Transcripts For CSPAN2 Public Affairs Events 20161115

On 600 terrific jobs, and i advocate for them all the time. Now i know the wall street firms want to forgo the cost of buying and paper and printing on paper and sending it out to investors. However our investors need this information if they have no other way to get it. So i am pleased and grateful that you have not moved forward on rule 30 e three that would make it more difficult for seniors to receive this information on paper. My question to you as the following. Why do you withdraw the rule . Weve discussed this discuss this and what i said at the time is that we actually adopted the rest of the proposal for Investment Company reporting and that was that we got stents of important comments along the lines that youve just made and i directed the staff to study it further and then come back to the commission basically targeting yearend to come back with a recommendation. After that was done we were looking at who is paying the bill to try to get better cost data. That undertaking is proceeding and its something that in the comments were well taken and needed further study. The decision will be made by the end of the year before you move on . I spoken publicly, i did at the open meetings, we were targeting yearend. Lets move onto a separate topic. We dont have a lot of time to deal with the role of f stock when it deals with Asset Managers. Your i may disagree on this but if we both run Pension Management firms and i say is my performance better than yours that your clients come to my shop but the assets are held over here at the custodial bank. If youre group gets in trouble it represents no Systemic Risk to the economy. That being said, and also, the fact that you have already adopted a new more aggressive series of rules to make sure you aggressively examine our Asset Management community, and you you folks are the primary regulator for pension fund managers, why dont you just recommend, if i may suggest, that you take the potential designation of Asset Managers as too big to fail just off the table. You you need it anymore . I think f stocks responsibility, i do think this is inordinately important to safeguard emerging rest and possible risk down the pike. Taking things off the table you are charged with continuing looking at it. Having said that, weve obviously done rulemaking since then but i think f stocks effort to date are complementary of what we are doing at the sec, not contradictory. That concern i have is that of course, if any asset manager that represents no Systemic Risk to the economy is so designated there will be a whole layer upon layer of new regulations that will drive up the cost and drive down the rate of return of our small investors trying to save for college or retirement. Thats why it would be terrific if we could use your influence during the last couple months you are with us to make sure they get the message over there at f stock. I really appreciate it and congratulations, we will be looking forward to welcoming you to maine whenever you find that to be the right time. Thank you mr. Chairman, i yield back. The gentleman yields his time. Mr. Hill is recognized for five minutes. I think the chairman and i think you chairman garrett for your service in this congress as chairman of Capital Market committee. You have done an outstanding job. Chair white, its a pleasure to see you and as someone who has testified before congress before, i always thank you for your forthright testimony. It is a relative statement compared to many who come before us. Some of sometimes the bars relatively low to step over but i appreciate your commitment to the committee in a timely way. The Market Structure topic, weve talked about it before. This is something in the first term i have had in congress over the past two years that has concerned me because we have done 50 trading platforms and added a new exchange and when the Commission Published its list pursuant to the regulation, where are you on your commitment to fully vet and review that rule . As i mentioned before, as i look at the Market Structure work, it is things we know now that should be fixed in a comprehensive review of development issues. That is something that is the subject of our committees work and the comprehensive review. We do have the safest, most reliable markets in the world and we dont want to do something i would have unintended consequences. When you think the commission will review their work and make a proposal . I cant really predict the precise timing, i guess it may be up to someone besides me, but i would expect it to remain front and center going forward. This issue between trading venues and exchanges is a related topic, i think it relates to having the most competitive markets. I noted mr. Gallagher gave a speech not long ago where he talked about should exchanges remain. In your work, as you head out and developed a personal view on that. That is something, we continue to say, thats also in our subcommittees that is very focused on. I have informed of you on it but i do think there are significant questions raised. I want to switch gears briefly and i think with Something Congress has reaffirmed and certainly the commission has and thats the issue that for equity research, one can use soft dollars commissions to pay for investment research. Is that still the position of the commission . There is not a prohibition on this. So, i hear in europe there heading a different direction under their 2014 proposal they put out called market and financial instrument directive. Shouldnt that create a disparity for u. S. Investment banking and Research Firm for their clients in europe versus their clients in the young states. It certainly has that potential. One of the things that struck me is how much we need to be correlating with International Investors because, its something we do consider when we decide our own policies as well. You are looking up, how how do you coordinate two different systems, whose at an advantage and disadvantage and its something we continue to discuss with them. Would you be willing to write a letter to the regulators and cautioned them about this. I think i would need a little further briefing on it as to exactly, we should never view how they think together or dont but certainly if i was of that view, after that i certainly wouldnt hesitate. I might not do it by letter but you know. You have time. In 17, you know how to firms work wellin advance of deadlines and i think it could put American Companies that severe disadvantage. Thank you for looking at. Gentlemen will have the last word on this entire matter. I would like to join my colleagues and also thinking our chairman of the Capital Market subcommittee for his leadership and chair white my think you for your service as head of the commission and for sharing your expertise and insight in helping us with our oversight responsibilities over the commission over these last several years. I want to focus on part of the mission, i wanted to followup regarding fixed income markets. Significant attention has been devoted to concerns and fixed income markets both in the u. S. And when you last testified in front of our committee and you were asked about the Regulatory Impact on liquidity and illiquidity that we are witnessing in fixed income markets, i think you testified that you could not identify the culprit and weve heard similar testimony from the treasury secretary who denies that regulations and that basel three can be pinpointed to blame here. We continue to see, since her last appearance, evidence of the effect on liquidity. Hank paulson commented that the poker rules saw the problem that was not a problem. It has become harder for Financial Institutions to provide the quiddity. That is his position. You had a ceo that they would no longer invest in certain bond traded because of underlying securities that become too hard to trade and on october 7, the value of the british pound plummeted from about 26 down to a dollar 18 in 18 in a matter of minutes during trading in asia with some electronic platforms recording trades below it 1. 