think all of those can be accomplished in our framework. We do in many other areas ensuring that we have transparency around conflicts and ensuring that the rules apply to people with significant influence in the marketplace to try to improve accuracy that is what we are striving for and we welcome comments. Are you looking at other areas of rulemaking moving forward in the automatic voting and any other priorities . I cannot say beyond that any specifics other than what i mentioned which is the plumbing is fairly archaic in the proxy area and also the universal proxy theres been enough debate about that we can now move forward with proposals. I have heard concerns over litigation and how it may increase in this space. Have you looked at this and do you have anything you would be looking at . Im happy to hear from people that have an increase in the litigation. The proposal makes it clear there is no new right of action created by the proposal. Another area i want to touch because weve had some of our members and i to some of the fos on the commission expressed concerns about buybacks. I think its a business trying to figure out the best way to deploy its capital. Would any kind of restrictions, what would the consequences be to the mom and pop shops or investors over time if we limit optimization or depletion of capital, but negative impact could that have on the average investor . Its difficult to say without any degree of precision, but i agree with the premise of the question jays Capital Allocation decisions, whether to buy a company, whether to invest in a new line card to pay the dividend or buy back stock. Those are board of director decisions understanding the idiosyncrasies of the companies and what they believe is best for the longterm interest of the company. If you put a point on it, i am not qualified to make that decision for them. In your current capacity i dont think that its an appropriate fold in the current capacity. Thank you very much. Senator smith. Hello again. Nice to see you again. I would like to followup on the line of questioning senator brown and senator reid started around the pools. Last month as they voted on the party lines to adopt the rules dont make it harder for investors to seek votes on shareholder proposals so i am concerned about this and i wanted to ask about something specific. In your statement would make approved the commissions you cited several Public Comment letters and said something to the effect of how they struck you the most because they came from longterm main Street Investors including a marine veteran, Police Officer and Public Servant and mom. This is all great except it turns out there is a question about the validity of the comments and according to Bloomberg News several of the letters you cited were not actually main Street Investors at all and their investigation found out the retired teacher said she never wrote the letter and the military veterans it turneveterans itturned out theyr and cousin of this virginia Advocacy Group that was paid for by the corporate supporters of this initiative. Bloomberg went on to say one of the retirees said he did write a letter bearing his name into the Public Servant cited she just allowed a Public Affairs firm to use her name without even knowing what it was about so i wanted to just ask a little bit about this. Given that you cited these letters does this have any effect on your thinking about whether this is a good idea . A couple of things, one is we are having an investigation done on this issue so i believe this does suck that out. I am very interested in hearing directly from individual investors in particular directly not filtered by groups. One of the reasons we conduct a town halls in connection with the rulemaking is when you interact directly with investors you have a lot of good information. During the Comment Period i encourage as many investors as they can to share their thoughts with us. We will be doing town halls where they have the opportunity to speak directly with me. That you are investigating these letters to understand what happened here and how they got included. We were in contact. Shortly after the article came out we contacted the general. Do you think it should be illegal to submit comments under a false identity as happened here . Im not going to get into that. I think the comment process is an open process to the extent of things happened im just going to leave that for now an it at d see what happens in the investigation. Im glad to know you are investigating this. If you are basing decisions on what to do about comment commeno public interactions that turn out to be fueled by corporate Advocacy Groups, that i think is a problem. Thats why we have an open process and Comment Period. Im going to ask another question. I serve on the Agricultural Committee so this question relates to that to a certain extent. In august Trading Commission agreed to settle allegations that they have manipulate had me wheat market and the Settlement Agreement was unique because it included no factual findings or conclusions of law and prevented the commission from making any public statements about the settlement. This has been concerning to me because i think the u. S. They t. Citizenship have the right to know what federal agencies are doing when they are settling cases. My question to you is how common is this practice . Is it happening at all that you are aware that the fcc . You are asking a very openended question. I am not aware of any situation of the type that you described and i want to make sure i carve out any kind of National Security or intelligence area from what i am saying as far as ordinary commercial actors, i am not aware of any. That is a concern to me as well. Thank you. Thank you mr. Chair. Thank you