Transcripts For CSPAN2 SEC 20240704

Minute, as a matter of fact. Good afternoon and welcome to the National Press club. The place where news happens. Im mark, chair of the board of governors, and Senior Reporter for investment news. Thank you all for joining us, both here in person and online, for our headliner event with s. E. C. Chair gary gensler. We are happy to accept your questions and after chair genslers opening remarks, ill ask as many as time permits. Mark to submit a question online, please email headliners press. Org, and put gensler in the subject line. For our cspan and public radio audiences, please be aware that in the audience today are members of the general public. So so any applause you hear or reaction is not necessarily from working press. It is now my pleasure to introduce our distinguished head table. Please stand when your name is called. Starting on monday right at the far end, mark, senior editor, cnet money. Next, j. D. , a reporter and host at the street. Com. Next to j. D. , con stance of con stance marks productions. Next we have miriam, technology reporter, american banker. Next to miriam, kimberly, host and senior washington correspondent at marketplace and my immediate predecessor as chair of the National Press club board. Next to kimberly, mark, a former Club President and senior economic analyst and Washington Bureau chief at bank rate. Skipping over todays speaker for a moment, but well definitely get back to you, chair gensler, lori, president of Stanton Communications and our Headliners Team leader. And one of our Headliners Team leaders. Now to my left, eileen, National Press Club President and styles and standards editor at axios. Were having a terrific year so far under eileens leadership and the turnout today is a symbol of how were coming back strong with inperson events during eileens year. Next to eileen, emily, National Press Club Vice President and washington correspondent at cnbc. Next to emily is scott, correcter of the office of Public Affairs as well as counselor to chair gensler and a guest of the chairs. Next to scott is lydia, s. E. C. And financial regulations reporter at bloomberg. Next to lydia is andrea, white house and economics correspondent at reuters. Then we have emily, senior Vice President , American Investments council. And at the end we have stephanie, director of speech writing in chair genslers office and a guest of the chair. [applause] mark this is not my first rodeo, s. E. C. Chair gary kpwepbsler told reporters in an appearance before the Senate Banking Committee Last fall. He had just been grilled by republicans and some democrats on a range of issues. Especially agency proposals that address climate reporting and environmental, social and governance or e. S. G. Investing. Indeed, chair gensler is familiar with the challenges of being a regulator under fire on capitol hill and elsewhere around washington. He served as chair of the Commodity Futures Trading Commission from 2009 to 2014. During that time he led the cftc in enacting rules that reformed the 400 billion swaps market in the wake of the financial crisis. That was a heavy regulatory lift. Now hes undertaking another effort that some see as herculean. The s. E. C. s agenda contains 55 proposals in various stages of the rulemaking process. The proposals address a wide range of issues and market participants. One pending proposal is described as being, quote, related to Investment Advisor conflicts in the use of predicktive analystics, Artificial Intelligence, Machine Learning and similar technologies in connection with certain investor interactions. Were about to hear more from chair gensler on the intersection of Artificial Intelligence and securities regulation. Skeptics say chair genslers agenda is overreaching, overlapping and too aggressive. His supporters say hes pursuing crucial reforms. Chair gensler has said his goal was to improve the efficiency and transparency of Financial Markets and reduce costs for investors. The rise of cryptocurrency has been another challenge for chair gensler in recent weeks. The s. E. C. s division of enforcement has taken several actions against crypto platforms that the s. E. C. Claims are operating as securities exchanges without following Securities Laws. A recent court ruling appears to have set back to some extent the s. E. C. s crackdown on crip toe exchanges crip toe exchanges crypto exchanges. Just as hes familiar with the cut and thrust of washington politics, chair gensler also was steeped in knowledge about Digital Assets, before the he took the s. E. C. Helm in april, 2021. Prior to being nominated by president biden, gensler was professor of Global Economics in management at m. I. T. And served as Senior Advisor to the m. I. T. Media lab Digital Currency initiative. In addition to his experience as a regulator and academic, the chair has served as an assistant secretary of the treasury and a congressional aide. He also has worked for many years he also worked for many years on wall street where he was the partner at goldman sachs. If youve heard chair gensler testify before congress or speak at an s. E. C. Open meeting, you also know that hes a fan of romantic comedies. Sometimes he relates that passion to s. E. C. Proposals. Perhaps hell do so again today. Please join me in giving a warm National Press club welcome to s. E. C. Chair gary gensler. [applause] mr. Gensler thank you so much, mark, for that kind introduction. I didnt know that you wanted me to talk about romcoms today. But i instead have to start with this. As is customary, id like to note that my views are my own, as chair of the securities and Exchange Commission, and im not speaking on behalf of my fellow commissioners or the s. E. C. Staff. Nor, if i can add something