15. They attributed this to a lack of currency traders in the Foreign Exchange markets. Given some of these more recent developments, have you been able to determine whether regulations, basel three are in fact impacting this illiquidity . The answer to that is no we dont have the evidence and theres also difference of opinions, a number of market dispenser noting from the data that we have available. One of the things that i constantly go back to the staff and say heres what the data looks like, we report quarterly to this committee and several of us in the Corporate Bond markets and where is you clearly have some deterioration to use the measure of dealer inventories, the other measures really seem to be holding pretty constant. We have as they had some impact from rex that but that seemed to recover so one of the things that is possible is wire the two different views out there, mostly critic liquidity measures are based on completed transactions. There can be transactions that dont get completed because you dont have an available buyer or seller. Its a speculative thought but it could be that some of what is in being measured is actually transactions not being consummated as opposed to those who take a while to consummate. The bottom line is we dont see that impact in the data and we dont see the deterioration that others see. There is evidence out there so when the ceo of blackstone says when they passed poker they were making markets in junkbond there were 25. Now theres five. Triumph question . You decide. What happens when things get difficult in the markets lock up this is not healthy and its happening all over. Its coming down because we mandate that to make the world safer. This does not make the world safer. This is encouraging the world, this is not encouraging the world to be safe because when people need to sell and there isnt liquidity, what happens . Reaction to that . Thats great. I think under volker you also have the market maker exception so you have banks so that can be a source of liquidity. Just start of stepping back, these are significant concerns. We study it globally, domestically, we study at getting all the data together and our economists are actually directed on the impact of regulations collectively and thats part of what they will be reporting on. Its a hard thing to do. Its a hard thing to measure. My time is expired and you are exiting your post, but i would encourage your successors to continue to evaluate that particularly in their role as a member. Thank you, youll back. There are a lot of other members out that are waiting to come in at this last minute. I was told you, unlike many others come down did not have. [inaudible] so that concludes todays hearing. Let me once again say thank you for your service. Someone made the comment come i dont thing amenta came out that way, they thanked you for your service and its relative to others here and it is true that the bar for other people is low, but you certainly have greatly exceeded that by the brett of your expertise and your dedication to Public Service and this disposition specifically. I think you for what you have done. Thank you for your service as well. With that said, without objection, all members have five additional days to submit questions which will be submitted to you. We ask always that those be returned promptly and you still have x number of days to fill that in. Also, without objection, all members all members have five legislative days of which to submit extraneous materials to the chair for inclusion of the record as well. With that, this hearing is adjourned. Thank you very much. Thank you. [inaudible conversation] [inaudible conversation] [inaudible conversation] Mary Jo White testified before the committee today. She is head of the sec. Someone who served more than two decades in the federal government. The first Major Administration appointee to step down after the election of donald trump to the presidency. On this day of elections in the u. S. House to choose congressional leadership, Speaker Paul Ryan started his News Conference today by saying welcome to the dawn of a new unified republican government. House republicans held a closeddoor meeting and all members were given Trump Campaign hats that read make America Great again. Cspan capitol hill producer tweeted some House Republicans put their hats on, others carried them or left without one. Republican leadership elections will be held at 1 00 oclock eastern time. Democrats also met this morning and delayed their leadership vote until after thanksgiving, november 30. At that point, new members will be on capitol hill to vote. Minority leader nancy pelosi is expected to run for another term. At least one other has announced a challenge to her position. U. S. Senate begins today. They meet at 4 00 oclock eastern for general speeches. At five, starting debate on authorization of a library of Congress Oral history project. Off the floor, floor, senators will elect their Party Leaders and newly elected senators are in town for orientation. We have a special webpage at cspan. Org to help you follow the Supreme Court. Go to cspan. Org and select Supreme Court near the righthand top of the page. Once on our Supreme Court page, you will see four of the most recent oral arguments heard by the court this term. Click on the view all link to see all of the oral arguments covered by cspan. In addition, you you can find recent appearances by many of the Supreme Court justices, or watch justices in their own words including oneonone interviews in the past few months with justices kagan, thomas and ginsberg. There there is also a calendar for this term. A list of all current justices with links to quickly see all of their appearances on cspan, as well as many other Supreme Court videos available on demand. Follow the Supreme Court at cspan. Org. The Supreme Court heard oral argument last month. Its a case challenging the government to prosecute people who profit from trading stocks on Insider Information. At issue is whether Insider Trading violates the law even if a person giving out corporate secrets to a friend or relative doesnt receive compensation in return. The oral argument is about an hour. You will see argument in case of solomon versus the united states. Mr. Chief justice and may it please the court. In case after case, this court has construed federal criminal statutes to avoid serious separation of power and badness problems. This presents those same concerns but to a far greater degree because no attitude defines the element of the crime. The court should limit this crime to its core as it did and that core is the insiders abuse of confidential Corporate Information for personal profit. Unless and until Congress Enacts a definition, the client should be limited to trading by the insider or its functional equivalent where the insider tips in exchange for financial benefit. To close, in this case, the person with the inside information, the the brother with the inside information had himself trading the securities. Then he gave the proceeds to what was his older brother. Would that have violated 10b . Yes your honor. So whats the difference if the insider trade and makes the proceeds a gift or if he just says he does the trade. The differences the transaction, the securities transaction is complete with the insider trade and this is a statute that doesnt even mention Insider Trading much less shipping or personal benefit. In that instance it wouldnt be covered he can do whatever he wants with the money. Justice ginsburg was setting up the question, isnt, in her instance where the tippy does the trading hes just an accomplice. No, your honor, this is a case where case where we have to take a step back and look at the fact that the statute doesnt define the element. He did it doesnt even mention mention Insider Trading much less dipping. They made it clear before that not all trading on Insider Information is unlawful but what makes it unlawful is that the insider is doing it for personal gain, whether trading himself and profiting on the information by doing so or by circumventing that rule as discussed in dirks and essentially giving the information to else so he can get a financial kickback. Maybe i am