for joining us. I will start by commending you for your leadership at the fcc. I appreciate that you do youve helped accelerate over the last year and i also appreciate the openness of your comments today in response to questions and conversations we have had in office and as members of the committee. I do want to raise a concern about what is occurring often referred to as regulation by enforcement. One commissioner recently asserted when they see a widespread problem affecting investors it showed, quote, issue its own guidance or promulgate a rule and put an end to the problem before it hurts investors and come enddoublequote command a believe its better for investors than the large Enforcement Initiative and provides regulated industries with an appropriate notice of what the fcc expects of them. Do you agree or have a comment of what was conveyed . To your question highlights regulating a broad market. If you see widespread conduct thats clearly problematic there is no reason to provide guidance you just go out and deal with it. If you see widespread conduct that is an area people could reasonably conclude one way or another i feel is guidance and filed guidance is the way to do that. Life is complicated. A lot of things fall somewhere in between. One of the things you and i have talked about is the shared clash initiative. Where we were was much closer. Its not all the way at the end of the spectrum but i appreciate that the spectrum and i think our Enforcement Division and Inspections Division understands that. Part of my job is to make sure they understand that and make the appropriate selection on how to pursue the conduct. In that regard you said before the staff statements and guidance do not create enforceable legal obligations yet i think we often see they point to risk alerts and proceedings by other participants as a justification for the appropriate notice. I was used february 2018 election Disclosure Initiative regarding disclosures for conflict of interest from certain fee arrangements as an example. Fcc staff pointed to a 2016 risk alert as evidence that they were given sufficient notice about what the fcc expects from regulated firms in disclosures such as the use of may versus will. However i understand that the initiative has penalized firms for activities dating back to 2014 and beyond. In other words, to the notice that you are claiming occurred. Is there something here that i should be worried about . I dont think theres something here in particular. But the principles that you articulate or something we should always be concerned about. We should not be in the business of gotcha, but we do need to be in the business of making sure that we enforce. If theres to be a change in the wall that should be the commission. That isnt really the issue and i dont know exactly what the due process means in todays world the notice has always been something that is included in the due process in order to come i would hope those that you have the ability to regulate if they knew what position the fcc was, they would comply voluntarily. If theyr their seemingly was ne it denies them the ability to voluntarily comply and it eliminates the opportunity for them to have the due process. Senator cortez. Thank you for appearing today. Im going to talk a little bit about my concern and what can be done and what you are giving to prohibit requests from clients. Let me give you an example. I sent a letter along with some of my colleagues to limit the ability of broker dealers and Financial Advisors to inherit money from the clients and its a big concern. I know its the former attorney general there is fraud associated and granted i understand some family members could have exceptions for certain relationships but most importantly concerned about the fraud that is associated with it. My question is twofold to you think they should prohibit Financial Advisors to receive the request from the client is and what are you doing to address that issue . On that specific question. On the area of the elderly many of whom are in a position wheren where they may have diminished capacity or not have support, we are very concerned about that. What specifically we are doing, we are doing a lot at the fcc to recognize that many of our investors are getting older and we need to deal with that fact including implementing the senior say fact which allows brokerdealers to hold off on disturbing funds if they think that something inappropriate is going on. Im happy to engage with you further on this issue. I would officiate that because i think its an issue that needs to be addressed and i look forward to seeing what you doing to address the issue. I also appreciate your attention to preventing Retail Investors from falling victim to fraud. The thing that has proposed a rule for dishonest brokers and their firms to operate, last month along with my colleagues they sent a letter asking them to strengthen the proposed rule 4111 to expel firms in a broker with history of fraud. Another finalizing this now and it should be passed to the fcc for you to take a look at, my question is will you ensure rule 4111 is clear that unscrupulous natural cannot continue to operate and secondly, when will the fdcpa approve or when you and to separate looking at that rule and approving it or having a common with respect to 4111. Generally our view, its a privilege to work in the security markets and a privilege that you can lose and should lose if you misbehave. I want to be careful not to prejudge havent seen the text of the rule but i have long been supportive of the concept that are in the rule including, if youre going to hire somebody who has a history with the registration of the requirements that should reflect that youre taking more risk than someone who does