Transcripts For CSPAN3 Politics And Public Policy Today 20160628

Willing, at least initially, until they find out theyre in a trap and become literally enslaved. Are you aware of Victim Services program that are particularly useful in dealing with the victim cooperation . Is there any social science, any experience out there that would help us do a better job of getting cooperation from the victims of trafficking . Well, of the 15 programs that we looked at, those grant programs, we also conducted sight visits to various places within the u. S. We talked to a number of Victim Service providers, as well as a number of Law Enforcement officials. They told us that while victims cooperation can be difficult, part of the reason its difficult because the victim fears talking to the Police Officer or to the Law Enforcement official but fear retaliation by the trafficker. In some cases, you could have a case where its not just the victim. Its not just the person that is being trafficked, but the trafficker might actually have someone from their family, for lack of a better word, being held hostage and holding it over their head in an effort to enforce them to engage in the trafficking. Some of the Victim Service providers have done a lot of training for the Police Officers. There are cases where theyre working in tandem to help them, when you see someone who is being trafficked, how do you have a conversation with that individual to help them, you know, talk to the Law Enforcement person. But you also to have to take care of what is happening to the rest of the individuals family. So Human Trafficking is frequently engaged in by organized criminal networks, right . Its not just an individual pimp or somebody who has decided to target one person. Its organized crime, isnt it . It could be, yes. It could be transnational, as well. Yes, thats another reason why it would be so difficult to get the victims cooperation. That particular victim might be being trafficked within the u. S. , they might have other family members that are being held outside of the u. S. So at trafficking cases, not typically a oneoff or isolated instance, its these are part of Human Smuggling Networks and sometimes fuelled by drug cartels and people who transact in other illicit activities as well, isnt that right . That was beyond the scope of the work we did. I imagine doj is probably better positioned to answer that question. Okay. Im going to ask miss steinberg to answer that. Thank you for the question. Our experience is that it happens in a wide variety of ways. There are more complicated Trafficking Networks and also might involve smuggling individuals over a border. But then there are also individuals who have, you know, one or two victims they might be trafficking. We actually see wide range of activity that relates to trafficking. Some of which is as complicated as you describe. Some of which is fairly straightforward. It might involve one or two victims. So within that range, though, you do agree that the international Human Trafficking networks are part of the problem. Yes. Senator tillis, do you have any other questions . I know we have a vote coming up. You have been great. Thank you for your testimony today. We appreciate your good work. What were hoping for, miss steinberg, we get that fund up. Because there are a lot of victims and a lot of organizations could use the grand funding to help provide services to victims. My friend former judge ted poe from houston in the house pointed out we have more funding for our pets than we do for victims of Human Trafficking, which is just a terrible contrast. We need to do much better, and fortunately the justice trafficking act was brought bipartisan support and created the new funding mechanism that would make more funds available. So we hope more doj prosecutors prosecute these cases and seek their restitution, and seek the assessments so we can get that fund up. Not only because they deserve to pay it, but also because the victims deserve the benefits of the fund. Thank you very much. The hearing will be adjourned. Reminder if you missed any of this hearing on Human Trafficking, you can watch it online in our Video Library at cspan. Org. Were back on capitol hill later this afternoon for the hearing examining the use of the term radical slam in combatting terrorism. Witnesses include officials from the justice department, fbi, and former customs and Border Protection officer. The Senate Judiciary subcommittee hearing begins live 2 30 p. M. Eastern on cspan3. Over on cspan this afternoon, republican president ial candidate donald trump gives an Economic Policy speech today in monessenw, pennsylvania. Following his remarks well open our phone lines and get your reaction to what he had to say. That gets underway at 2 30 p. M. Eastern on cspan. On june 1st, 1976, the space Museum Opened the doors to the public. Friday marks the 40th anniversary of the museum and American History live tv starts at 6 30 p. M. Eastern on cspan3. Well tour the museum. Well see art tickets including the spirit of st. Louis. Plus, live events a the front of the building. Learn more about the museum as we talk with its director general jr jack daily, valerie neil chair of the department. You can join the conversation as we take your phone calls, emails, and tweets. The 40th anniversary of the Smithsonian National air and Space Museum Live friday evening beginning at 6 00 p. M. Eastern on cspan3 American History tv. Senator richard sell by chairs the committee. This morning we will receive testimony mary jo white. Oversight of the commissions and part of the committees jurisdiction. The sec is an independent agency tasked with protecting investors, maintaining fair, orderly, and efficient markets, and facilitating Capital Formation. The s. E. C. Is responsible for ensuring transparency so investors have adequate information to make Investment Decisions and mitigate conflicts of interest, fraud and manipulation. This regulatory paradigm is one reason why our Capital Markets have long been the envy of the world and the lifeblood of our economy. Excessive and unnecessary regulation however may endanger americas status as the worlds preferred financial center. First and foremost, i believe the s. E. C. Should focus on the core mission. This has become more difficult as the commission has come under increased pressure to expand the mission and cater to special interest. Examples of such efforts include attempts to force the s. E. C. To mandate disclosure on Climate Change and political contributions. These efforts arent new. Its my expectation that it will continue to do so in the future. Chair white, as you pointed out in the 2013 speech, and i will quote you, we make our decisions based on an impartial assessment of the law and the facts. What we believe will further our mission and never in response to political pressure, lobbying or even public clamor. The s. E. C. Must, i believe, continue to adhere to those principles and uphold its fundamental mission. It should also periodically review the appropriateness of its existing rules. For example, while the commission is undertaken work to review equity Market Structure, it is not engaged in a comprehensive review of its rules, even in light of the socalled flash crash which happened over six years ago. I also hope the s. E. C. Will continue to take seriously the importance of strong Economic Analysis when promulgating rules. As we have seen, agencies that fail to undertake sump an analysis in rule making are vulnerable for legal challenges as well as they should be. An agency with thousands of employees like the s. E. C. Should be able to analyze in detail the impact of the rules on the markets, investors, Financial Products and the broader economy. If the cost of the rule outweighs the benefit the rule should be eliminated. If a rule passes cost benefit muster, it should then be implemented by the appropriate agency. The s. E. C. Has a primary expertise in Capital Markets and should be the lead agency in regulating them. Specifically, im concerned that attempts by other federal agencies to erode the s. E. C. s jurisdiction could under mine the integrity and function of these markets. Recent examples of this include the department of labors fiduciary duty rule. The continued focus on asset managers. The sec has 88 decades of specific expertise in these matters. This should outweigh desires of other regulators at the expense of the markets. Chairman white, i look forward to hearing your thoughts on the issues and the future agenda of the s. E. C. Senator brown. Thank you, mr. Chairman. Welcome, madam chair. Good to see you again. Over three years ago, you were confirmed as chair of the s. E. C. And assumed the task of guiding under the wall street reform act about jobs act. They completed the wall street reform rule makings and evaluating how to finish the implementation of the rest. When you last appeared before the committee in september of 2014, you said the staff was proceeding on the outstanding rules. We can expect to see additional rules shortly. Several rules have been proposed and some finalized, many are still incomplete. And particularly the commission is not finished the derivatives rules under title vii of the wall street reform act and the path seems unclear. These rules are important because title vii is a key part of reform to the financial markets. And would do less damage. In isnt entirely on your shoulders or the s. E. C. s shoulders there are certain markets such as credit default swaps that depend on s. E. C. Until the rules are completed, the s. E. C. And other regulators wont have the benefit of a framework that provides transparency and access to market data. Another wall street reform act rule that remains outstanding would prohibit incentive compensation that could lead to excessive risk tacking or significant losses in financial firms. We know what happened during the financial crisis in that regard. The multiagency rule was proposed in 2011, and reproposed last month. Six years after wall street reform became law, this rule still isnt finished. A final rule would provide the market and the public with some assurance that Senior Executives and Financial Institutions wont be rewarded for taking inappropriate risks that could harm the markets and could harm their employees, could harm the economy. I urge you and ore regulators to finish that rule as quickly as possible. At your confirmation hearing you stated you would make strengthening enforcement a high priority throughout your tenure. You said then, and i agree, that, quote, investors in Market Participants need to know that the Playing Field for markets is lemm. And the wrong doughers individual and constitutional whatever position or size will be aggressively and successfully called into account. We see repeat offenders enter into settlement after settlement that seem to have effect. The question isnt what time at what point is the s. E. C. Going to stop handing out warnings and start giving tickets. Finally, i would like to return to an issue that has been discussed many times in this committee. Democrats in the senate have repeatedly asked you to begin work on a Corporate Political Spending Disclosure rule. This is not a plea from a special interest as some on the other side of the aisle might say. This is Good Government policy. When you were last year, you acknowledged the interest of investors and others, unquote, on the issue but you pointed to the low priority of mandatory rule making. I realize this years appropriate limits the work on the rule but shouldnt prevent you from doing