missing, maybe one of us is missing the import of the question. Are you suggesting that if two people get together, one of them has inside information and he says to the other person, why dont the two of us, what you trade on that and you and i will split the proceeds, thats not covered. That is covered your honor. Im sorry, what i meant is the insider, as it occurred in this case and its undisputed in this case, they did not ask for any financial gain or make any money at all. That is his brother statement when he was asked about trading, by the younger brother. He said, i owe somebody money. Isnt that most naturally meant to be either giving the money to pay this person back or giving me information that lets me pay him back . Isnt that always the quid pro quo of a gift . You believe that if you give somebody a gift its going to cost you, one way or another. Youre going to give them something of value where youre going to substitute money for the gift or youre going to do something that saves you money by giving the tip. Well your honor, i think the the problem with that is that virtually anything, with any disclosure that would amount to a gift and this court has been Crystal Clear that not any disclosure leads to a violation. Thats true but then comes the government suggestion that the disclosure has to be for a personal benefit or personal purpose, that there has to be a reason youre doing it, not unknowingly, but something you are doing because you want to receive some benefit from it. In this case, its quite clear that the insider rather didnt receive any benefit at all and the District Court and the fcc made that clear. He did not do that for self benefit and i think the evidence, as it must be demonstrates that most, the insider guy the benefit of getting his brother off his back. This was not a willing transfer of inside information. Why do you say scant . Well your honor, i think we have to get back to the fact. My bigger question is why do all the disclosure forms we have to fill out, they have a a lot of relatives. Yet the put your children, your wife, giving gifts, you you have to disclose your minor children, your wife, why are the statue books filled with instances where the public wants to know not just how you might benefit, but how your family might benefit . They are filled with roads like that but section be. Because, i realize it doesnt but im looking for the reason why, and of and of course i could suggest a reason because very often i think it depends on families. To help a close Family Member is like helping yourself. Thats not true of all families. For many it is. I think the important thing here is that the statute doesnt address. No it addresses benefit. No the statute doesnt, but there is a long History History and the person who is being defrauded or in the object of deceit is the company with the information you used. When you use their information, which you shouldnt, and tell it to someone, you are hurting them then there is a subset of cases that we prosecute. The subset of cases that we prosecute the cases having use that information, you use that to benefit yourself. The question is when you use it to benefit a close Family Member, is that in fact benefiting yourself . A rule of relativity, never higher relative. You could have that view, but you could also have the view that helping a relative is helping yourself. That seems to be where we are in this case and the laws filled with instances where they do think it is the same and there are a lot of cases here that think its about the same so why is it . There are a lot of cases but the only cases these have decided is the only case that the court had for the government was ohagan and the insider was making his own profit. or an intention to benefit the particular recipient and then it goes on to say what insider makes a gift of confidential information to a trading relative or friend, and then in the last paragraph of the opinion where it is summing up everything it has done the court says th that tippers receive no monetary or personal benefit nor was their purpose to make a gift a fallible information. So theres a lot of language in dirks which is specific about its not only win theres a quid pro quo from the tp to the gipper but when the tipper makes a gift to the tv and the particular relative or friend. Thats right. It does mention gets but a dont think this is like half their holding. I dont agree. It mentions it into place but believe its victim and holding of the case is far different. It should not be used for the base of colonel liability when we have a statute i dont know what dictum means. The court is very clearly setting out a test. This is part of the test. It the survey not dictum in dirks when the the courses with us. A test is whether the insider person will benefit directly or indirectly from his disclosure. I agree with you, justice kennedy. And, in fact, the court goes on to do and say right after that, absent some personal gain there has been no breach of duty to stockholders. Stockholders. Were talking about benefit and personal gain. Dirks says theres a benefit of making the gift. Its true in the law of gifts we dont generally talk about benefit to the donor. Other than and gift tax, but thats for Different Reasons. No. In fact, the opposite. In most areas of the law i get is supposed to be something that is not intended to benefit the gipper. Its critical in this area, and i think the Securities Industry Association breathe ella straits this point, that many of the other except as Justice Breyer points out, you benefit from giving to your family. I want to be very clear about it ennobles you intimate sense it helps you financial because you make them more secure. I want to be clear about the test were proposing it as i think its going to capture on of these families situations. The point is the line has to be clear whether its down or anyone else that the disclosures been given to. And under the pecuniary gains test that we proposed, sort of the with any cases where the government can introduce evidence showing us the financial interdependence that will illustrate that the insider does benefit financially from the disclosure. Im sure thats going to be true in most situations involving spouses, and many other situations involving close relatives. Let me give you a hypothetical. Lets suppose i would like to give a gift to a friend of mine but its just too expensive for me to give it. And then i pass a coworkers desk mac a 100dollar bill sitting there and to take the bill. Now i can give a gift that ive wanted to give, but i couldnt. Have i benefited from stealing the hundred dollar bill . Yes, your honor. And why should the issue be any different if instead of stealing the hundred dollar bill of my coworkers desk, instead steal information into the gift of that information rather than give the gift of cash . Theres going to be some situations involving kids that will be covered. For example, if i have a tradition, every year at christmas time to go households employ a bonus, and one year i decide to give her a tip instead, that would certainly qualify. Its going to depend on the nature of the evidence and whether there is i think one of suggesting by the hypothetical is that we all have our own interests and purposes behind giving gifts. Some of those might be very practical and pragmatic. Some of them might be more altruistic. But we gift is her individual interests and purposes. Im stealing Corporate Information. Its essentially a kind of embezzlement or conversion. Im stealing information to get a gift to somebody i know. It might be as in this case a Family Member. It might be a friend. I benefit from that because, i personally benefit. Its the exact opposite of using Corporate Information for corporate purposes. Im using it for my own personal purposes. But that would be true in virtually any instance one could think of where an insider disclosed confidential Corporate Information, whether its in a business setting or as is often the case a mixed social and business setting. Analysts talk to Company Insiders all the time, and its essential to the free flow of information to th the marketplae the that occurs. Wait