not. Thank you. Let me also, i appreciate the concern around Digital Currency, this is an area that along with the chairman of paying very close attention to and i know your comment is here and we should not go around it, i absolutely agree and im hopeful as we move forward that you are putting resources to addressing and taking a look at this and what can be done but at the same time coming back to congress and talking about what we can do with you to be prepared for the future of Digital Currency. Because it is coming and we need to be prepared. Thank you. But i do have one final question with respect to the enforcement i was glad to see the fcc had taken action against crypto currency firms that fail to comply with prior interim requirements from raising funds for investors. However, according to a recent article at the wall street journal, three of the companies mr. Deadlines to repay people who bought their token. What is fcc doing about crypto currency companies that fail to comply with the fcc settlements one, and 2d have enough resources within the Enforcement Division to address these issues . Let me try and summarize what can happen with settlement. We try to structure settlement and i think were trying to structure in a way that tries to get the most money back to investors over time. Sometimes that means allowing payments over time. Enter tar enterprise to continuo get the money back. And sometimes they feel. Because they were not Good Companies to start with. That paradigm applies to the situation that you identified. In terms of resources. I think we can do our job, when i first took this job i did not know what i would do with significant Additional Resources now i feel better but we can have Additional Resources particularly in some of the emerging areas and we can put them to good use and your job how to how i feel about it. Thank you. Thank you, senator cramer. Thank you chairman for being with us in your candor. I want to go down on the certified audit trail which is great by design to collect a lot of personal sensitive financial information. Information on every retail brokerage client in our country which should amount to buy my calculation over 100 million clients. That in itself itself, that much data intensive information has challenges in an addition to that, with 3000 people in 24 organizations have the ability not only to access but default downward into their systems. I did not used to be paranoid what ive come to a point where the ability for institutions to secure that much data with this broad application concerns me. I would love for you to help me feel more comfortable with the fcc is doing to protect against attacks and cyber challenges with that risk. The cat is a good example of how we should look at a lot of large data projects. I agree with your concern and the question is, not what data would be like to have, but what data do we need to have to do the job. We are going to reprocess with the sros and others, i think we can significantly limit i said speaking for myself, from information from individuals should enable us to do her job and have a cat function in a way it was envisioned to function. So that reduces the risk because the data is not as sensitive and of course the other side of the coin is what type of security protections do put in place and how do you ensure that those security protections can evolve as the threat of all. Thats a general summary but were working on reducing the Sensitive Data and ensuring folks have insight into it and we continue to improve the security protection. Just go further my understanding that the firms are required to sign the cat reporter agreement which in essence, shield sros from liability. Anytime we start to shield in institutions or individuals from liability i was asked why is that necessary. If the safeguards are in place, it only adds to my insecurity if you will. From my point of view, this is a highly risky and i believe a breach will eventually happen but i hope the sec can prevent the obviously print. Im aware of the issue around the allocation of potential liability in a meeting tomorrow with representatives of the sro committee and the Dealer Community to discuss the issue. I appreciate that. Busy day tomorrow. It sounds like a. Thank you, mr. Chairman, thank you for being here. I want to ask you about the Commission Engagement on the task force for climate related financial disclosure, how are you working with the task force . We are working there are International Bodies sfb, iosco, and output that you there, we are working with all them on this issue because market disclosure issues of this type are global issues not just domestic issues. And i would say on medium to light heavy we are fairly engaged to some other issues. Specifically what are you doing. We are working the reports and working on repose proposals. I think it goes beyond that. I personally have recently met from the io and spoke with them. Trying to bring to bring decision useful information to the marketplace. Thats a good way to look at a. You say were not quite there yet . It is hard. Are you actively enforcing your 2010 guidance on Climate Disclosure . If what you mean by actively enforcing it, are we actively Monitoring Companies to see if theyre following it and to the extent that they are not addressing that. I think the answer is a clear yes. One way you can more actively enforce it is to put issuers on notice that Division Corporate finance will be examining. Thank you. I think people listen more carefully if you say you examine for this. To be clear, we have been examining and i would encourage people to look at the comment letters that become available publicly. I had this problem in a number of categories, and politics that are mostly in terms of your