anything at all. I hope you begin work. Im interested in hearing your update. Thank you. Madam chair, your written testimony in its entirety will be made part of the hearing record. Youve been here many times. Thank you, mr. Chairman, Ranking Member brown and other members. Let me, before i start, express im sorry to speexps for everyone, my thoughts and prayers are with the victims and their families on the orlando shootings. The commission has been busy since i last testified in 2014. The last three years has been marked by a vigorous enforcement and examination program. Empowered with new tools and methods to protect investors and hold wrong doughers accountable. In fiscal year 2015 alone, the commission brought over 800 Enforcement Actions, an unprecedented number. Secured over 4 billion in orders directing the payment of penalties at an all time high. Performed approximately 2,000 exams of four year high. And more importantly continued to develop cuttingedge cases and smarter, more efficient exams. The strength of our program can be seen in the kinds, complexity, and importance of the cases we bring that span the securities industry include numerous first of their kind actions, and focussed heightened attention on market gate keepers like accountants and lawyers. Significantly approximately twothirds of our staubstantiate actions in 2013 involve charges against individuals. We continue to obtain admissions and in certain indications which we have done in over 40 instances since we changed our settlement protocol. The commission over the last three years pursued consequential rules and other initiatives to protect investors, strengthen markets, and open navenues. Since i last testified, advanced major rules addressing key equity Market Structure issues including controls on the Technology Used by key Market Participants. A transparency of alternative Trading Systems and the consolidated audit trail. We issued a series of proposals. We adopted new rules for crowd funding and smaller securities offerings under regulation a. While also proposing additional avenues for Small Business to raise capital. We finallized major components of the Regulatory Regime for securitybased swaps and we continue to execute a comprehensive review of the effectiveness of our disclosure regime. This work marks the latest phase of extraordinary regulatory efforts by the agency. Both before and after i became chair enlisting all of our policy divisions and offices. The initiatives the Commission Adopted final rules for 66 of the mandatory rule makings of the doddfrank act. The majority of them since i became chair. And senator brown title vii is a major priority for 2016, which im sure well get into. We completed all of the rule makings directed by the jobs act. And we have made significant progress on the rule makings required of us last year under the fast act. While our work enforcement and rule making are perhaps the most prominent examples of the agencys achievements. The i want pmperatives of our m are moved forward each day. The division of Corporation Finance reviews the annual and periodic reports of thousands of issuers each year helping to ensure that investors receive full and fair disclosure about the Public Companies in which they invest. Last year the division of trading and markets reviewed more than 2100 filings from exchanges and other selfregulatory organizations to preserve a fair and orderly marketplace for all investors. The division of Investment Management reviewed filings last year covering more than 12,500 mutual funds and other inve Investment Companies. For many individuals, as you know, invest their hardearned money to save for retirement, college, and other important goals. Our economists in the division of economic and risk analysis produce more than 030 incisive papers and publications in 2015 including two major analysis to help inform our work on Asset Management. This afternoon i will have the privilege to participate in our annual awards ceremony at the commission where we recognize some of the tremendous work from some of our staff. The commission today is a stronger and more Effective Agency and im honored to lead the agency during this time. Never the less, significant challenges remain if were to address the growing size and complexity of the securities market. Its critical that the s. E. C. Has the resources required to discharge our responsibilities. The new ones and the many others we have long held in the face of a growing and ever more sophisticated Financial Services industry. I deeply appreciate that we must be prudent stewarts of the funds we are appropriated, and we strive to demonstrate how seriously we take that obligation by the work that we do. At the same time, our resources are insufficient, and the cuts and limitations to the s. E. C. s budget that the house bill proposes would seriously imperil the progress we have made and diminish our ability to fulfill our mission. More remains to be done, and achieved, im proud of the agencys impressive accomplishments across the range of its responsibilities. For that, i want to, again, thank first and foremost the exceptional staff of the s. E. C. As well as my fellow commissioners, present and past, and i want to thank the chairman, the Ranking Member, and this committee as a whole for your support. Your continued support will allow us to better protect investors and facilitate Capital Formation more effectively ov oversee the markets we regulate and build on the significant work were doing. Thank you very much. Im happy to take your questions. Thank you. Madam chair, i understand that the commission can vote to delegate certain of the authorities to the s. E. C. Staff including enforcement proceedings. Once the commission has voted to delegate, how are you and your fellow commissioners in the Securities Exchange commission made aware of the staffs use of that authority and if a chair is recaused on a specific matter, who is accountable for the staffs use of the delegated authority . The exchange act actually is explicit on this, mr. Chairman, that the commission, as a commission, has the authority to delegate many of its certainly daytoday functions. It doesnt have the power to delegate rule making to the staff. Statutorily yes statutorily done. Obviously we have hundreds and hundreds of daytoday things we must do at the commission, so its important that the staff have delegated authority to act. It safe guards, however, on the delegated authority the commission can review any of those actions. The staff itself can decide to refer something to the commission, even though it may have delegated authority for the commission to decide. And that the review of the commission can be precipitated by any one commissioners desire to do so. Once the Commission Votes to delegate its authority to the staff, its my understanding such delegation remains in place under future commissions and you commissioners dont have a chance to approve existing delegations authority, is that correct . Yes, mr. Chairman. I think essentially the way it works is that if one were to review or change the delegation, it would be up to the chairman to put that on the agenda. Would you whoever the chairman is. Madam chair, would you support an s. E. C. Review of existing delegations including an analysis of their in other words you look back. You do oversight, i hope, in your agency, like we do here. Since ive been there, its been areas ive discussioned with the commissioners. And we have the list of delegations that exist, and so what i have urged my commissioners, if they have an issue with any particular delegation, is to bring that to my attention, and well certainly look at it. Youve often stated, madam chair, that the securities and Exchange Commission is an independent agency. Thats the way we want it to be. Its set up that way. While one can expect some plit votes because the way the commission is set up. There have been many party lines 32 and 21 votes under your cha chairmanship. A former chairman never had a 32 vote and former chairman leavitt would rarely take a matter to vote unless he knew he had a 50 vote. Are there any areas you can work on cooperatively with the other two commissions to reach an unanimous decision, if so, could you give us an example . I certainly, and i think we certainly strive for consensus. We know everything is not unanimous. Everything is definitely not unanimous. They gave me the figure the other day. I havent verified. It i think 65 to 70 of the votes are actually unanimous. Thats still a percentage that havent been unanimous. I think i discussed with you, mr. Chairman, and senator brown probably some of the other members of the committee as well. One thing i found as chairman, even though we strive for the consensus unanimity, indeed, on the rule makings that so many of our mandated rule makings have been, in particular, the doddfrank act, which the controversy surrounding that at the time, i think, was adopted, i think, is continued into the implementation of those rules. So weve ended up, i think, with an extra change of reaching consensus because of that. Madam chair, in 2013, you posted for comment a study on Asset Management by the office of Financial Research that was requested by f sod. It allowed the public an meaningful opportunity to provide feedback and highlighted significant flaws. Given the benefit of Public Comments on that study, will you commit to posting other asked studies affecting s. E. C. Regulated entities. If not, why not . I think certainly at the s. E. C. And i think our other agencies the benefit of the notice and benefit process is enormous. So i think getting that feedback is important. The report youve referenced, mr. Chairman, was report of the ofr. They publicized it. We opened a comment window because we thought it was important to get the public input. If we were in another situation like that ofr or fsoc itself didnt post the studies to make it easier for the public, we would consider that again. A last question in the area of repeating violence violations. There have been concerns about repeated violations by s. E. C. Registered entities. Two years ago a former s. E. C. Commissioner stated with respect to the most egregious and repeat repeated violation by security laws. We need to ask ourselves a fundamental question, should the violating entity retain the privilege of parenting in our Capital Markets . The question to you is this, in your opinion, when is it appropriate for the s. E. C. To exercise the ability to deregister an entity . For you to give an example, that would help. Its enormously important power we have and should wield appropriate circumstances to protect the markets. Integrity. Absolutely. I think you have to look carefully at what the violations have been over what period of time, who was involved in them, obviously. You want an aggressive Enforcement Program to bring cases when they are there to bring, i think. But there can come there certainly can come a point. Im quite open in the interest of strong interest protection of our markets. There comes a point when one of the entities should no longer be registered. And i wouldnt hesitate to revoke their license. Thank you. Senator brown. Thank you, mr. Chairman. Some of my colleagues there seems to be a sort of collective amnesia on this panel, in some cases, and in this body about what happened with the financial crisis. Some of my colleagues, as a result, particularly in the house, but some here, continue to push are if the repeal of the wall street reform act insisting it created more problems in the Financial System than