a minute. First of all, thats no longer true. Theres regulations that stop that, talking to analysts. But talk about the culpability question. Why is it any less culpable to give your close relatives, who youve been supporting every month for your entire life, so instead of giving him one month or two months that regular 100dollar bill, you choose to get in Corporate Information. Thats the example. Why is that person more culpable than the person who just, a relative comes and says, it would be nice, i need some money. And you give them a tip instead of the cash. I think the issue is that there has to be a clear line. We are daily with a crime that was never defined by congress. None of these words are in the statute. But congress doesnt define whats deceptive or manipulative or, whats the third quarter, defrauds. It has a gentle words. Dont devise a scheme that does these things. The law has for ages said that the failure to speak when youre obligated to, i. E. , an insider who doesnt disclose that hes using your information is an omission thats been classically a fraud. So i dont understand why you keep saying that the law doesnt define this. Because, your honor, the law says nothing about Insider Trading, and as the chiarella court said, the statute provides no specific guidance does the legislative history. This is similar to the Honest Services fraud crime, or indeed before the statute was enacted, the mail fraud statute that existed before the mcnally case. The statute talk about fraud. The Honest Services fraud statute talk about fraud and to provide no specific guidance as as to what would violate. This court held that the statute needed to be construed narrowly to ensure there was a clear line. Other countries have Insider Trading laws, and all of those laws use words like insider and define under what circumstances a person is violating the law by trading. This court has repeatedly held that there is no general duty to refrain from Insider Trading. Its essential that the Market Participants understand when the line is crossed and when it is not. I agree with that, but it seems to me the nlg is the antitrust laws, very vague statute. Theyve been around a long time. Exactly whats criminal and what civil and so forth has been developed by courts over and longtime. This statute has been around since the 30s, and weve courts developing law and it. I believe the marketplace pays a lot of attention to that. Virtually every court i think but this one has held that this does extend to a tip or tipper getting inside information to a close relative. And it seems to me, and im getting a chance to respond to it, suddenly to take the minority statute here, or to take the Second Circuit is what im thinking of, is really more likely to change the law that people have come to rely upon than it is to keep it. I just want to get your view on that. I dont think so, your honor, editing some of the amicus briefs illustrate that theres been a tremendous amount of murkiness in the Securities Industry Association, in particular it does have a lot of trouble, its members have had a lot of trouble determining when they can and cant use Market Information of this sort. Regulation is very clear that it does not come it purports to change the antifraud laws. The regulation itself provides that a violation of regulation does not in and of itself constitute Insider Trading under 10 b spirit that addresses whether not theres an initial breach. Here we assume theres an initial breach. The question is how far out as liability extend . It seems to me that what youre saying doesnt quite address the problem were discussing. I dont agree with that because what this court has repeatedly held in a number of cases going back to the santa fe case is that not every breach of fiduciary duty violates section 10 b and it has to be a fraudulent breach. The question of whether its a fraudulent breach depends upon whether the insider is doing a disclosing in exchange for personal benefit. Thats the test. Its not so the whether theres any old breach of fiduciary duty. Indeed, one could argue in the jerk space that the inside of their was breaching his producer duty. If the turks is the test and it was phrased as a test and the judge understood if it is of the test, then this case falls within a. Because its a gift, right . I dont agree with that, your honor. I think the facts of this case show that there may be many family circumstances where this would be a gift but i think the facts of this case show that the insider, he was being pestered by his brother and pressured to release the information. He didnt even know he was trading until later in the process. And even then the largest trade in this case involved a situation where he immediately called his brother back and begged him not to trade, and the brother said he would. So i dont agree with that. I think it is essential in order for there to be a clear line that the court holds that the insider must personal benefit in a concrete way and less and until congress, if thats an underinclusive test, congress can act. Congress can change the law. Why isnt it the benefit, if he said the brother was pestering him so now his brother is happy . Hes a longer being pestered. Isnt added benefit . If thats a benefit than virtually anything is. And then the court would be going back to the role that expressly rejected in chiarella, reaffirmed in dirks and even in the omega case that there isnt a general duty not to refrain from comment to refrain from Insider Trading. But you agree that, you phrased it in terms of a concrete personal benefit. I take it you agree doesnt have to be purely financial . The example is the government gave a preference for a child in college admissions, romantic favors. The personal benefit usages have to be tangible and concrete but it doesnt have to be money, right . It doesnt message will have to be money. It has to be something concrete. Except your defined limit . It has to be tangible . It has to be tangible. It doesnt have to be cash. It has to be something that is either immediately pecuniary or can be translated into financial. If we disagree with you because of the gift language of dirks, how else could you suggest to limit liability . What of the ways are there to take care of someone who, closer cases that exist . Besides the fact it has to be a tangible benefit. I dont think theres any of the tests that the court could provide that wouldnt essentially be judicial expansion retroactively of a statute that doesnt address the question in violation of the separation of powers. I think that the other thing that i would like to come back to, which we talked about in the briefs come is the fact is a very analogous situation with respect to the private right of action in 10 b which is also critical i in the courts and ths court has repeated held that in the context, which is not in the criminal context and does not involve a risk to a persons liberty that the court must narrowly construed the statute and not expand it further, and its for congress to decide whether to extend it for the. I do think here is not a question of expanding it for the u. S. Asking us to cut back significantly from something that we set several decades ago, something that congress has shown no indication that its unhappy with common and in the context in which, obviously the integrity of the markets are a very important thing for this country. You are asking us essentially to change the rules in a way that threatens about integrity. No, your honor, i dont think where asking you to change the rules. This court has only addressed this question once. I dont think the gift language is the holding of the case. The holding of the case is that the insider has to get a personal gain. The point of the test in the case which, again, ruled against the government, is to ensure that was captured is something that is essentially a circumvention of the test the court discussed in chiarella where the insider is improperly profiting from the information. And with respect to the integrity of the markets chiarella really wasnt an insider. He was the printer who had information but he didnt have any fiduciary duty to the