commission and mostly through that part of the problem but a couple of other problems, one we have to develop instruments and process that work across platforms and the planet so when you do disclosures youre comparing apples to apples but the other part of this, whether or not you as an agency are leading versus waiting for tc fd and others and see how things play out in the ecosystem that is working on this, would you consider the sec a leader, follower or participant. Where you put yourself in the. Definitely a participant, i would say a leader of a useful lens, including articulating ways that we can use the information that is being generated to further our what i would say is monitoring oversight, there are a bunch of voluntary regimes as you know, tc fd in the carbon disclosure project. And some organizations that come under your jurisdiction are making voluntary disclosures under tc fd and others in a separate less informative disclosure as it relates to climate risk to you. Do consider it appropriate for the commission to look at those voluntary disclosures and incorporate into risk and also. I dont know that im fully examine for this, not just in this area but in many areas we look at companies and Public Disclosure that require statutory disclosure and whatnot and compared what theyre seen in other places and Ask Companies please make sure you reconcile these force to the extent. You think you can be useful, theres a number of ways to look at that one problem is you have different ways to disclose a climate related risk do you think the fcc can lead or assist in developing a more consistent comparable thorough disclosure of a climate risk . Let me say this, i think we have a great deal of expertise in assisting in disclosing risks in a way that investors can use it. And were trying to bring that to bear in all areas and what we do including the. Thank you. Senator rounds. Make you mr. Chairman. Good morning. I want to followup on the issue of consolidated trail, it seems to me that you suggested there will be modification or we can expect modification based upon the amount of data that can be collected. Im concerned because clearly there is a high probability that there would be breaches and as an example having an employee to take home a notepad with data on it, any type of a process in which employees can gain access and then lose if nothing else. These seem to be ways in which data could be lost and were talking about the consolidation of data from a lot of different entities into one location in which seems to be making for a prime opportunity for nefarious activities. My question is number one, when we talk about the limitation of liability as senator cramer suggested, it bears to mind that somebody still has not lost and the question is do you believe the rules as are being laid out or the guidelines as we see them and limitations for some, are these fear the way that their set up to limit the liability and will you go so far to review that process of limitations that are being put in place today . The short answer is yes, do you want the longer answer . Yes, i do. The longer answer is your premises right. When you allocate responsibly you generally try to allocate it to the people can that can best address the risks who are responsible for. That is something that is in my mind as i look at the sink. I just want to bring attention, i think this is a serious issue and it does not mean you dont need to consolidate an auto trail but if youre going to go that route then theres gotta be something in which data has to be kept in a secure entity and if you cannot do that, which im not sure that you can then perhaps we should look at a more limited amount of data and it sounds to me like youre looking at that but along the line making certain that where the possibility of risk is that in the blame does not lead the location. There is a responsibility and authority combined for the production of the risk. Understood. I want to give you an opportunity should i say, that clarifies the suggestion that libra might be ridiculous. I want to go into this with the following. I know theres been a number of folks that whether or not its libra which is an attempt to do something different, if we simply walk away from that and say that is ridiculous and the product is ridiculous which is the way i heard it, we pick winners and losers. Im not asking judgment, if my comments that any product is ridiculous, i tell you what, i dont know. What i do know is, there is a great deal of friction in the marketplace the digitization can reduce. We need to make sure to the extent that the happens and were still being true to our statutory missions are crossed the federal Financial Regulatory Committee in our Investor Protection in efficient markets, at the banking i dont want to fispeak for them but safety and soundness. We cannot lucite of those things because of a new technology but we cannot rely on Old Technology to ensure we do those things. You looking at definitions now that come from a 90yearold law. Let me cut to the chase, do you see a difference between and see it as a separation between crypto currency and perhaps a Digital Currency, do you see this as being the separating issue where you have a Digital Currency today and in some respects it reverses integration. You have an obligation in this case as a regulator where you look in a book. Let me say this, theres a lot going on, its complicated. Weird have a great deal digitization in our Financial System, i do believe there is a difference between a sovereign backed medium of exchange in a private medium of exchange. I want to say to you and this committee, i have heard you and i appreciate that we meet something, we should be engaged with you. And i thank you for that. Thank you