it prevented. A couple of questions, to start with you. Are you concerned by efforts to repeal wall street reform. Do you think its been effective to improve the Financial Stability . I think the reforms under the doddfrank act have been enormously important in strengthening our Financial System. I say that as a collectively i think there is a Financial System is much stronger and resilient and certainly in part because of the actions undertaken by doddfrank. I certainly would not want to see the reforms repealed. Okay. Thank you. Despite the improvements to date that you have mentioned and that are selfevident with the stronger, more stable Financial System, this reform, of course, is a work in progress. My Opening Statement i mentioned the derivatives rules that are outstanding. Im not concerned its taking s. E. C. So long to finish the rules, but also that s. E. C. Is far behind other agencies implementing resumes and similar issue areas. Let my give you two examples. It covers a larger portion of the derivatives market. It made more progress than s. E. C. Even accounting for a few hick ups along the way with far fewer resources. Second, the department of labor was able to propose and repropose and finalize the few di few fiduciary rule. Both agencies were able to adapt along the way and move forward. Why is the s. E. C. Slower than those agencies . What is not working . Well, i think, again, i think what the s. E. C. Was given between the doddfrank act and the jobs act, plus, obviously, all of our various discretionary responsibilities, which are vast, and we have undergone the last few years, you know, a historic level of regulatory activity of great complexity. I think ive said it before about doddfrank, in particular, that and i said it from the day arrived. Im deeply committed to getting the congressional mandates under both of the statutes and the fast act done as promptly as i can. They need to be done well and need to last and need to be adaptable to how our markets change. With respect to different issues on the two you mentioned, i think on the department of labor fiduciary duty rule, thats an authority that doddfrank gave the commission to decide whether to exercise or not. It was not a statutory mandate. Ive said myself speaking for myself about a year ago, after an extensive study i think there should be a uniform fiduciary duty coming under 913 of the doddfrank act. Thats speaking for myself. The staff proceeded to develop outlines and recommendations, but its up to the commission as a whole whether to advance that rule and what the parameters should be. In terms of title 7, in the derivatives market, youre right, the share is a little less than 5 , i think. Its an important part of the markets. Again, before i arrived by way of criticism, i see how it made sense. What the s. E. C. Decided to do with the title 7 rule makings is essentially publish a policy statement that set forth a sequence of when the s. E. C. Would adopt proposals first and finalize the rules before they became effective. So weve been following that road map. I think there couldnt be a higher priority among all of the commissioners. Three of us there now and the other two that left us last year to completing those title 7 rule makings. I think in terms of this regulatory year, thats a very high priority, certainly, to finalize. We certainly finalized a number of those rules since i was last here. In terms of the regulatory mechanism for dealers, im hoping were done by the end of the year. Thank you. We know from during the financial crisis that how important the regulators Work Together industry is good at shifting the business mod toll find gaps, and areas of weakness, and in the regulatory structure, for whatever reason chose not to combine the Financial Agency a agencies six years ago. Fosc but beyond that not combining the agencies and it makes your cooperation with other agencies more important. One other question. Democratic members, madam chair, of the committee have taken a close look at the policies and practices and decisions surrounding the waiver applications the s. E. C. Receives from Financial Institutions. I thank you and your staff for the information you have provided to us to the banking staff that so far, i hope, we can count on you and your team for additional assistance when needed as they make more requests. Absolutely. I think its an enormously important area. As you know, senator, its an area i focussed on the outset of my tenure as chairman. Weve made a number of changes, i think, to enhance the robustness of the process and the transparency of the process. Obviously we continue to look at that or whether there are other enhancements that would make sense, particularly in the area, i think, of when we do not grant the waivers. Because, you know, in terms of making certain that the public knows that there are many cases, including those involving Financial Institutions where the waivers are not granted, but because of the nature of our process that isnt as transparent. For reasons that are historical and good ones. We want to encourage people to come in and talk to the staff about whether they qualify or dont and often what they submit is nonpublic information. Continue to look at aspect of our process. Certainly, since i became chair have directed the staff to keep track of the instances that come into it, assuming theyre not anonymous and obviously a number of people wont apply for waivers. Nay know under the guidelines they would be denied. They would not be granted because of what the guidelines specify. Thank you. We have a particular concern about the lack of transparency on the waivers that are granted the Public Institution violates the law. The s. E. C. Issues a short issue of improving the waiver. How can you assure that the public and which committee and everybody in our society will be able to understand more of what happened and how you bring more transparency when the waivers are granted. Again, on those granted, i think the ones youre addressing now. Not those not granted. They are publicized on our website. They also are subject to in the case of the socalled waivers and the bad actor waivers and some of the other waivers, as well, you know what the criteria are that the staff or the commission considers when reviewing those requests. And i think what is published on our website does march right through what the criteria are and the facts under each one. Again, if theres some enhancement that would make sense, im open to considering it. Okay. Well come to you about that. Thank you. Thank you, mr. Chairman. Chair white, modernizing our Market Structure isn i appreciate the work by the s. E. Krechlt as. Ech s. S. E. C. On this issue. What do you want to achieve this year and how will it strengthen our markets and investors . Its an enormously important area, and as you know a high priority for me personally. Both in terms of some specifics short term reforms, as well as that comprehensive review. Soup to nuts of the entire Regulatory Regime. Were building on, you know, fortunately, the strongest, reliable markets in the world. It doesnt mean they cannot be enhanced and optimized. I think in terms of ive been pleased i always want things to be done sooner. Its my personality among other things. Were concentrating a lot of resources on it. Ive been pleased to date with the work of the msack that we formed early 2015. Theyre tackling those core issues. I think as you know, senator, weve received the Committee Received a recommendation from one of the subcommittees about the possibility of doing a make or take pilot. That is obviously one of the core issues. We are expectationing, actually, a telephonic meeting from the subcommittee to make a specific recommendation on july 8th. So i look forward to that. I think thats a very important area. We also, ive done a number of things. A lot of things have actually already been done in the Market Structure arena. One is, obviously, an area of resilience si of the markets, shortly after i testified in 2014, we adopted s. C. I. , which is the systems compliance and integrity rule making that is aimed at the critical market infrastructures and enhancing their resiliency and responses to incidents when they occur. That rule is now just recently in the last few months but subject to examination for compliance. And thats enormously important to get it done. Its already done. I expect in this year rather imminently well propose a rule to provide Greater Transparency and order routing for Constitutional Orders as well as enhancing the existing disclosures that are made to on the retail side. Again, thats very Important Information to our markets to ensure fairness to see what your agents are doing as they, you know, execute your order. So those are some examples. So you referenced the telephonic meeting on july 8th. Thats a report from msoc you were referencing . Yes. That will be a further discussion by the full committee of the subcommittees recommendation on the make or taker pilot. Were taking up other issues at the meeting. Following that meeting, do you expect that the commission would be in a position to take the next action and move forward or when do you expect it could get to a Commission Decision . Well, i mean, the next step is the staff of the commission and the commission, you know, to take in the recommendation from the committee. But it will be up to the staff and the commission as to what to do, what the parameters should be. I do think its an important to do this in a welldesigned pilot. It does touch on a very important issue where we need the data. Do you have any feel for about when the commission i dont. I cant give you a specific time. Its a this year priority to move it along as soon as we get the recommendation. Thank you. I say move it along and consider it. Thank you. I want to thank you for your past efforts to improve the transparency of the Financial Stability Oversight Council process. By seeking Public Comment on the report by the office of Financial Research on Asset Management industry. There have been several hearings on the financial instability Financial Oversight Commission focussed on ways to improve transparency and communications. In the subcommittee hearing that senator warner and i held last year, the witnesses agreed that fsoc needed to provide actionable guidance on how they can derisk and ultimately shed their designation label. What has been referred to as an offramp. Do you agree it would be appropriate to take additional steps to increase transparency, accountability, and communications in the fsoc process . I think thats something that we have to be committed to doing as we go forward. Thats not something that may be completed at any point in time. I think fsoc is committed to looking for ways to enhance the transparency of the process. The off ramp process is an existing process under the fsoc rules and guidance. Its an annual process, but i take your point about Greater Transparency and what the factors are that may be involved in that. Thank you. Senator markly. Thank you, mr. Chairman. One of the most egregious things in the lead up to the meltdown were firms that put together securities and then they sold them saying these are the best things since sliced bread. They were privately taking bets that securities were going to fail. Carl levin championed an end to this egregious conflict of interest and section 621, here we are six years later. We dont even have a draft rule. Why not . This is enormously important rule. I obviously know well the range of transactions that youre talking about that it was