corporation. Thats correct. I was referring to the discussion in the case about when a duty would arise. The court in the case of the was no duty, but that a duty whatever reason if he had been an insider in the Company Whose shares were at issue. The reason for that is that the court held that it would be and fraud to exploit the information for his personal trading profits because he had a duty to those shareholders and a duty to speak and either disclose or abstain from trading. With respect to the integrity of the markets, getting back to your question, Justice Kagan, i think that is clear to a policy question, and it is a very complex policy question and it is not one as simply as good but would like to the court believe. I think theres extensive literature cited in our briefs and some of the amicus briefs which illustrate theres a robust debate among academics, regulators, Market Participants about what, what Insider Trading should be regulated at all, but more important to what extent and how do you do that while ensuring that their sufficient free flow of information to the markets that this information can actually work its way into the price. I wasnt suggesting that there are easy answers to the question of what contributes to the integrity of the market. I was suggesting that its a reason for caution in changing a 30 year old rule that everybody has understood and lived by. And that congress has shown no indication its unhappy with. Your honor, i reserve the remainder of my time for rebuttal . Sure. Thank you. Mr. Griev mr. Grieve and. May it please the court, undertaking again obligation to the personal benefit test in dirks, a corporate insider possessing very fallible nonalbum Material Information to parcel out to favored friends, Family Members and acquaintances who can all use in trade without the knowledge of the public or the investors on the other side of the trade. This would be deleterious, the integrity of the secure market. It would injure Investor Confidence and do it contradict a 33 year old precedent of this court that was designed to announce circumstances in which material nonpublic information possessed by an insider could not be used. Isnt something of a stretch to say that the circumstances you describe more widespread on dissemination are all gifts . Some of them may be kids. Some of them may be to obtain a reputational benefit that might translate into future into pecuniary gain. Some of them might actually involve a quid pro quo. My point is that under petitioners theory, when they are gifts, when information is given out to a romantic partner or to a struggling child who is having difficulty making it, or as in this case a brother who at one point actually was offered money by the insider but turned it down and preferred the information, those things would not be criminal spirit but not everything is a gift just because its disclosed. Social acquaintances, you know, that people say were all going away for the weekend, why dont you join us . I cant, im working on this google think of Something Like that, and it means somebody other people. You would call that a social interchange and maybe its something they shouldve been more careful about saying, but its quite different than it gets. It seems to me that however you read dirks, it doesnt go beyond gets. I dont disagree with that, mr. Chief justice. Theres a difference between a breach of a duty of confidentially with respect information, and the kind of reach that was defined by the sec in katy roberts and a corporate the law of securities fraud in this courts decision in chiarella and dirks. It has to always do. The first element is that the information was made available to the insider for a corporate purpose and not for personal benefit or personal use. The second is that the insider is providing it for the purpose of obtaining a personal advantage either for himself or for somebody else. So then the casual social interchange i hypothesize would not be covered under your interpretation . It would not be a personal benefit. It might give rise to liability on the part of the tippee if it wasnt understanding between the parties, the insider and the tippee, that conversations of that kind would remain confidential. Its kind of hazy like to draw, isnt it, between something that you characterize as a gift and something that would be characterized as social interaction, isnt it . I dont think its hazy at all. Does it depend on how close a friend, the front of going away for the weekend, how close the friends are . I want to give a gift because we been great friends who mourn so many years, as we do i just wanted him why cant come . The burden is on the government to show that the information was given for purpose of trading and that was a breach of fiduciary duty. In most of these cases there is no evidence of any legitimate corporate purpose for the disclosure whatsoever. The difficult part is for a personal advantage, at least to me. And the question is what counts if the tipper gives inside information to remember, a Family Member or friend . When is it for a personal advantage, and when is it not for a personal advantage . So i think that do we decide . I think it, Justice Breyer, that whenever information is given, it inside information to its given by insider to another person for that person to be able to profit on it, something that inside himself is forbidden to do. Its covered. If you give it to anyone in the world, whom you happen to know, and she believe that that person will trade on it, that is for a personal advantage, yes speak yes. What is the personal advantage . You have taken valuable Corporate Information and youre giving the gift of that information to a person to enable them to profit. So what is the personal advantage that she received . The advantage that you receive is that youre able to make a gift with somebody elses property. I think to the extent that the court used the word that is a personal advantage . Justice breyer, let me step back for a minute. What the court was trying to do in dirks was separate out when an insider with breaching his fiduciary duty by providing information and when he was not. The line the court selected tracks the basic duty of loyalty in corporate law. It doesnt seem to me that you argument is much more consistent with dirks and mischievous. Supposedly, the insider is walking down the street and see someone who has a really unhappy look on his face and says im going to do something to make this persons day. And so he provides the inside information to that person and says, you can make some money if you trade on this. Is that a violation . Yes. I cant explain why that is. I think dirks adopted the basic line that sets forth in the duty of loyalty which is wellestablished, that when youre given something for corporate purposes you may not use it for personal reasons. That was exactly the court adopted in if they did that why did they use the word advantage . You keep going back to the part that everybody concedes, this tipper is usually information he shouldnt use and away he shouldnt use it. Okay . Conceded. Its the next step of when is he liable, and what the words are is when he uses it for a personal advantage. It sounds to me as you are saying, and you said this, whenever the tipper knows that the person to him whom he gives information might well use it to trade. No. I did not say that, Justice Breyer. Let me clarify this. What the court said in dirks was there was drawing a line between people who have information for corporate progresses and use it consistently with those purposes, and people with access to Corporate Information made available to the only for corporate purposes and used it for personal benefit. It gave a number of examples. I think the way to understand dirks is to synthesize that theres examples of the court gave to understand the principle underlying the decision. The examples include direct quid pro quo profiting, it could a personal benefit but also includes something far less tangible, reputational benefit that will possibly translate into future into financial advantage. Then it clearly included in the category of things that were not appropriate