to that disclaimer, am i speaking for or by a generative Artificial Intelligence model. [laughter] as the pandemic swept across europe and the United Kingdom my pages are stuck together. Look at that. Maybe the a. I. Model did do this. [laughter] as the pandemic swept across there they go. Thank you. Students packed up their books, they went home. One student at Trinity College in cambridge left for his remote family farm, while in isolation, he continued his work on physics and math. Now, im talking about the 1660s here. And the bubonic plague. It is said that while in confinement, isaac newton contemplated gravity, among other profound insights, including a new form of math, cal khruls calculus. The math innovation. Perhaps the bain of some of your high School Experiences and with journalists in the room, maybe just the bain of your college experiences or your childrens experiences. The math innovation is embedded in so much of life, from pharmacology to finance. Well, in the beginning months of a more recent pandemic, when many 21st century students were packing up their books, going home, like isaac newton did 300plus years earlier, there was a rollout of a new version of a generative a. I. Intelligence model, gpt3. That was already threeplus years ago. Given the Health Crisis that relief may not have gotten as much attention as the subsequent model released, chat gpt4, which was unveiled, yes, on pi day. March 14. Its not when you eat apple and cherry pie. But on march 14, the same day, pi day, two other companies also released a generative a. I. Model. Interestingly, just two days later, chinas largest Search Engine company also released ernie bottom, a chinese bot, a chinese language competitor. A lot of the recent buzz has been around such generative a. I. Models, itkly large particularly large language models. A. I. , though, is much broader than just large language models. I believe its the most Transformative Technology of our time, fully on par with the internet, fully on par with the mass production of automobiles. We dont know for sure where it will all head. But that transformative. Just like calculus, if i can, for some journalists, just like calculus, the math underlying a. I. Is built on a groundwork of many others. Newton built on many earlier mathematicians work. One of them was renee in the 17th century, and those mathematical achievements, yeah, the bane of some other people in this room, that famous linear transformation formula, y equals mx plus b, you might go, wheres heeded, yeah, you can try to figure out, im a bit of a math geek, i like romcoms and i also like to dance. So there you go. [laughter] but you maybe could have figured that out if you were using generative a. I. But similarly a. I. And newtons work on gravity both are based upon data and computational power. So its not just the math. Newton built, of course, on galileos work. Gathered data from other scientists research, his computational power up here, his mind, and his quill pen. Discussions about a. I. , though, go back at least to the mid 20th century. You may remember allenner toking. Imitation game, the enigma code. In 1950 he wrote a seminole paper computing machinery and intelligence opening with, quote, i propose to consider a question, can machines think . End quote. Thats allen turig, 1950. In the 1980s, world chess champion claimed a computer would never beat a grand master. In 1996, he beat i. B. M. s deep blue. Only a year later, carey lost to deep blue. Fast forward 14 years. I. B. M. s watson used brute force computational power to win jeopardy. That was 2011. Watson had been fed more than 200 million pages of documents from dictionaries and novels. Ken jennings, the jeopardy champ at the time, wrote on the screen during the final jeopardy, i for one welcome our new computer overlords. Think about that. That was 12 years ago, ken jennings. In 2016 alpha go using new forms of a. I. To feed it a human World Champion in the complex game of go. Though perhaps not catching as many headlines as these computer versus human experiences and these challenges, or even chat gpt, were seeing a lot of adoption of a. I. Text prescription in prescription in our mobile devices and emails is commonplace. The u. S. Postal service, by god, the u. S. Postal service uses and has been using a. I. To predict the addresses from human hand writing. How else could they write Gary Genslers hand writeing . [laughter] its being used for National Language processing, translation software, radiology, yes, our radiologists can siebert patterns as to see better patterns as to whether that looks like a tumor or not from a. I. , and robotics and a virtual assistant. Im talking about siri and so forth, erica, not that movie her with scarlett johansson. That was a good movie, i should say. [laughter] in finance, a. I. Already is being used for cost centers, account openings, compliance programs, trading algorithms, in fact, this talk may go into a computer that discerns the sentiment of the chair of the s. E. C. What they find, i dont know. And more. Its also due to rapid change in brokerage app. Look, just as newtons work on gravity was based on math, data and computational powers, theyre the three, math, data, computational powers, all three are fueling a. I. Progress today. The math underlaying a. I. Has moved from brute force computing, like what happened in that jeopardy or what happened to gary, from brute force Computing Power to whats called new orleans networks to Neural Networks to deep learning. What that math is may move on. Having layers of individual nodes or, yes, neurons. The parameters, to speak math, parameters are these coefficients like the m and the b back to that. But the parameters, the coefficients relating the connections