mr. Chairman. Thank you sir. Senator van hollen. Thank you, mr. Chairman, welcome mr. Chairman. A couple of things first that i want to associate with kennedys remarks over legislation require that Chinese Companies withstand our exchanges and meet the same audit requirements that we require everybody else. It seems to be common sense. Second on a number of occasions weve had hearings that he raised the in the issue of the strong correlation between the timing of insider share selling and stock buybacks, since we last discussed that, commissioner jackson and others have prevented presented more evidence that the timing is not a coincidence and executives may be manipulating the timing at the expense of the shareholders. I am disappointed that you and the commission have not moved forward more rapidly to investigate this. I am disappointed instead your focus on strengthening the hand of already very strong ceos and corporations at the expense of their shareholders in many cases. With the proxy advisory regulation that you post. This seems to be an answer in search of the problem. There are issues and we know what you described as a plumbing and trying to figure it out and i agree with the conflict division provision. But what you are doing is saying if i go out and hire somebody, an independent proxy advisor to make recommendations to me about how i should but with my shares, that proxy advisor has to go to the company and the ceos and get them to essentially comment and they get to have a number of reviews. I really dont need a nanny to advise me. If i dont want to hire a proxy advisor, i do not have to. What troubled me more, you try to present this as a concern of main Street Investors prewhen you roll this out, you attempted to create the impression that this was something a lot of main Street Investors care about. I tell you, i sit on the committee and served on the house, senate, ive not had a main street investor come up to me and say this is a concern. If there are other look forward to it. But you got duped when you rolled out. Senator smith asked you about that but the reality is in addition to the fake letters that she mentioned, people who you cited who apparently says now she did not write the letter, there were a number of letters that you cited that were cruelly orchestrated by a group called 60 plus. For those of us who have been around for a little while we know what 60 pluses. Its a dark money front group that corporations use for messaging. They dont have to disclose their donors. It sounds great and makes it sound like theyre taking care of seniors. But we found out their donors include corporations like chevron and exxon and so it turns out that a number of the letters you cited were relatives of the head of 60 plus. Are you aware of that . I have now heard this, i was not familiar with the group 60 plus. Were you aware of the retired couple you cited are the mother and fatherinlaw of the head of the 60 plus association . Maybe because you just told me. Are you aware they told the reporter that had no connection with the letter . No. Are you aware that the military veterans that you cited other brother and cousin of the chairman of the 60 plus association questioning. If a company had done this we can go after them for deceptive practices for misleading statements. I know you did not intend to do that. You became the vehicle for that. And you became the vehicle for that as you try to roll out this provision that it was looking out for main Street Investors. Wasnt that your intent . Regardless of this, i still believe were looking out for main street. It does not appear to me, this is the top priority in this does not make it had but it does mean you should be cautious before you say its a top roadie of mainstream. This is the top priority of a lot of corporate ceos that do not want to be secondguessed by proxy advisors. Isnt that true . So look, lets see what we agree on. Disclosure conflicts. I said in my remarks, that is number one, there is two in three will get to three. Disclosure conflicts, commensal responsibility for what youre saying, the antifraud rules should apply. Okay . The last one, i will tell you, i am open for discussion on all of them, the last one on how we ensure better accuracy, i am very open if people think that what will we are proposing is too onerous but we can get to improved accuracy in another way, i am open. As you know theres an ongoing lawsuit on this issue because the basis for your rulemaking is that the proxy solicitation the proxy o undr proxy advices the same as a solicitation theres a three 2 vote. There are Different Levels but that goes to the heart of the question of your authority. My question, are you willing to delay the real making process pending the outcome of the lawsuit . I will not commit to that today. What if you go through the process and the lawsuit says theres no authority to do it. Unfortunately thats a risk that we run. The advice weve gone that we should be very comfortable or where we are. My biggest concern right now is the way you tried to present this when you rolled it out. I am not backing away from the fact that we want to do whats in the best interest the letters that you cited were orchestrated by a Dark Money Group that is funded by many of the corporations that stand to benefit from your proposal. They are advocating for that, theyre using this group to funnel their money through and you become their mouthpiece. I think its important for you to retract those statements and let the public know that you were duped, you did not intentionally deceive anybody but the letters that you used to make the case that this was for main Street Investors were in fact orchestrated by a group that is funded by the very big corporations that are pushing hard for