corporate purposes, giving a gift to somebody, and explained why. If you give the gift of information to somebody for creating, it is equivalent to the insider using the information to trade himself, and then making a gift of the profits to a recipient. You are arguing for an exact relationship between, not for the corporate purpose and for personal benefit. Is there any area that something falls and the of that, that its not for a corporate purpose but also doesnt qualify for personal benefit. Whenever you talk about how you define personal gain, personal benefit, you say this was not given to ford corporate purpose. But is it an exact parallel . I think it is. So any disclosure of any confidential information is actionable because affected him to disclose. No. That is the difference between the breach of a duty of confidentiality, which made to do with the Corporate Office is a duty of care, as distinct from the duty of loyalty. Dvd sample something sample something that is not for a corporate purpose but is also not for personal gain under your view. And there is no knowledge that the individual 200 giving the information is trading. Theres a breach of the cady, roberts duty. So in your hypothetical of the social conversation, the government would not seek to libel somebody who was loose in the conversation but had no anticipation that there would be trading. Im not interested in who the government would seek to libel. Im interested in what the rule is going to be spent i. E. Equating them. I understand, i think the role we are asking the court to adopt israel a rule that tracks the basic principles of duty of loyalty to light the base of the dirks opinion. I realized that dirks opinion use language in it, a variety of formulations, personal benefit, personal advantage, personal gain. But the examples that the court gives, gave to support the doctrinal analysis. I think lead to the conclusion that what Justice Powell was going to do independent was to distinguish cases in which some it was a Corporate Officer and the use of the information for an appropriate purpose. May be silly without hundred on it afterwards im not sure that your solution is going to buy much of this area, because now i think the fight is going to be over what was the reason that the tipper gave for giving the tip. I mean, in this very case there were three reasons for breaching the rule of confidentiality. The first, to become more knowledgeable of the health care industry. Under your reading, if he had no knowledge his brother would trade, that was not actionable, correct . Correct, Justice Sotomayor but it also is not information that was flowing from the insider to his brother. What we charged in this case were the circumstances im not talking about that there are three examples of breaching confidentiality. The first was for him to become more knowledgeable of the health industry. The second was to the father with his medical care. And the third, the one you charged, was beginning of information, knowing that his brother was going to trade on a. How do you draw the line among those three . All three were for personal reasons. No, but the only one that involve knowledge or anticipation of trading with the circumstances in which the brother was basically funding his older brothers securities trading. So if all he did it for was to get information for his father, had no idea that his brother was trading, he would not be liable and his brother wouldnt be liable. I agree with the first, not with the second. If i could explain briefly. There are two theories of Insider Trading. One is classical Insider Trading were an insider who has been given to the patient for a corporate purpose trade on it, or tips so meals to trade on the. The second three is misappropriation. If the older brother in this instance was given confidential information under a circumstance in which there was an understanding that there would be no use of the information personal benefit or under the secs current world, which defines these kinds of close family relationships, siblings, parents and children, husbands and wives, as being relationships that are typically ones in which secrets are protected, the older brother could be charged with misappropriating information from the younger one. By marriage, he gets the money, i mean he gets the tip from the first tippy. How long does it continue . Tipping chains can go quite away when the information is passed an limitation on when the government can charge these cases is a limitation of proof. We need to be able to show that the tippy, perhaps the end of the chain will be more difficult than the that that acknowledged it was a breach of fiduciary duty for personal benefit. They shouldve known. No we had to show how knowledge can be inferred someone deliberately avoids confirming fact of which they are or should be aware. That involves a personal culpability that takes care of the criminal liability that will extend forever. It wont. Click on the other side, if you think about the tipper, you used a couple of times, the phrase knowledge or anticipation that there would be trade. Is not something more than he thinks there could be or would be . Is it as strong as that . Let me give you an example. The person with the inside information had a few drinks at the country club is in talking to some friends and discloses the inside information to the friends and one of the friends then trades on the information. What would you have to prove based on the mental state of the tipper and the tippy. Would you have to prove that the tipper new one of the friends would trade on the inside information or he was reckless, he knew the person was in the stock market and as to the tippy, what would you have to prove . That the tippy knew the insider knew he was going to trade on the information. As for the tipper, we submit that and element of the duty is at the insider anticipated that the person to whom he gave the information would trade. Is anticipated the same as he knew he would. Yes i think understanding is the language. But its not enough that i think he might or im sort of betting that he would but i dont really know. No in a criminal case we have to show a breach and we have to show an intent to defraud and we have to show will furnace in order to obtain a criminal conviction. Why do you want to put knowledge that it will be used for trading as part of the breach of fiduciary duty . If you do that then you approve the tippy knew that the tip or thought it would be traded but i think thats a difficult burden because in most of these situations, its obvious why it is being done. Like it you put it in the incident to defraud . It goes to intent to defraud. So why make it part of the breach . Dirks adopted the Katie Roberts formulation of the breach of duty which, to to go back to it again, it is the transmission of information that was made available only for corporate purpose for personal benefit with the intent and knowledge that the individual is going to trade. The document says theres a sentence here and thats exactly what i thought you were going to answer before you got cut off the sentences, the element exists also when an insider makes a gift of confidential information to a trading relative or friend. Yes. That doesnt sound as if the writer of those words had in mind any person in the world. In each instance you have to know that that person would in fact use the information to trade, but it doesnt say any person in the world. It says a trading relative or friend. Yes. [inaudible] the portion of the opinion in which Justice Powell is giving examples of the concrete circumstances of objective criteria that will allow the government to establish that the purpose of the disclosure was for personal benefit as opposed to what the sec was concerned about that people would use a sensible business justification to explain why the information was being given out in the s ec was concerned this would create a quagmire of subjective analysis in the courts response was to give examples in which the objective criteria would help establish, and the confirmation of this is that at the end of the opinion, the portion that Justice Kagan read