intended to address. As i know, you know, senator, there was a proposal issued in, i think, september of 2011. So which is still outstanding where we got tremendous comments. This was actually before the s. E. C. Also adopted its economic guidance. So some of the comments we got must do and i agree with that. And very intense good Economic Analysis of this. Also got comments it wasnt tough enough or it was too tough or it swept in too much or didnt sweep in enough. Its proved to be much more complicated than certainly our experts and the agency envisioned. I think we asked in that proposal a hundreds questions. And for us, even, thats a large number. I mean, you know, who is covered. What is covered . And all sorts of, you know, various interpretation issues including with respect to what should the exceptions be, which is also vied there. We had a recent issue come up as late as december of 2015 as to whether certain Fannie Freddie guarantees would be handled because of the concern that those securezations could not continue, at least under the parameters of the proposal. So it is one where the staff is working very hard to get a reproposal done as soon as it can. Its proven to be very, very difficult to draw the right lines. This is one of the most direct examples of unacceptable wall street behavior. Our Congress Took a very clear stand wall street desperately wants it to never happen. The s. E. C. Has gone year after year after year failing to get it done under the argument its just too complex. Its just too difficult. I dont think anybody in america buys that this type of conflict of interest is too difficult. Instructions have gone to the s. E. C. , the s. E. C. Has failed the public on this issue and allowed this type of conflict of interest practice to continue. I think its absolutely unacceptable, and i would have said the same to your former chair back in 2013, but here we are three years later, now the responsibility rests with you. Let me turn now to the issue of political spending being disclosed by corporations. A million Public Comments have been received supporting disclosure because the owners of the company, the stockholders feel like if the company is spending their money on political activity, they have a right to know. Under the concept of money if you dont get to know how your own money is being spent its really stolen. Thats bad enough but its material to what investors understand about the future prospects for that company. What are they advocating for . What are they lobbying for . Who are they lobbying for . Who has which philosophies or which positions . And so both from the viewpoint individuals knowing how their own money is being spent and from the view of material issues related to the future performance of the company, it is imperative there be a disclosure. There was such a plan on the agenda when you took the chairmanship, but in october of 2013, you took it off the agenda. Not even to hold the conversations to prepare on this. Its an issue of freedom of speech. Its an issue of knowing how your own money is being spent. Its an issue material to the future of the company. You took it off the agenda. Why would you do such a thing . Well, let me say, first, i deeply respect and understand the deep interest in this issue on all sides, and i think its, also, important noted that if the issue is material in the context of a particular company, as we sit here today, that would need to be disclosed under the federal Securities Law. We have through our proposal rule 14a8 avenues to share it and they make great use of that avenue. The average approval for proposals, i think last year was about 26 approval rate. And some companies over the years using that avenue there have been a few majority votes by the shareholders and the companies have generally gone ahead and made the disclosures voluntarily. Certainly in Large Companies a number of them involuntarily disclose political contributions has grown. More than half of the s p 500 now provides that disclosure voluntarily, i think is a good thing. What was on the reflex agenda put on there in late 2012 and there when arrived was an item reflecting that the division of Corporation Finance would research and consider whether to recommend a rule proposal on this subject. My predecessor wrote to congress in response, actually, to a congressional investigation on this issue that neither she nor the commission nor the staff reached, you know, any conclusion about that and no one was actually working on a rule proposal at that time. What i did when arrived is looked at certainly after the agenda was due, so i basically carried forward, for the most part, what was on the previous agenda, including that item in the fall when i had been there a little longer, i had a chance for the staff to do a deep dive of all the items on the reflex agenda. When the rule making agenda was an egregious affront to the core issues of our republic. It came after pressure. Political pressure. I think its unacceptable. I think you should put it back on. That item and about 20 other eye tempts on the previous agenda i removed for reasons i said. It was never to advance. Thank the d. O. L. Over the fiduciary rule. Analysis of the cost and benefits of alternative approach is the rule as recommended by the s. E. C. And required by the executive order. But the staff economists from both agencies had disagreements overrule. In fact, the report found that the disagreements reached the point of the Labor Department staff writing, and i quote, we have now gone far beyond the point where your input was helpful for me. If you have nothing new to bring up, please stop emailing me about this topic. Chair white, how do you believe the s. E. C. Can structure a uniform foo duu. N uniform fiduciary rule over the fundamental goals of the rule . I think what ive said in the past is i believe that there should be a uniform fiduciary duty rule when giving securities advice to at least Retail Investors. Thats really under our rules. The department of labor and s. E. C. Are separate agencies. So our rules arent identical even before this rule was adopted in certain areas where our registrants may overlap with theirs. In terms of the department of labor, s. E. C. Staff interactions on their rule proposal there was a prior one as well, i think the comments you mention is from 2012 actually on the prior proposal. I wasnt here then. But i will say that the s. E. C. Staff did give substantial what we call Technical Assistance to the dol staff on the current now final with you but then proposed rule, including Technical Assistance on our own rules and what they provided but also the likely or the possible is better word i think impacts on the availability of reasonably priced advice by brokers and what the impact would be on the broker model itself. The nature of those exercises weve done it with other agencies, too, on other rules when we have the Technical Assistance to provide was not really to Reach Agreement but to make sure we were giving our best Technical Assistance and input to the department of labor which then obviously made the decision as to what the proposal should be, put it out for notice and comment. I think notice and comment was focused on some of those same issues. Would it be fair to say based upon the rule thats in effect right now coming out of dol, would it be fair i dont want to put words in your mouth, but is it fair to suggest there would be concerns yet as to the availability of Investment Advice being made available to the smaller investors and perhaps a limiting of some of that advice right now based upon the traditional ways that we provide Investment Services to some of your smaller investors in the United States today . I mean again, that is an issue again i am very focused on that issue myself in connection with our work on a uniform fiduciary rule. I think certain changes were made i think in response to that concern and possible impact. But i think to some degree this is true of our rules, too you need to see what happens as rules are implemented. Certainly we are available to provide whatever help and assistance we can to our registrants if they run into a situation of conflict with our rules. Nobodys come to us yet for that. My concern is that sims as we try to protect individuals we actually limit the availability to them of opportunities to invest. One other area. One of the s. E. C. s goals is to facilitate Capital Formation. One recent trend along these lines is the increase of private shares which can have less Disclosure Requirements than private offerings. Private offerings can only be sold to qualified highnet investments. In 2014 more than 2 trillion was raised privately, private stock issuances under the s. E. C. s regulation d accounted for more than 1. 3 trillion of this amount. In comparison, registered Public Offerings amounted to approximately 1. 35 trillion in 2014. Are you concerned by the fact that issuances of private stock has now outstripped public shares sold to all Retail Investors in terms of new issuance . Doesnt this kind of point to a trend here of kind of the guys who can afford the the guys who are capable of investing large amounts of money are basically providing a lot of the new public issuances theyre receiving and smaller retail folks seem to the knob in that position . Isnt there something going on here thats maybe not moving in the right direction . Again, we do monitor both private and Public Markets very closely and continuously. We have a triparteid mission to facilitate Capital Formation. I dont see those three pieces to be in conflict but they certainly need to be taken into consideration in terms of everything we do. I think the point youre also making is on who should be within the definition of a credited investor which drives a lot of what happens on the private side of the markets. Clearly from our inception that concept is meant to protect investors, protect investors who may not be able to protect themselves. That obviously hits the core of our Investor Protection mission which we feel obviously very strongly about. In terms of the Public Markets, one thing i do think we have responsibility for we certainly are looking at this constantly is whether by virtue of our rules, is there something about our rules for the Public Markets that is unnecessarily driving away public offering. We look very closely at that. With the jobs act, the ipo, onramps, things that make it somewhat easier to do that. Were still focused on Investor Protection but those whole range of issues deserves and is getting attention. We had a series of recommendations on that and that hits some of the issues youre mentioning. Mr. Chairman, thank you for your time. Chair white, id like to bring you to the plight of the 3 1 2 million United States citizens on the island ever puerto rico. This is a situation where puerto rico finds itself paying 33 cents of every 1 that it has towards its debts. The government has been forced cut back schools, essential services, hospitals with no power are closing doors. Island is losing at least one doctor each day and we have one of the most significant migrations out of the island to the mainland in quite some time. Which underlines the critical importance of the congressional solution that will allow the government to restructure its debts and protect the people. But beyond those reasonable and Necessary Solutions that should come from the congress, the people of puerto rico deserve to know whether illegal activity by advisors to puerto rico and its municipal entities controls and contributed to the current