between the neurons no longer number in the hundreds, they number in the thousands, millions or even billions. Decart would have been pretty impressed. Collectively the models are being optimized to discern patterns in data and making predictions. We also, though, are living in an era of exponential data growth. Datas being drawn, of course, from social media footprints, our shopping, our spending. But more than that, its also being drawn by an explosion of sensors. Cell phones, of course. Fitness devices. Telematics in the cars, the actual sensors in the cars. Appliances, cameras, and other socalled internet or thing sensors. I recently installed a new heating and air conditioning unit in my home and i was asked for my wifi code so that could tie into the internet. And someone i guess has another bit of information on the chair of the s. E. C. I turned it off. [laughter] i just want to say for the record, its not you know. There are bound to be more sensors than humans in the united states. We also see in the early stages of whats called multimodal Artificial Intelligence systems. Thats where you combine multiple types of data. Video, audio, speech, images, text. And you try to make even more accurate determinations when you have multimode ales coming in at you multimode ales coming multimode ales coming in at you. The ability to increasingly exponentially have more computational power. So its math, its data, computational power. This isnt a forward direction. Its like wily to its likely to continue. A. I. Open its up tremendous opportunities for humanity. From health care to science to finance. As machines take on pattern recognition, particularly when done at scale, this can create great efficiencies across the economy. In finance theres greater financial inclusion, enhanced user experience. When newton pondered the laws of gravity, he thought in the micro, the apple. He thought about the macro, the cosmos. So if i could be inspired by newton a little bit and in that vane talk about a. I. s advances, what they might mean in the micro to each of us as individuals and the macro to the broader economy and society. So starting on the micro. What i might call narrow casting as opposed to broadcasting for all you journalists. Narrow casting. Today a. I. Models provide an increasing ability to make predictions about each and every one of us as an individual. This growing capability facilitates being able to differentially communicate to each of us and to do so efficiently at scale. How might we respond to an individualized communication . How might we respond to an individualized Product Offering . How might we respond to an individualized pricing . Communication, products, pricing, can really tailor and individualize, in other words, narrow casting. Quite a difference from turigs day at the dawn of network broadcasting. On a daily basis already we receive messages from a. I. Recommender systems that are considering how we might, individuals, response to the props. The models have been developed to assist in making decisions already about who gets jobs, who gets loans, who gets credit. Who might get the entry into a school. Who might even get a health care outcome, where that m. R. I. Is going to be for us or somebody else. And thats just to name a few. This raises a host of issues, not necessarily new to a. I. , but accentuated it. One is, when i was at m. I. T. , when studying Artificial Intelligence, we used to talk about explainability, bias and what the computer scientists called robustness, you might call accuracy. A. I. Models decisions and outcomes often are unexplainable. Part of this is the inherent models themselves, the math. Remember, that math i was trying to skraoeufplt its nonlineal describe. Its nonlinear. Its hyperdimensional. Meaning its up to thousands or even billions of dimensions. And thus its hard to explain. But its also dynamic. It learns from new data and from the models use. So its not static. Thus the insights that come out of such models by design are inherently challenging to interpret in terpgs of accessibility for us humans. Why does the model, for instance, qualify one of us for a loan and somebody else not for the loan . A. I. Also makes it more difficult to ensure for fairness. The outcomes of its predictive algorithms may be based on data reflecting historical biases as well as features that may be proxies for protected characteristics, right in the data itself. Further, the challenges of explainability may mask underlying systemic racism and bias right in the predictive data analystics analytics. The availability of these models to predict doesnt mean theyre always accurate either. They might be predicting based upon somely a ten tent some latent feature. Does the model look at a photo of a dog and say its a dog or is it a cat . A couple years ago, this was back in 2019, my identical twin brother, rob, hands me his iphone and he says, what do you see . I say, i see a text message. He says, dang, he said, that was set on facial recognition for rob gensler, not gary gensler. You might say, thats ok. Identical twin. But these challenges of Data Analytics are not new. In the late 1960s, early 1970s, congress weighed in. Fair credit reporting act, fair housing act, equal credit opportunity act, all in part with similar issues. Making sure that people had explainable and fair and unbiased Consumer Credit in housing and the like. As advisors and brokers incorporate these technologies and their services, the advice and recommendations they offer, whether or not based on a. I. , must be in the best interest of clients and retail customers and not place the interest of investors or place their interest, the a. I. Models interest, ahead of the investors. Theres also a possibility about