earlier today on page 667 is where the Court Analyzes why siegrist and the other insiders at Equity Funding had not occasioned liability for dirks. I want you to tell me what i can read to get the explanation of dirks within a majority of lower courts that have followed. It seems to me the Second Circuit has not read it as you are reading it. Correct. After all they came to the opposite conclusion, and are there circuits that have read it just as you have and say you walk down the street, you find anybody you dont even know im, and he says trading, trading, trading and you tell him and therefore you know you will he will likely trade. This case does not involve that situation. No i realize that. This is a typical situation that actually arises in the real world and gets prosecuted. Involve this hypothetical of someone distributing inside information. Im not worried about that. Im not worried about this case. I am worried about line drawing and you want to draw a line so that friend, relative, doesnt matter, and before i write those words, i would like to know what circuit courts have followed that approach. I think there arent a lot of cases that dont involve friends or Family Members. I think that take that most closely tracks the analysis that i think best explains dirks is the decision in scc versus mail. It cited in our brief. It does involve two people who were Close Friends because ordinarily those are the circumstances in which people decide to risk criminal liability to give out inside information so someone else can profit. The court makes the statement that there was no corporate reason, there is no legitimate reason why one friend who is an insider the corporation is giving the information to a third person. He didnt have to give information at all so why did he do it except for what the court concluded fits within the dirks language. What if you have a situation where Close Friends or whatever and the one side i want to tell you what ive been working on, its pretty and interesting, but whatever you do, dont go buy stock, thats against the law. You not going to prosecute that situation when the tippy goes and makes 100,000. The temper in that situation, theyre disclosing information in the context where he has made an express statement and im assuming understanding between the two that the information would not be news used. The tipper is not liable for inside trading the tippy who then trades may be charged under the misappropriations for having taken information from our last relationship of confidence or an express statement of agreement not to use the information in the fog bear is between the tipper and the tippy, not between, as, as here, the tipper and the people to whom the tipper owes of fiduciary duty. This is explained in the rule 10b52 which helps define the kinds kind of relationship that support a misappropriation that i think what this illustrates is that we are not urging a theory in which tippers are liable every time inside information is disclosed. This is not a revival of the information theory that was rejected in dirks. I think what makes that most clear is that there are situations in which inside information can be legitimately revealed, even when it is known that it will occasion trading and it doesnt violate the insiders fiduciary duty. I think you are taking this way out of existing realm. Are you going to suggest that tippys are routinely prosecuted when tippers dont know that they are going to trade . I think they are, and most often its because you claim that they shouldve known it was confidential. So in a criminal case, we are not claiming that. There is a legion of cases i have for this argument where. I dont think thats what, were certainly not making that submission in this case, and i think the cases that we are trying, and the jury instructions that we are obtaining contemplate that the disclosure is to trading relative or friend in is and that is at the heart of the gift theory. So youre going to let go of the guy, the guy on the street who is not my friend or close relative, but i give him a tip and i say go trade on this, it will make you a lot of money. That person, that tipper would not be liable. Will he would for the very reason you articulated. In that situation theres a gift of information to someone with the intent that the person trade so its irrelevant rather its a friend or Family Member. My submission is that the best way to understand dirks is that it goes to a breach of fiduciary duty which not be limited to categories like that and i dont think Justice Powell, in articulating the species of personal benefit was attempting to rely on it. I was trying to explain this before. At the end of the opinion, where the court precisely says that siegrist is not liable because he didnt make any financial advantage, he goes on to say nor did he make a gift of valuable information to dirks. Now the court didnt say well dirks was a close friend, he wasnt a relative, therefore, therefore hes out of the picture. The court applied gift analysis in that situation precisely because the line of the court that they were trying to draw was the appropriate use of Corporate Information and the inappropriate use. I get your theory and why it doesnt make any particular difference, and indeed, in that same paragraph where the court says relatives or friends, the court, just a sentence before talks about the intent to benefit the recipient without any sense of who that recipient has to be. On the other hand, as you say, almost all of these cases are relatives and friends and thinks might look different if we had a case that was not a relative or friend and why not separate out that strange, unusual, hardly ever prosecuted situation and say were not dealing with that here. We have nothing to say about it. Im fine with that. We are not seeking the court to go beyond dirks. These are the cases that actually do arise in the real world. There is one case that involves a guy who was an insider who tipped his barber and the District Court said while the barber and the insider werent close enough so that it didnt count under dirks. I think thats wrong. I dont think thats a good principle. So is there a difference between friend and acquaintance as you are talking, tell me. So this is precisely the reason why i think its also make sense from a point of view of principal or application to draw a distinction that is based on words in the opinion of the court that they didnt actually a turkey late when they to the very situation set forth. There is more nebulous teachers about relationships once you confine it to undefined terms as friends or relatives, but this case clearly doesnt indicate that at all. It is in the heartland of the insider trader prohibition. It is one brother to another brother. Its a very close relationship. The court doesnt have to deal with further outlier cases and it doesnt have to reconceptualize dirks or even interpret it in the way that i have synthesized its analysis in order to conclude that a gain limitation is inconsistent with the doctrine that the court has announced and applied for 33 years and, with the exception of the Second Circuit, lower courts havent had any difficulty applying it. There have been a couple of outlier cases that i mentioned involving barbers, but almost all of these cases involve situations in which theres a pretty good explanation for why the tipper would be providing information for the tippy in breach of a fiduciary duty. In cases where there is a legitimate corporate purpose alleged for the disclosure which conceivably may have been the concern of the newman court, they have are ready address that too. It said when there is a legitimate justification proper to the disclosure, people people are not going to be wandering around in the dark trying to sort out a subjective intent. There will be objective factors from which the relevant purpose, the personal purpose can be inferred, and thats the portion of the opinion in which the court goes through examples of what those objective circumstances will be. It includes the intention to benefit a personal specific person and it includes the gift situation. Of the court feels more comfortable