debt crisis. Doddfrank explicitly mandated that the s. E. C. And the municipal securities rule making board protects municipal entities. And yet despite the widely acknowledged problems on the island, neither the s. E. C. Nor the msrb has held one hearing. Commission Meeting Initiative werent giving any particular attention to puerto rico. At least to my knowledge. Broker dealers and underwriters all subject to the regulations that operated in puerto rico, have they done so free of conflicts of interest, whether they package and sold bonds worthy of the savings of hard working investors and whether theyve acted in the best interests of the port recab government and people. How will the s. E. C. Pursue this element of their crisis . I couldnt agree more with the state of that crisis and what our government collectively in my view needs to do to address that in a positive way. But in terms of the s. E. C. s jurisdiction there, we have actually closely attended with respect to investments in various funds with bonds that may be at risk in terms of Investor Protection. We put out guidance on some of that from our Investment Management division. We also have brought there are two i think public Enforcement Actions that have dealt with brokers who have misled investors about the riskiness of those bonds. In puerto rico . Yes. Yes. Both of them. One in i think this year and one in 2014. I can give your staff details of that. Again i cant comment on specifics of anything ongoing that were looking at. But i think i can say that were very focused on the issues that you raise. So you know, several cleeg colleagues of this committee and others have joined me in a letter to you and the commission urging you to be not just a cop on the street on wall street but also in san juan, and to make sure that those who may have contributed to crisis are held accountable. So i look forward to your continuing work in that regard and would like to be advised of whats happening when it is available to be public. Secondly, back to the question of corporate political spending. I continue to believe that transparency and disclosure to shareholders is the utmost importance both as a matter of Corporate Governance and Investor Protection. And its not just me. 1. 2 million americans have employed the s. E. C. To act by virtue of their commentary during the rule making. Its been nearly six months since i along with 96 members of congress wrote to you asserting that the s. E. C. Retains the authority to take critical steps to prepare for a possible rule on the issue of corporate political spending. As we indicated in the letter, we expect and continue to expect the agency to move forward with plans to prepare for a rule making. Now i know that the 2016 omnibus act is seen by the commission as preventing them from taking that type of action but that action talks about specifically issuing, implementing or finalizing a rule. It does not speak to preparing a rule for that moment because i can assure you that that provision will die. That provision will die. We need not wait for it to die when 1. 2 million americans have said to you probably in an unprecedented number that they regard. So i hope id like to get from you a sense of whether or not we have pending nominees to the s. E. C. I dont care for the way either of this emanswered me on this question. Id like to know are you going to at least prepare and respond to those 1. 2 million americans and nearly 100 members of congress who believe that you should move forward in this regard . Again, you may have heard my answer to some of senator merkleys questions. There are very strong views on both sides of this issue and ive mentioned how the disclosure is developing through our proposal and the shareholder process. But. Issue of the s. E. C. Doing a rule making to mandate political disclosures by all Public Companies is not on our red flags agenda. With our without the appropriations language the priorities that we are pursuing and pursuing as hard and fast and well as we can are really the ones ive outlined since my early days here which are the mandated congressional rule makings and certain of the Mission Critical initiatives. Ive talked about Asset Management and equity structure. So i think thats the status now. I say that with a full appreciation of the deeply held views on all sides including by i think it is 2,000plus unique comment letters weve gotten on the petition that you reference. Ill just close, chairman. 1. 2 million americans. I think have we rarely had the s. E. C. Seen that extent of commentary. It tells you the incredible importance that people believe in the nature of unlimited corporate spending at a time in our National Politics that determines decisions in every aspect of our life. So i think that should be a far greater level of consideration by the s. E. C. Than it presently is. Thank you, mr. Chairman. Madam chair, before i recognize our next senator, we have over 300 Million People in this country, so 1. 6 million would be about. 3 . I hope that you as chairman of the s. E. C. Or any agency would not react to generating mail from republicans or democrats but would do whats best for the country and also under your jurisdiction, it is my understanding this is under the basic jurisdiction of the federal Election Commission for what its worth. Senator toomey. Thank you, mr. Chairman. Chair white, welcome back. You oebdzbserved a few moments one of the opportunities of the s. E. C. Is to facilitate Capital Formation. There is legislation that i think would be very constructive to that end. It was introduced in the house by congressman mulvaney. What it would do is streamline some of the regulations affecting Business Development companies, bdcs, and included in that is a modest increase in the lefb r lefb r leverage theyd be permitted to use from a 1 to 1 ratio to a 1 to 2 ratio. If this is adopted it seems to me bdcs would be able to provide loans to small and Medium Sized Companies which are finding it more difficult to access bank loans given the regulations of doddfrank. Two also allow better returns for investors potentially with some added risk that would be fully disclosed to those investors. And it has demonstrated extremely broad bipartisan support in the house. I think this bill passed 534 and it was included in legislation that passed the house floor overwhelmingly. My understanding is that you have some concerns about the leverage component in this. I wonder if you could briefly because i have limited time tell me why youre concerned about the increase in the leverage of bdcs. Yes. First, let me just say that i think bdcs have been very good vehicles for growth. They were designed to be that for developing companies that might not otherwise be financed. The current reality is that Retail Investors have hold the majority of those shares. That always raises our Investor Protection antenna. We have worked over the years and the staff to try to facilitate bdcs operations because of their patchwork of regulations because of their exemptions from some of the Investment Company act provisions. I first got here in october of 2013. There were some changes made in the bill which i think improved it. I appreciate those. I recently also have written a letter late last year to chairman hensarling and Ranking Member waters. I still have Investor Protection concerns. Or i wouldnt have written letter. Whats the concern . One is leverage. What about it . It doubles the leverage which means your up side and Downside Potential are obviously multiplied or multiple and i think its a higher level of leverage than any sort of counterpart kinds of funds. Secondly, i think it allows more investment in Financial Institutions than was originally conceived and allows investments in registered Investment Advisors. Let me ive got very limited time here. So it is true that it increases the risk profile increases the exposure. But so does investing in a bank. A bank is a highly leveraged entity. Retail investors are allowed to buy securities on margin. Do you support allowing Retail Investors to continue to buy retail securities on margin . Im certainly not opposed to that but i think there are more issues with respect to this bill and risk with respect to this bill than just that. Thats one of them. Okay. I thought leverage was the main concern. I would simply observe that there are many, many opportunities for an investor to take on leverage if an investor sees if it to do so. Buying options, for instance, can create the equivalent of enormous leverage. Much, much more than this very limited increase that would be, after all, managed by a professional managed company. I would really urge you to consider that among the various ways a Retail Investor can achieve leverage, this would be a very modest way. It is heavily regulated, run by professionals and the up side benefit i think is very significant. Let me touch on another item here. I think the s. E. C. Has a proposed rule that would govern the use of derivatives by registered Investment Companies. Of course derivatives are used for a variety of reasons, a achieve fund objectives. It is all disclosed, it is all articulated. If the s. E. C. Were merely consolidating previous guidance letter, then i rather doubt we would have seen the volume of comments that have resulted. In fact, i think there are some things new. One that i am concerned about is that the exposure thats used to cap the amount of derivatives is based simply on the aggregate notional amount of those derivatives. When in fact notional amounts are a terrible proxy for risk. They dont measure risk at all. So why are we using the notional amount to determine the limit on these Investment Companies derivative holdings . I think thats precisely one of, among several, important issues that we teed up in the rule proposal and youve point out weve gotten a lot of comments on, which the staff is very thoroughly going through as they consider what their recommendation will be for the final rule. Thats one of the probably one of the most frequently commented on aspects of it. Not all critical, mind you. But a number that are for reasons you state. So is it your intention there will be some modification here and there will be a measure other than simply that meaningless Notional Principal amount . I cant get ahead of the prois he s process but the nature and notice of our comment process is that we very seriously consider all of the comments and try to basically propose a final rule that is optimal and better than our proposals. Thank you, mr. Chairman. Senator donnelly . Thank you, mr. Chairman. Good morning. Thank you so much for being here. In 1982 the s. E. C. Adopted rule 10b18 to provide a safe harbor from market manipulation liability on certain stock buybacks. Buybacks could have been considered market manipulation back then. Recently in my home state of indiana, 2,100 workers were let go by a highly Profitable Company in order to get 3 an hour jobs to mexico. The ceo said returning cash to shareholders continues to be a top priority. Were targeting 22 billion of total shareholder returns through share repurchasing and dividends through 2017. Of that 22 billion, 16 billion will come in the form of stock buybacks. 