rent extractions and conflicts. The communications, product offerrance and pricing can be narrowly targeted for each and every one of us. That means they may be more able to find each of our own maximum willingness to pay a price or purchase a product. And with such narrow casting, theres a greater chance to shift whats called an economics consumer welfare from us, the consumers, to the producers. Extracting more rents in our economy. And at the optimization function of the a. I. System is taking the interest of the platform into consideration, if the math is taking into consideration that, then this can have a conflict. In finance, conflicts may arise to the extent that advisors or brokers are optimizing, placing their interests ahead of investor interests. And thats why ive asked the s. E. C. Staff to make recommendations for rural proposals and what mark mentioned is on our unified agenda, for us to consider regarding how best to address such potential conflicts. Deception. Deception and the narrow casting, theres also deception in the broadcast world. But since antiquity, bad actors have found new ways to he receive the public. Of course, with to deceive the public. Of course with a. I. Fraudsters have a new tool to exploit. They may try to do it in a narrow casting way, praying upon our preying upon our personal vulnerables. We used to get spam but wed all get the same span. Now communications speak efficiently advertised individualized. I also wonder how a. I. Will lead to change in teaching methods, guarding against plagiarism. I dont know what id do in the classroom anymore. Is it back to the old blue books . Deception also can be broadcasted, of course, and earlier this month my Communications Director sitting over there, he contacted me and said, lots of rumors on the internet today that youre resigned. [laughter] you would tell me if you did, right . Yes, scott, i would tell you. The false rumor had apparently been from an a. I. Generated text on a recently stoodup twitter account. More seriously, bad actors may seek to use a. I. To influence elections. The Capital Markets or spaobg the public. Potentially making orson wells radio broadcast look tame. I say that because im make no mistake, though, fraud is fraud. The s. E. C. Is focused on identifying and prosecuting any form of fraud that may threaten Investors Capital formation or the markets more broadly, whether its generative a. I. Or not. Lastly the Public Companies making statements on a. I. Opportunities and risk that we oversee, they need to take care to ensure that the material disclosures are accurate and dont deceive investors. Let me turn to the macro. Theres been a lot written about it. Just as any historic transformtific time transformative time. Whether automation of the farm, factory or services, there are going to be macro challenges for society writ large. To the extent that generative a. I. And other a. I. Technologies have the potential to automate a significant percentage of how workers spend their time, it can lead to significant changes in jobs and job markets. If theyre automating that which we do now as workers. A. I. , particularly given its transformative nature, is shaping up as another way in which china on the one hand and the u. S. Compete economically and technologically. There also are macroand geopolitical challenges for state actors and militaries potential use of a. I. And, further, back to ken jennings, remember of jeopardy fame, he may have just been joking when he wrote that thing about welcome to the overlord, but there are now leading a. I. Technologists, some fathers and mothers of a. I. , that were at the foundation of all of this, who are fearful that a. I. Becoming our overlords. While these are important policy debates around macro issues, ao eupg going to focus on two that are more toward the economics here. We have seen in our economy how one or a small number of tech platforms can come to demeanor nate a field to dominate a field. We may see this in a. I. Platforms. Given that todays a. I. Relies on a demand for data, computational power, economics of scale and Data Networks at play. Weve already seen companies both incumbents and startup relying on base or foundation a. I. Models and building applications on top of them. The down stream applications use the base models, and theyre called base for a reason, or foundation for a reason, they built upon them and they can be improved in the process, refining their parameters based upon the down streams application. Meaning the base model can improve from time to time based on all that usage. This not only will enhance the base model but it will give them greater competitive advantage, adding to the possibility of having just one or maybe a small number of base models. Weve seen in a lot of other places in technology. I believe the multimodal a. I. Systems i mentioned earlier will probably even add to that. Once again, thats what raise . It raises some really real economic issues. The debate around privacy, i mentioned earlier, initially had been about who owns individual datas. But now its are individuals not only in control of their own data, but it also has this important debate about scraping of all this data into the base model. So today a. I. Todays a. I. Reveals this related issue that data being collected on each of us, were all helping train the models. We are personally helping im not just talking about when you go in and say whether the cow is upside down or this way or that way to identify getting in. Im talking about every time you, anyone in this room, uses one of these generative a. I. Models, you are helping them collect data. And the base models are training off of the down stream applications if they so wish. So whose data is it . This