the role. Thats a deceit on the public, not from you but you became the vehicle for that. I hope you make it very clear that you find outrageous that the people who hope that you will do this, these are people who were pushing hard for this to happen and you became the vehicle for their fraudulent attempts to make it sound like this is all about street investor. Senator brown would like to ask another question. First to comment, thank you for your comments in the back and forth with the chairman. We hear always in this committee particularly from that side of the aisle from momandpop investors in all the trump nominees want to take care of the nominee and the momandpop investors and i think senator van hollens investigation shows often times the momandpop investors have some front to not take conspiratorial in this town and in these days but its clear thats whats happening for so many of the Dark Money Groups. Let me go to a different place, early in my Opening Statement i mentioned that i asked for inclusion of a letter from the employees retirement system and i appreciate that he crucially did that. They waited last year end the roundtable and proxy voting. Its a raise concerns and changes to the role that make proxy advisor advice more expensive, less independent, less timely and can only public under the pretense of improving disclosure the limited errors, but the rule would go far beyond that by giving companies to bytes to the apple to review proxy research before it gets toe investors that are paying for. How do those sweeping changes that institutions didnt ask for compromise the research they are paying for . How does that benefit investors . I dond think that robust conflict disclosure, when it is material does benefit investors. They should know what the people have when theyre making statements. I do believe if youre making statements in an attempt to influence or solicit votes, generally any fraud principle should apply. On the last one come how to increase accuracy, like i said you centered van hollen, i remain v open on ways to do tha. But lets just be clear what were trying to achieve your. Trying to achieve that the investor has a robust of, robust mix of information on which to make an investment decision. If that comes from a proxy Advisory Firm in combination with the company, so much the better. Thank you forth that. Again we kept the power to far in favor of company and management needs more accountable not less and more shareholders need more tool and not less and the direction you soon be going is not that. Lets also be clear, we are not say on pay other engagement mechanisms, this is what i want to achieve is people who are making the investment decision, the voting decision, have as good a mix and acted as mix of information as they could have. Thats what you want to achieve. Thank you. That concludes the question today at againou i want to thank you, chairman clayton for being here today and also for your strong leadership at the sec. I appreciate it. For senators who wished is a question for the record those questions are due on tuesday, december 17. I,sd chairman, to please respond as popular as you can to them. This is our last hearing for this congress, ls with schedule another one unless we schedule another one. Weve had a lot of productive drinks. I think we should i want to thank all of our centers for making that happen and also our witnesses and those that come before us. Its laid the foundation for what expected a significant amount of productive effort. With that, this hearing is adjourned. Thank you. [inaudible conversations]. [inaudible] mister chairman, there are 23 aye, 17 know. Resolution is amended and reported favorably to the house. With the judiciary approving two articles of impeachment, abuse of power and obstruction of congress the House Rules Committee will meet to determine the guidelines on how the debate will unfold on the house floor. Watch live coverage of house rules tuesday at 11 am eastern on cspan3, online at cspan. Org impeachment or listen online with the free cspan radio app. Tonight on the communicators, Pennsylvania Democratic congressman mike doyle, chair of the house subcommittee overseeing technology and telecommunications. Our concern is to make sure that we close this Digital Divide that exists in our country and we have an opportunity to do that now and i think thats important that we do that. There are kids literally 40, 50 percent of their homework assignments require Internet Access and they cant get it where they live. They go to mcdonalds or to a library to find ahotspot to do their homework. These young people are being greatly disadvantaged in our country when they dont have access to broadband so thats what i think theyre going to be focusing on is how do we do that . How do we close the homework gap, how do we closethe Digital Divide . How do we get broadband deployment out to these underserved areas . Watch the communicators on cspan2. Alaska governor Mike Dunleavy set to speak on the challenges of overcoming his state budget deficit and creating opportunitiesfor a growth in alaska hosted by the Heritage Foundation in washington dc. Live coverage on cspan2. [inaudible] life from the Heritage Foundation in washington dc this morning awaiting remarks from Alaska Governor dunleavy, set to talk about the challenges of overcoming his state budget deficit. Also transparency in budgeting and creating opportunities for growth in alaska. Live coverage here on cspan2, we expect it to start in just a moment. Ladies and gentlemen please welcome the Heritage Foundations executive Vice President jim hall. [applause] its a nice rainy day outside, everybodys bunched together to keep warm. How is everybody this morning . Governor, welcome to the Heritage Foundation