16 billion in stock buybacks while firing 2,100 workers in indiana in order to get 3 an hour jobs in mexico to help fund the stock buyback. I will also note that the savings they get from this are less than onehalf of 1 of the amount of the stock buyback. So my question is, in 1982, this could have been considered market manipulation. What does the s. E. C. Think of actions like this now . Well, the safe harbor rule that you mention does not imm e immunize market manipulation if it occurs. It is basically designed to impose some rules to at least try to prevent market manipulation. But in terms of nonmaterial publication, fraud action can be brought. Safe harbor doesnt deal with that at all. So im acutely aware of the sort of whole set of issues with buybacks. Gotten a lot of attention in a lot of situations so were focused on it. Let me ask you this. Did the s. E. C. Should the s. E. C. Play a larger oversight rule in overseeing stock buybacks as this has been funded by firing American Workers . Well, again, without i take your point completely. I think the s. E. C. I dont think has the authority to tell a company how to spend its money. What we can do though and we are focused on doing because we also have Disclosure Rules with respect to buybacks that provide transparency to investors and the public, frankly, of companies that buy back at least shares registered with the s. E. C. Under 12g and we are addressing that issue in our disclosure effectiveness review and our recent let me ask you this. Do you think this was the conduct envisioned when the rule was changed back in the 80s . Well, again, i think it is very not sure what the conduct that you are describing. The way you are describing it im not doubting it at all is obviously a horrific set of events and had obviously very significant, unfortunate negative consequences. But again what i think what we designed with our rule making and we are looking at it again to see if we cant do more is to avoid market manipulation which is within our jurisdiction. Well in the s. E. C. s eyes, who is the Corporate Responsibility to . Just the shareholder . Do they owe a duty to the entire corporate enterprise, including workers . What is the corporations responsibility in the eyes of the ses. E. C. . Who is it to . The fiduciary duty of the board, for example, and the officers is to their shareholder. But by my saying that i dont want to exclude that i dont think there are duties and responsibilities does the s. E. C. Assume that they have any responsibility to their workers or can they just fire them willynilly . That is not a subject thats within the jurisdiction of the s. E. C. Unless it is something that by virtue of what is within our authority to do has a positive impact on that. When you look at this, i think a big part of this is corporate shorttermism. I dont know that thats a very technical term, but it is the reality of life. I met with these workers this morning. They were making 13 an hour. Their ceo made 11. The ceo before him took over 150 million out on his last day and theyre making 13 an hour on a very, very, very profitable plant. And theyre fired so their jobs could go to 3 an hour in mexico to help fund the stock buyback. Dont you do you inherently see something wrong with this Business Model . Is this the American Dream that we all fight for . Is this what the s. E. C. Expects in conduct from the corporations that you regulate . Well, i mean what we expect from corporations we regulated, frankly, certainly the citizens expect from those we dont regulate also is fairness to not only the shareholders and fiduciary duty they owe to shareholder which is in our direct bailiwick but also to their employees as well. There are studies out there on the buybacks and the detriments that go both ways depending on the context of the particular company when theyre buying back, what theyre doing with their funds, what they have to do with their funds and so forth. But i take your point. Thank you, mr. Chairman. Senator cotton. Thank you. I want to talk a little bit about fnra and its structure. Defined as a selfregulatory organization. Is that correct . Yes. Does fnra operate with a mandate from the federal government . Is. Fnra is a selfregulatory organization that is a Membership Organization. But it is certainly an organization that is primarily responsible for the surveillance and regulation v brokerdealers. Does it use tools similar to or typical of an independent Government Regulatory Agency . Certainly on its example and enforcement side. They have tools we dont have, frankly, because it is a Membership Organization that we cant do that they can. But they certainly use surveillance tools, enforcement and exams which are similar. And they make rules that will govern the conduct of their members . They certainly make rules. Many of them are subject to s. E. C. Approval. Are there any other private organizations that are similarly structured and oriented within the Securities Law space . Not at the present time. What sort of input to your knowledge to finra members have into finras regulatory policy agenda . I dont know the specifics of that. Obviously they have a Board Structure and they obviously are Membership Organization. What authority does the s. E. C. Have over the finra board . We certainly oversee finra. We inspect finra. Our exam staff does on various issues. Some of their programs. Obviously we have some authority over their rules as well. Some of their rules. Do you have the power to appoint Board Members . No. To remove Board Members . No. So finra exercises investigators and prosecutorial functions related to s. E. C. Rules, federal security laws and its own rules . Yes, generally speaking, yes. Theres some exceptions to that, but yes. Are those functions executive power, in your opinion . Theyre not obviously i know this is an issue that people talk about all the time but theyre not a government entity. But im not the answers i gave are accurate i believe in terms of their powers. To your knowledge does finra employ paid lobbyists . I dont know. Thank you. Id like to turn to a separate topic, shareholder activism, as it is sometimes called. On a number of occasions you have commented on the role ha economically motivated investors play in the Capital Markets. In a speech last year in new orleans, you noted that an intense debate is taking place in the business, legal and academic communities as to whether activism by hedge funds and others is a positive or negative force for u. S. Companies and the economy. In that speech you also said that the s. E. C. s role in any given contest between shareholders and boards of Public Companies is not to determine whether activist campaigns are beneficial or detrimental but rather to ensure that shareholders are provided with the information they need and that all play by the rules. So putting aside the question of any particular dispute, any particular company, any particular investor, do you believe that unbalanced engaged shareholders provide critical Market Driven checks and balances to provide greater corporate productivity and management accountability . Thats a very broad question. I certainly think they can. Aafn youve spoeb favorably in the past benefit of cost benefit analysis. Are you concerned about some appeals to a motion that we see from some involved in the debate about socalled activist investing which is sometimes portrayed as shortterm investing . The s. E. C. Is an independent agency. I think i am an independent head of that agency so i think it is very important for us to keep our eye on the ball and make decisions based on the merits which i think we do. In this space you are committed to developing rigorous Economic Data which exposes limitations on marketplace participants or would those changes be proposed and adopted . Certainly any of our rules are subject to that Economic Analysis. Thank you for that and for your appearance today. Thank you, mary jo, i appreciate the work that you do. I appreciate you taking the blame for a lot of stuff but i want to talk to you about the commission right now. How many members are active on the commission . How many members do you have on the commission . We have three. Its my understanding correct me if im wrong its been that way for about the last eight months. Right . The last want me to give you the hours and minutes . The last six months. Is it true that since youve only got three, any 1 of those 3 can say if they dont like a potential vote that might be coming up, just stay away and then you dont have a quorum and then you cant work. As a commission of three, we have to all three commissioners to do a rule making. So any one of them can walk away from the table and are you sunk. Right . Had thats pretty good power. They could but i think all three of us are very focused on getting the work done, too. Thats good. What about your staffing . How are you staffed up . Do you have adequate staff . I think the s. E. C. Is significantly underresourced agency for our responsibilities. Would that change if you became a selffunded agency . It would. Could you give me sort of have you run any are you 20 down . 30 down on staffing measures . I mean ive certainly talked mainly i suppose the context of our ability to cover on the examination side Investment Advisors which are obviously enormously to investors, particularly Retail Investors. Ive also talked about how we are so outspent on the i. T. Side by those that we regulate that in those areas weve done some analyses but again, what i try to do is i respect the appropriations process, the congressional oversight process and try to make at best case i can for more adequate more and at kwdequate resources. Look, theres been ten people speak ahead of me and some of them have been very critical. Some of them on my side of the aisle have been very critical about you not doing some of the work thats assigned. I could be critical, too. By the with a i ay i am. But the fact is you have got to deal with the hand thats dealt to you and the hand thats been dealt to you is a pretty weak hand. Do you agree if you had five more commissioners youd be much more effective . The answer is yes. Certainly being staffed up would accomplish that. So we had a fiduciary rule that several have talked about that got put out by the dol. The i was critical because i thought this was a job you should have done. I think if you would have been fully up, you would have gotten it done but unfortunately, that didnt happen. Are there any flaplans to get t rule i am committed to getting it done because i think it is of enormous importance but i also have made clear how difficult and long road that is under section 913 under the doddfrank act and that im one vote. Yeah. And so fair point. Its been documented there was some differences between the ses s. E. C. And dol when that rule was put out. I dont hear you saying it is going to be done before this administration is out the door. I am committed to moving it as fast and well as i can but i cant give you that commitment, no. In all practicality it is a longer route than that. Okay. So weve got the dol rule. The question occurred to me, do you have to enforce the dol rule . We do no the. So who enforces it on investment, advisors and broker dealers . I mean there unfortunately, their rules are their responsibility. So the dol enforces the rules on all investment, advisors and broker dealers. They would enforce their own rules with respect to traditionally wasnt that a job for the s. E. C. . Not as to their rules, no. No. But as far as investment and still is. But except not with respect to their rules but with respect to our rules. So tell me how this is going to work. I mean practically how is it going to work . I mean i think it is again, independent agencies, independent rules. Weve had before this rule rules by dol and rules by the s. E. C. That overlap, so to speak. Weve managed our way through that pretty well. We clearly will watch this as it