debate is currently playing out right now in hollywood with strikes in hollywood, its playing out in software developers. Its playing out in social media where Major Social Media Companies are trying to put gating on their information. It raises questions about economic rent at the macro level. The platforms may generate greater economic rents if it becomes dominant. What does it mean for the s. E. C. . The challenge here is to promote competitive, efficient Capital Markets. Thats our agreement. Competitive, efficient, fair markets. In the face of what could be a dominant base layer at the center of the Capital Markets, i believe we really have to closely have to it, assess this and make sure that we continue to propose that competition transparency and fair access in the middle of the market. It also raises some issues about financial stability. The possibility that one or even a small number of platforms are there. While i was at m. I. T. , lilly bayley and i wrote a paper, a stem winding, im sure you all read it, it was called deep learning and financial stability. This was in you did . Oh, my gosh. [laughter] a prize. Written in november, published in november of 2020. The recent advances of generative a. I. Models make the challenges lilly and i wrote about even more real. A. I. May heighten financial fragility as it can promote herding. With all the individual actors, the down stream applications, making similar decisions because theyre getting some signal from the base model, or data aggregator. This could encourage basically a mono culture. All study, when you tend toward mono cultures, you tend toward fragility. A. I. May play a central role in the afteraction reports of future financial crises and people will say, oh, my god, everybody was getting the same mortgage data or mortgage pricing from that base model somewhere. Which will be hard to explain and we wont even maybe know it for a while. But i think it unfortunately may be in our future. With current Model Risk Management guidance, while we need to update, we at the s. E. C. , maybe the other regulators update, individual Model Risk Management, this is about the system as a whole and so i really think that were going to have to come together and think about what we do in whats called a macro prudential way. Let me wrap it up. Im sure ive gone too long. Weve come a long way from newton contemplating an apple in the cosmos. He would marvel at the math, the data and computational power. Hed probably be intrigued by it fact. That a. I. Is actually helping refine data to detect tkpwrafpb stational gravitational waves. That was from hein stein einstein. We at the s. E. C. Are technology neutral. So just like our treatment of calculus, we focus on the outcomes rather than the tools. We dont have any regulation at the s. E. C. On calculus. We look at the outcomes. Securities law, though, may be implicated depending on how a. I. Technology is used within our current authorities, were focused on protecting against both the micro and macro challenges i mentioned and while recognizing the challenges, we at the s. E. C. Also could benefit from staff making greater use of a. I. In their market surveillance ander disclosure review exams enforcement and the like. I think a. I. Is going to continue significantly transforming science,ing at the nothing and Commerce Technology and commerce. I expect newton, though, would agree that its important to focus on these microand macrochallenges of a. I. And given that were dealing with literally the automation of human intelligence, the gravity of these challenges is real. Lastly, a disclaimer. Though these remarks likely will be analyzed by a. I. Models, they are not the product of any generative a. I. Theyre all human. Mark. [applause] mark thank you. Ill read questions from the audience. My wife suggested we ask chat gpt what i should ask chairman gensler. Heres number 10. How does the s. E. C. Balance the need for innovation and Technological Advancements in the securities industry with the necessity of maintaining market integrity and Investor Protection when it comes to Artificial Intelligence . Mr. Gensler well, chat gpt, if i can answer back to you and you will maybe refine your model based on that, were technology neutral. This threepart Mission Congress laid out, protecting investors, promoting Capital Formation, the issuers, and then the marks in the middle, thats our threepart mission. We have to look at the outcomes of the use of your technology, mr. Or mrs. Chatgpt. There are challenges about protecting invest the conflicts of robo investors. I should look at the camera, right . The chatgpt and other a. I. Models, the conflicts that can arise of robo advisors, if they consider their interest ahead of yours. I also think we have to be onguard against fraud and deception in the markets because fraud is fraud and, thirdly, thr eu there are some issues that this could accentuate fragility in our Financial Markets. Mark from this point on, all the questions are from humans. Mr. Gensler you say. [laughter] mark does the the s. E. C. Have the resources and knowledge it needs to be able to regulate the financial industrys use of a. I. . If not, whats your plan to get them . Mr. Gensler its a really good question. I think this is a challenge for all the Government Agencies ive spoken with about this. Not just financial regulators. This is a really rapidly changing technology. And hiring good technologists in a very tight labor market for technologists is a challenge for Government Agencies. We are currently we do use some a. I. At the s. E. C. And our economics and some market surveillance alike. But we really do, i believe, think could benefit. And the american public, the investing public could benefit by our being able to ramp up. Part of it is asking congress for more appropriations and resources for technology. But i think that we do have capable technologists, but this is like a step function, a real change in the underlying technology. Mark should the s. E. C. Be the primary regulator of a. I. In finance, given the wide range of a. I. Applications across industries and potential challenges with understanding and monitoring this rapidly evolving technology . Mr. Gensler i think the securities and Exchange Commission has a really important remit, over 100 trillion Capital Markets, and its the Securities Laws, but thats where we should stay and to your question, theres other financial regulators, the banking regulators, the Commodity Futures Trading Commission, that i was once honored to be at and others, the consumer bureau, that have really important roles. We at the s. E. C. , i think, when we think about Artificial Intelligence, again, its like how we think about calculus. Were not about regulating an individual technology. Its about the use of that technology and the outcomes and ensuring that those outcomes are within the appropriate Public Policy that congress has put in place. Mark what are the main challenges and opportunities you see regarding the use of a. I. In Investment Advice . Mr. Gensler i think it really does provide a potential to be much more effective and efficient. The narrow casting i spoke, it has some challenges but it has benefits. Each and every one of us might have a different circumstance about our risk appetite, about our family life, our employment, our mortgage, our stage of life. And taking those into consideration and really giving us effective and efficient advice. Its in essence also an ability to ultimate a lot of what we humans have done. Weve automated in the past when we automated much of what happened in other parts of our economy. So i think thats really a great potential. But it raises these other micro and macro challenges of narrow casting and then sort of finding a way to steer us potentially into the wrong product for us. Because of the conflicts that are there as well. Or, even worse, deceive us. Mark we have one other a. I. Question. A. I. Is expected to have a Global Economic impact of approximately 15 trillion by the end of this decade. Should Public Companies assess the potential impact on their organization . Mr. Gensler we at the securities and Exchange Commission are paid to be meritneutral. I do think this is the most Transformative Technology of our time, every bit as much as the internet or automobile, mass production of the automobile 100 years ago. But what any one company does is up to them. Their material disclosures about it should be accurate. Roosevelt said our Securities Laws, the first Securities Law was about the truth in Securities Law. Thats what he called it. And so were about full, fair and truthful disclosure and investors get to decide. So thats up to the companies. Ensure that your disclosures are not misleading. Mark of course you wont be surprised, theres a lot of interesting cryptocurrency today. Mr. Gensler really . Is this from chatgpt . Mark no. Everything is from humans now. How does the federal court ruling last week in the ripple case impact your stance toward Digital Asset regulation . Does it inject urgency into the need for federal legislation to clarify a Regulatory Oversight of this industry . Mr. Gensler look, our Mission Remains exactly what i spoke about earlier. About Investor Protection, promoting Capital Formation and the markets in the middle. This is a recent decision, just a handful of days ago. Were pleased from that decision, recognizing the importance of protecting investors on the Institutional Investors in that and that the Court Movement with regard to fair notice, while disappointed on what they said about retail investors, were still looking at it and assessing that opinion. Mark what is the next frontier for the s. E. C. s crip tow enforcement crypto enforcement push . Mr. Gensler im going step back a little bit. I was so honored to go up to m. I. T. In 2018 and get involved at the intersection of finance and technology. I was honor to dod that honored to do that with remarkable scientists and technologists and students and staff at m. I. It. And in m. I. T. And in 2018 and in 2023 i sounded fascinating this focus on Digital Currencies and crypto. By the press. With all respect. And even the Retail Investing public. In contrast to Artificial Intelligence. I for one have already stated here clearly, i think Artificial Intelligence is the transformtific technology of our time Transformative Technology of our times. As it relates to cryptocurrencies, our role at the s. E. C. Is protecting the markets, the investing public, the Capital Formation, and ensuring for compliance with the laws that are in the books, Congress Passed them. Thats what were doing. So whats next, were going to continue to try to bring firms that may not be into compliance into compliance without prejudging any one of them and trying to ensure that we protect the investing public. The basic bargain that was laid out for you, the listening public, was that you get to decide what investments you make with folks that are raising money from you, that you get full, fair and truthful disclosure from them. Without that disclosure, how can you be ensured as to, like, what risks youre takeing . And the platforms, the intermediaries that are transacting in securities have basic protections against conflicts, against fraud, against manipulation. And you have a field, crypto field, thats been reiff with fraud and abuse. I think weve seen this story before and its called the 1920s and it was prior to the Securities Laws coming into being. Mark youve heard this