goes forward and if issues arise, well certainly be available, im sure dol will be available to coordinate if a conflict should develop. And if and when i hope we go forward with our own rule making obviously well coordinate with them about any new issues that might arise with respect to that. Appreciate it. Mr. Chairman, put a few more questions on the record but thank you very much. Senator moran . Chairwoman, thank you very much for your presence today. Weve had a conversation in the appropriations process. I want to continue to ask you about deals with regulation of the National Marketing system and the question i have is whether the nms plan governance model should be reformed to reflect evolution of our markets and add additional participants as voting members. The s. E. C. My question is, does the s. E. C. Currently have Legal Authority to approve the addition of Additional Market experts as voting participants in the governance of n ms plans . Subject to our overall srl rule process. One thing i should mention, we actually have recommendations coming from our the subcommittee of the equity Market Structure Advisory Committee on this very subject. But we essentially are typically in the position of approving a rule filing. But we could also issue orders to solicit rule filings. Maybe theres more to this story than me just asking you whether you have the authority. Is there something in the works . Can you bring me up to speed on this topic . It certainly is a topic that the staffs focused on, so is our Economic Advisor Structure Committee and our trading venues subcommittee and thats one of the topics indeed that they discussed at their last meeting with the full committee. And is or may be the subject of recommendations. Do you have any personal thoughts on this topic or are you just waiting for those recommendations . Im very well aware of the issues. I know some accommodations have been made which obviously other participants, advisory participants have not found sufficient or satisfactory. So it is an issue i am focused on. It is an issue i continue to consider whether and what changes, if so, should be made. I want to follow up a bit on the senator from arkansass conversation about finra oversight. I noticed that finra appointed a new ceo yesterday who is a former employee of the s. E. C. I guess my question is, how do you satisfy the need for congressional oversight of finra . Is it just a matter of we have oversight over the s. E. C. And the s. E. C. Has oversi oversight over finra . Tremendous publicer is advance. We work very well with them. I know rick i think youre telling me that my assurance is that you are watching over finra and we need to watch i know you wouldnt say this but we need to watch over the s. E. C. Maybe you would say that. No, no. It will happen anyway, right . But, no. I think no. I think that that is correct and i think it is also i guess the other part of my answer was that you have used your position to encourage finra to be cooperative with congress, open and available to us. That would be useful . Yes. Thank you. Mr. Chairman . Senator warren. Thank you, mr. Chairman. Thank you for being here. As you know, the s. E. C. s mission is to protect investors and our Capital Markets and requiring companies to disclose information is a critical part of that mission. Publicly traded Companies May not like disclosing potentially embarrassing or damaging information, but the s. E. C. s job is to look out for investors, not for Big Companies. Now there is a lot you could be doing to protect investors. There are still 20 mandatory doddfrank rules from 2010 that the s. E. C. Hasnt completed and there are more than 1 Million People, including countless investors and former o s. E. C. Commissioners pushing the agency to require publicly traded can ps to disclose their political contributions. But instead of moving forward on issues intended to help investors, youve actually headed in the opposite dregs. Since your first year in office, youve dedicated significant s. E. C. Time and resources to a project you invented and called the disclosure effectiveness initiative. According to a 2013 speech you gave, your big idea behind this project is that the s. E. C. Might be requiring companies to disclose too much information. Causing investors to suffer from something you Call Information overload. Im all for eliminating redundant disclosures or improving the ways information is presented, but honestly i have never heard of the concept of information overload in the context of investing in stocks. Ive never heard the idea that investors actually want less information that theyre getting. So i have a Pretty Simple question. The s. E. C. Is an Investor Protection agency. So when you launched your project, what evidence did you have that information overload was a real problem that investors wanted you to solve . Its an issue, senator warren, that the commission has been looking at for really decades, among others. But the purpose of disclosure effectiveness it wasnt invented by me. It was basically in response to a congressional mandate to do a report that reviewed our entire im sorry. When was this report that you are talking about . It was i think presented to congress i think at the end of 2013. Now wait, are you talking about the jobs act report . Yes. Because that one i actually looked at that. And what was asked of you was if the s. E. C. Reviewed one subset of disclosures to see if that subset should be modified as they apply to one subset of companies, so called emerging growth companies. Your project has gone way beyond the boundaries identified in that law. Yeah. Those are very broad swath but thats not the point of the project. Weve been for decades at the s. E. C. Is my point undergoing disclosure effectiveness review. I absolutely agree that there is nothing more important my question is the initiative called the information overload is what you identified. I just want to know what evidence you have that this is a real problem, that investors have come to you and said were worried about getting too much information. First of all, the review is not limited to duplicative or overloaded information. The review of the 2012 jobs act. No, no, our review. It is meant to be more meaningful to investors. Weve also gotten comments recently from all kinds of constituency, including our investor Advisory Committee, about identifying and really not objecting to removing things that are repetitive, duplicative, not useful. And the purpose of this review is to make disclosure more meaningful for investors. I started this by saying, i dont have a problem with getting rid of duplication. I dont have a problem with making it more effective. The question i asked you about is whether or not the socalled information overload is a real problem identified by investors that have come to you. Lets be honest about this. I cannot find and you have not produced a single investor who has complained to the s. E. C. About receiving too much information. Investors dont want less information about the companies where they put their money. In fact, i think thats ridiculous. The s. E. C. s own investor Advisory Committee, which includes everyone from hedge funds to Pension Funds to Retail Investors say recently that the current amount of disclosure here was their word is appropriate. So who wants less information to be disclosed . Pretty clear the National Chamber of commerce which represents the giant companies that have to do the disclosing. The chamber has produced a factfree report whining about this nonexistent information overload problem in 2014 shortly after you launched your initiative. Information overload is a problem that was invented to justify a project aimed at making life easier for Big Companies and harder for investors. In fact, the s. E. C. s head of the Corporation Finance division and the lead on this project, ed higgins, kind of let the cat out of the bag in 2014 when he said in a speech the aim of this project was to reduce the burden on companies, consistent with our mission of Investor Protection, wherever we can. Now i recognize that Congressional Republicans put language into the mustpass highway bill at the end of last year that asks the s. E. C. To review disclosures with an eye toward eliminating ones that are unnecessary. Of course that doesnt justify the s. E. C. Dedicating resources to this project for two years before that, but nevertheless, given the views of your own investor Advisory Committee, that the current disclosures are appropriate, do you agree that the supposed information overload problem does not exist . No. I think if you go back to even Thurgood Marshall years ago in defining materiality under the federal Securities Laws, the concern was expressed about too much information could sort of cloud the meaning. I think youre describing the review in a way thats narrower than its intent. I think one of the most important things about a disclosure effectiveness review were listening to everybody. Were talking also about adding information that needs to be added for example on foreign taxes and other things. But it is also the manner in which the information is being provided to investors given how which is a huge were over our time so let me just stop you there. I have said now three times i think in just this brief exchange, im fine with cutting out duplication. Im fine with making the information clearer. And as should be clear, im fine with providing more information. What im trying to identify is something that you specifically have targeted and talked about. I am frustrated that, at your direction, the s. E. C. Has apparently spent two years trying to address a problem that you have no evidence exists, instead of making up work to help giant corporations, the s. E. C. Should do its job. Starting with the 20 required ru rules under doddfrank that still arent fixed six years after the law was passed. Your job is to look out for investors, but you put the interests of the chamber of commerce and their big business members at the top of your priority list. A year ago i called your leadership at the s. E. C. Extremely disappointing. Today i am more disappointed than ever. Thank you. Im disappointed in your disappointment and could not s agree disagree any more with your characterization of what were trying to do to improve our disclosure regime for investors to make it better. When you bring the evidence of this socalled information overload that you have initiated, then we can have more i would suggest reading the s. E. C. Concept release for a range of issues we are addressing, including that. Id like to see some evidence that there really is a problem here. Senator warner. Thank you, mr. Chairman. Chair white, it is good to see you again. I want to move to another area of a concern that i have. Ive seen evidence recently im sure you probably have as well obviously put together a chart of this complexity is a little overwhelming, that there were 839 different fee structures. This is getting to the make or take issue. With 2,700 different iterations in terms of incentives and rebates. Quite honestly the structure gives the impression that the system is rigged to direct trading through to those firms and entities that are going to give you the biggest rebate or fee structure. There is an extraordinary amount of conflict of interest here between brokers and their clients. When we look at this weve got obviously the complexity of our markets and trying to make sure that weve got to get information out in a clear and transparent way. You talk about an area that is opaque, how