term, regulation by enforcement, the audience member asks, why take a regulation by enforcement approach towards crip toe rather than crypto rather than regulation by rulemaking similar to the e. U. With their mica framework . Mr. Gensler in all of our work, we take a number of approaches. We have a number of tools that congress has given us. And the rules are in the books already. If youre security and youre having the public, youre offering and selling securities, the public under the law is to get proper disclosure. If youre transacting and said securities, whether theyre crypto securities, equity securities, bonds, securitiesbased swaps, 30plus things on the list, in the statute, and if any type of security, investment contracts are what some of these crypto securities are, then youre supposed to have certain protections. Thats what were doing. But to your question, we have engaged, weve done some rulemaking around special purpose broker dealers or broker dealers in this space. Weve done notice and comment rulemaking about rules, about exchanges, about safeguarding or custodying, as well as something called best execution. And weve spoken through also various Enforcement Actions. And it is something we do. The way we protect the market against Insider Trading from the 1960s to now has been speaking to the market on a somewhat regular basis through Enforcement Actions. We bring over 700 Enforcement Actions a year because congress has put us here to protect you, the investing public, and be a cop on the beat. Mark something related to cryptocurrency, the bitcoin, what more do you need to see to be confident that a spot bitcoin e. T. F. Is actually ready for primetime . And is the potential for market manipulation still the largest holdup to spot e. T. F. Approval . Mr. Gensler i recognize the question. Its a good question. But understanding that as tkhaeur of a Regulatory Agency chair of a Regulatory Agency and having various applications in front of us and not prejudging them and also recognizing that there is ongoing litigation about these very matters, i think im going to have to defer on that one. Good try. You could ask chatgpt. Mark fair enough. Ill do that. Maybe this evening. After the Club Board Meeting ill type that prompt in and see what happens. Of course environmental regulations, rulemaking having to do with the environment is big for your agency and others across the government. Several Congressional Democrats have expressed concern about the s. E. C. s plans to require Big Companies to disclose their scope three emissions, saying the potential requirement could hurt small farmers. More recently representative david scott of georgia, the top democrat on house ag, brought up this concern during one of the houses e. S. G. Hearings last week. Does this concern surprise you . Will scott and other democrats be satisfied with the final climate discossure rule . Disclosure rule . Mr. Gensler very good questions. Let me step back again for the audience and the listening public. Again, the securities and Exchange Commission is meritneutral. I think those debates in the 1930s landed it about right. Its about full, fair and truthful disclosure. So investors in our Capital Markets have been for a number of years investing in companies in part, whats the climate risk of that company . The companys future path, their future profits, their prospect, their revenues, given climate risk. And over half of the top thousand companies in the u. S. Currently make disclosures around their Greenhouse Gas emissions. And well over half make some disclosures around climate risk. How that management team. So what we did is we put out a proposal last year, a little over a year ago, to try to bring some consistency and, yes, kprablts to those dis comparablity to those disclosures. To the specific question about one form of Greenhouse Gas emission, we did hear a lot from commenters, we put a proposal out, we got over 15,000 comments from the public. More than in any other proposal in the history of the securities and Exchange Commission. It gets topvolume weighted comment file. And so we did hear a lot about scope three. Im not allowed to prejudge. But were taking a close look at it. Were considering it. Staffs considering it and ultimately five commissioners. So i hope the representatives would understand that and ultimately appreciate wherever we come out. But weve got some work still to do. Mark what is the timeline for the Climate Disclosure rule . Can you give us any hint . Mr. Gensler we really do this thoughtfully, by the book, consider the economics, consider the legal authorities. And with 15 or 16 15,000 or 16,000 comments in the file this, one is a little longer than maybe standard may be standard but i dont have a time. Its really when the staff is ready and when the commission is ready to put something out and adopt it. Sorry i didnt make news there, mark. Mark thats ok. The s. E. C. Plans to release a Human Capital disclosure rule. What information do you think companies should be disclosing that many choose not to report now . Are diversity statistics among them . Mr. Gensler again, it goes to investor demand. What do investors wish to know about a company that they find material and its important for them and their investing . And for years investors have wanted to know something about this important asset of a company. Its work force, its Human Capital, so to speak. And thats whats important. Three years ago my predecessor under chair clayton and that commission, they put in place some new provisions around Human Capital disclosure. Weve looked at those filings in 2021 and 2022 and sort of learned from what companies are doing and staff is considering and i think the commission will consider how we can bring some