are we going to get through this . Now you talked about this back in 2014, the negative outcomes of some of these this structure. I strongly believe we need to move quickly on the make or taker pilot. I would encourage you that when we take a look at this make or taker pilot that we have all venues included, both lit and unlit. When you think about again, you look at the chart and the dark pools behind it, enormous challenges and that we dont i know that the trade act component issue added a whole series of complexity to the project. My hope is that we wont see those same kind of, great to have, but potentially items that dramatically slow down the ability for us to bring more transparency to our markets, particularly in terms of this area where there appears to be an enormous amount of conflict of interest. Can you speak to that . First ill say i said it at the Committee Meeting as well but i do believe we should promptly proceed with a well designed pilot. How promptly . Considering what we saw the tick size we ended up having to order a plan that didnt work. It took a while to do that. It will launch in october. I think you have to be careful you are getting the information you need from these pilots. I think senator warner may not have been in the room when i said we expect a subcommittee report to the full committee on july 8th. Frankly, i urged that to happen sooner than their next scheduled meeting so that we could move this along. It obviously is up to the commission and the staff recommending to the commission what those parameters should be. But it is one that i think again, everythings more complicated than it seems. I dont think the system is rigged but i think its developed in a way that weve got to figure out how to deal with that. I am particularly concerned about the conflicts of interest. Just again, you sort through this byzantine process and how any investor, small or large, for that matter, really knows where their trades are being directed based upon the level 6 fe of fees and rebates. We need more market confidence. I think our transparency proposals are an important part of that, too. Last few seconds here. Let me go back. Senator moran raised some of the questions around market governance. As more and more of these process processes, making decisions to make huge Capital Investments in technology, sometimes that Technology May give them that fraction of a second advantage over others and as i have said before, i do believe at some poi point, speed is the god of liquidity being the answer is not always the completely correct answer. But as we sort through this, and with all of these exchanges, can you expand on what you said to senator moran in terms of governance . How the right parties at the table sorting through these issues . Well, again, im not sure were talking about the nms governance which we were addressing, but frankly my whole idea for the equity Market Structure Advisory Committee was to try to bring in expertises across the range of constituents and also to make sure we had a panel at every one of those meetings that had everybody else there that had a different point of view and an expertise. And ive been very pleased with it so far. Its also something that focuses and i think moves along more promptly the commissions comprehensive review of this issue and it really needs to be there. In terms of the speed issue, certainly you get to diminishing returns i think you had that conversation with steve luparella at your subCommittee Meeting. I dont think you roll back technology. Weve had tremendous benefits obviously to Retail Investors and Institutional Investors in our markets in the technological advances. Sometimes people talk about High Frequency traders as if theyre one thing. And theyre not. Theyre not monolithic. They have different strategies so one of the proposals that the staff is working on is an antitrading disruption rule which sort of deals with when markets are particularly vulnerable liquidity being taken away by virtue of speed to avoid that. So the issues again are complicated but im largely agreeing with you. My time is expired. I just want to say, mr. Chairman, as we look at complexities and equities market as weve seen complexities and the bond market, even if the treasuries markets obviously the Options Markets and my fear sometimes that some of these bespoke products and the incentive systems, i worry that the complexity has gotten so great and the effect it has on the overall market ecosystem that its bleeding from one market into another. And i appreciate chair white your comments but would love to come back and revisit that. Senator schumer. Thank you, mr. Chairman. Welcome back, chairwoman white, my fellow new yorker and as you know i have a great deal of respect for you. But im going to go back to the issue i care so much about. I just want to the money i am now involved in a lot of our campaigns, our races, the money that is pouring in is unprecedented. And it is undisclosed. And its a few organizations. One is the koch brother organizations, one can karl rov rove , one is chamber of commerce itself, pouring in and poisoning our politics and we dont know where that money comes from. The shareholders dont know where that money comes from. It is ill have to tell you, its more important than anything else to me before the s. E. C. All the things between shareholder and Corporate Governance pale before whats happening in america. And you want to know why people are so discontent . In part, its because a few powerful people can send cascades of money into our system, the ads they put on tv have nothing to do with the issues they care about. And you, frankly, are aiding and abetting it at the s. E. C. Because we cant do everything and we know that our House Republicans Mitch Mcconnell is insisting that this stay they gain from this and its shortterm gain because in part people become so discontent with the powers that be that they not only go against the they go against the republican establishment, witness the last election, the last primary. And i just dont get it. I just dont get why corporations that give money shouldnt tell their shareholders. These are major decisions. They have effects on the corporations. If exxon and im just picking one i have no idea what they do undisclosed, but if they put a ton of money of undisclosed into the chamber of commerce to fight Global Warming lets just assume that their shareholders have a right to know. They may be making a bad decision. I think youre hurting america. You are hurting america. And i know you can stay in your narrow little box and say, well, the rules of the s. E. C. Are limited and this and that. First, a lot of people dont agree with that. Most people. Second, the public, i mean, i know senator shelby said 1. 2 million petitions is a small amount compared to the population of america. Thats true. But how many other issues have you gotten 1. 2 million petitioners calling you . And i wish you would change your mind. Im just so disappointed. So disappointed. Because every one of our commissioners should be a citizen. They have to do things within the law. This is within the law. And youve made the decision not to go forward. So let me just ask you this. This is a relevant question. Menendez touched on this issue, but i want to come back to this. John coats analyzed that the s. E. C. The Republican Leadership insisted that this provision be put in the bill. Shows you the provision that says that congress cant touch what you do. But it wasnt that explicit. And as i understand it, it only explicitly prohibited the s. E. C. From finalizing, issuing or implementing such a rule during this appropriated period. So do you disagree with coats analysis . And second, if you dont disagree with his interpretation, will you add this issue to the s. E. C. s agenda . I mean, i havent studied his interpretation of it, and i think let me just say that, you know, obviously i respect you enormously. Your views its a mutual respect. And i also deeply respect the views on all sides of this issue. And i think you know, again, i sort of explained what the s. E. C. Was looking at earlier when i came in and so forth. I wont basically repeat that or what ive prioritized for the benefit of investors and our markets since ive been there, although i certainly made a commitment to advance the mandated rule makings and other Mission Critical issues. But having said that, ive also talked about the avenues for shareholders to bring this issue to their companies, which is in our rules, the 14ah shareholder proposal wrote the average approval rate for those petitions last year was about 26 . I also and i said it earlier certainly applaud those companies that are voluntarily providing the information which they by the way are doing in greater numbers. What else can you do to encourage companies to do it voluntarily . I understand the worst ones arent going to do it. Violators are not going to do it. There is a report that came out in i forget what month of 2015, but basically showing that over half of the s p 500 now makes the disclosures of political spending and i think 80 plus percent have policies and procedures governing their spending. So that information is certainly voluntarily. Provided obviously our rules could never reach the koch brothers. It is not as if, you know, that our rules are the solution to Campaign Finance reform. I understand youre not suggesting they are, i take your point. Essentially, the subject of doing a rulemaking has actually not been on the s. E. C. s what im asking you is would you since youre not prohibited from starting the process, would you be willing to start the process . Well, again, it is the subject is not on our reg flex agenda now. So it is not, you know, one of the priorities we are advancing. Sort i get to that before i get to what could we do or what couldnt we do under the appropriations language . Obviously the appropriations language is there with its prohibitions. The Corporation Finance staff did look at this, actually before the item was put on the reg flex agenda in 2012 to research and consider whether to recommend a proposed rule, not to advance a proposed rule. And they did, you know time has extipired. Okay. Im explicitly asking you a question, are you able to start the process, that is allowed even with the legislation that we passed. I have not researched the legal issue, but the answer is that it is not a subject that is on our current reg flex agenda because of my priorities. I know the priorities of the commission. I would say to you, your priorities are out of line with what Corporate America needs and America Needs and i hope when you go to bed late at night youll think about that, because our country is basically being steered in an awful direction by a narrow few wealthy people at the very least there ought to be disclosure. Senator heitkamp. Thank you, mr. Chairman. And thank you chair white for appearing. As you know, ive been working on a number of provisions within the Homeland Security and Government Affairs Committee Regarding supervision of independent agency rulemaking. Obviously still concerned that we have been unable to effectuate the implementation of a longstanding executive order in legislation and have met with great resistance from all the independent agencies. It is not going to be the basis of my question, but i want to just remind you that when we met, you offered to sit down and actually have a conversation about this because i think there is a growing amount of concern in the regulated community that there isnt the kinds of safeguards that other