more, again, consistency to the disclosures that have been happening so far about that its really a critical asset. I mean, i hope it remains the critical asset. We were talking about automating the human side with a. I. I really do believe its a critical asset of these entities and how to ensure for consistent material disclosure. Mark you mentioned 15,000 comment letters on Climate Disclosure. Industry and in some instances academics, legislators and retail shareholders have criticized aspects of the commissions recent proposals. As well as hill republicans, they have their e. S. G. Month right now, a lot of that is aimed at you. And trying to halt these proposals. How do you and your staff go about taking into account or weighing these comments when formulating a final rule and to what extent do they influence you . Does the pushback influence you . Or is your mind sort of made up . Mr. Gensler no, no. As opposed to chatgpt, were dynamic every day. Were updating for the comments we receive. Thats the administrative process. And i contend its the human process. Thats what we are. And so we get even this meeting here thats telecast, im a human, im a living, breathing person. I get a question about scope three, its all part of what we do. But then we have to document these things. We bring it together. We assess the economics, we assess the law. But the comment, whether they be from congress in these various forms of letters and hearings, or whether its from the open public, very much are taken into consideration in a dynamic, real way. Mark one thing that your skeptics or opponents, i guess i should say, bring up again and again and again, when they dont like a proposal is, they say the s. E. C. Doesnt have the authority to do that. And now they can point to e. P. A. V. West virginia. The major questions doctrine, if congress didnt give you the authority to do something, you cant do it. Ed s. E. C. And other federal agencies have recently faced pushback by the Supreme Court and other courts. What are your views as to the limits of s. E. C. Authority and are you concerned that these proposals are going to be these final rules are going to be stopped in the courts . Mr. Gensler we live in a democracy. Its congress that sets the law, the courts who interpret the law. The s. E. C. , we do our work within our authorities and how the courts interpret those authorities and the Supreme Court when they write an opinion, thats the law of the land. So we work consistently to do that. Of course were human, as best we can. So we do take into consideration these recent Court Opinions and really think through. Now, in terms of of the s. E. C. s authority for disclosure, weve been tasked since the 1930s to promote this consistent comparable, or as roosevelt said, truth in Securities Law. He once said, it was about complete information. He didnt put the word materialality in but we have a concept of materiality. Thats how we think about it. But the Court Decisions are important to us. Mark a source told me the other day, october is the new april when it comes to the s. E. C. Agenda. Because so many rules that you planned to go final in april are now final in october. And perhaps that will be extended again in the next regulatory agenda. As we get closer to 2024 and the 2024 election, to what extent are you concerned that final rules could be overturned by congress, the close you are get to close you are get to the election next closer you get to the election next year if republicans take control of the whole government . Mr. Gensler let me address two things. We, twice as a year, as all Government Agencies do, put out a regulatory agenda and its published by the office of management and budget. So we put some estimates as to when things will happen and we just put it in two buckets. April and october and youll see that the next one that comes out will be october and april. Sometimes things go a little faster, sometimes things go a little slower. To your other question, we will only finalize something if we think its right and its ready. Not with an eye to the clock. But just the eye to the law and the policy and the economics. We have finalized today during my time 19 adopting releases. We have 30 or 35 proposals that are not yet adopted and well go through weve also reopened and reproposed a number of those based on the comments, the economics, the law. Mark all right. And one final question. A lot of these major rules come out with 32 votes, you and your two fellow democratic commissioners in favor and the republicans against. Is that good, bad or indifferent for rulemaking . Mr. Gensler we all work really well together. The five of us. And ive been honored to be the chair of another economic at one point in time at the federal level and one at the state level. In maryland. I think its a really strong form of democracy that we have these different views, five of us bring different aspects and different backgrounds and perspectives to the law and the economics and the policy. And we work and get feedback from all five of us back and forth. But there are times that we see things differently and thats part of democracy and human life. Weve had a fair number of unanimous votes too. It seems like just like at the Supreme Court, they dont focus as much on that. Mark ok. Fair enough. Before if i could step forward mr. Gensler im honored. Whatever. Mark before i ask the final question, let me take a moment to thank the organizers of todays events. Headliners team coleaders, dina, who is not with us today, and lori, who i introduced earlier. Club membership director, kate, club events coordinator, cecile, and Club Executive director. Id also like to say thank you to the kitchen staff and the wait staff. This was another delicious lunch