with the facts of this case and reaffirming dirks and thing that was the line 1983, it remains the lot today, that is completely fine with the government. I think there are cases in which it would be clearer and more beneficial to adopt a rule that if there is no corporate purpose the disclosure to anyone is a breach of the fiduciary duty, but if the court is more at home with the language that was actually used in dirks and wants to reaffirm it, it should do so. Clearly congress is aware of this line and it has never disturbed it and it actually incorporated the words into section 10b. When it applied the 10b prohibition, the wellknown area of the law and the submission of the government is that the court should reaffirm it. So it unites oneway concern and the requirement is that to be know that the information came from an insider. Yes, yes to know that it came from an insider in breach of a fiduciary dirty and for personal benefit as ive been articulating it. Conscious avoidance can be used to establish that knowledge. The pearson doesnt doesnt have to know all the details of exactly what the breach of fiduciary duty was. There has to be enough information so the government can prove beyond a reasonable doubt that the tippy did no. Recklessness . That is not enough for criminal case. We need to show knowledge in order to establish the breach of fiduciary duty. We can and do rely on conscious avoidance to the extent that the tipper understood that the tippy would trade, thats requirement of knowledge. Its not a requirement that the person intend, its just an understanding and knowledge that it would happen. The tippy has to have the knowledge of the breach, oftentimes this can be inferred from circumstantial evidence. This is a perfect example of it. The petitioner in this case was the brotherinlaw of the insider. He knew the information was coming out of citigroup. He knew there was no legitimate reason to be disclosed from his brother and in submission, finally the court believes, the government believes the court should affirm the judgment in this case. Thank you. Thank you counsel, you have four minutes remaining. The governments argument to this court illustrates precisely the dangers with weaving a statute, without having a statutory definition. The government now says, for the first time in its merits briefs and its argument to this court that somehow section 10b in dirks embodies a duty of loyalty standard that is not in the statute or the dirks case. Indeed, they never argued this to the District Court or the ninth circuit or in the newman case. The facts of newman are actually inconsistent with the standard that the government purports to propose because the government claims that it will insist that the insider has to have an intention that the tippy trade and if you look at the facts of newman, you will see that the undisputed evidence was that with respect to the company tipper, there was no evidence that that insider news acquaintance from church was going to trade on the information, and likewise, there wasnt any evidence that the other insider was aware that anyone would trade, and the example of the other insider also illustrates that sometimes its not so clear if someone has a corporate purpose or personal purpose because sometimes purposes are mixed. In that instance, the insider was speaking with an analyst who was checking his financial model, and as the evidence in the case shows, this happens every day in the market, the government, the government argued that he was also seeking career advice from the other individual who was a college friend. There is no indication there that he knew he was going to trade, and furthermore, the governments argument is completely inconsistent with dirks. The facts of dirks, it was undisputed on the record is that the insider secret disclose the information. He was seeking to expose a fraud but he intended that dirks would share the information with his institutional clients so they could trade and drive the prices of stock down. The court expressly rejected, and footnote 27, a test almost identical to what the government is proposing here. The sec appears to contend that an insider invariably violates the fiduciary fiduciary duty by transmitting nonpublic Corporate Information to an outsider when he has reason to believe that the outsider may use it to the disadvantage of this shareholders. The court rejected that argument. Later in the footnote, the the court talks about the dissent argument and the dissent argued that by perceiving a breach of fiduciary duty whenever inside information is intentionally disclosed to security traders, the dissenting opinion would achieve the same result that the court had rejected that is effectively a parity of information role. This is inconsistent with dirks. Furthermore, as i believe he mentioned, one of the points in the section of the opinion thats discussed of the test is the concern that they had shouldnt have to read the parties mind as to this element of the offense. To the extent that the government claims that theres an intentionality element to the breach of duty, that would violate that suggestion in the dirks case as well. Finally, with respect to the whole remote tippy concept and petitioner in this case, in this case, petitioner had no idea why they were disclosing information to his brother. The only thing the record shows is that there was testimony that michael told him the information came from the brother. There was no evidence he had any idea why, and i believe justice so to more your pointed out earlier, there were three Different Reasons at various points that information was disclosed. One was so he could educate himself about the science of the work that he was doing and one was so they could discuss potential drugs for their aging father, and then there was the third phase, but there was no evidence whatsoever that the petitioner had any idea whatsoever that the information was being disclosed. Finally, with regard to the point about the congressional statute, the fact of the matter is, if congress could be said to have ratified anything, all it could be have said to have ratified is that there is an Insider Trading band. There is no indication that they ever ratified the dirks language thank you counsel, the case is submitted. We have a special website at cspan. Org to help you follow the Supreme Court. Go to cspan. Org and select Supreme Court in the righthand top of the page. Once on our Supreme Court page, you will see four of the most recent oral arguments heard by the court this term. Click on the view all link to see all of them covered by cspan you can also watch justices in their own words including oneonone interviews in the past few months with justices kagan, thomas and ginsberg. There is also the calendar for this term, a list of all current justices to see all their appearances on cspan as well as many other Supreme Court videos. Follow the Supreme Court cspan. Org. A look outside in front of the Supreme Court were hundreds of students are protesting Donald Trumps presidency. Right across the street from the Supreme Court, at the capitol, republicans have nominated speaker ryan to remain a speaker of the house. There will be a formal vote on the house floor in january. Now voting on the majority leader position with current leader Kevin Mccarthy running unopposed. Republicans and democrats elected a week ago were on the u. S. Steps for their class photo. They are capitol hill for orientation with sessions on forming an office in other steps they need to get ready for their job. Cspan, where history unfolds daily. In 1979, cspan was created as a Public Service by americas Cable Television companies. It is brought to you today by your cable or satellite provider next the first automotive Cyber Security summit held in detroit. Automakers work about protecting drivers from car related cyber threats. This onehour portion of the summit includes remarks by the ceo of General Motors, maryborough, and a a panel of Auto Industry Security Officials now it is my privilege and honor to introduce to you mary ybarra, the chairman and ceo of General Motors. Mary and her Leadership Team are transforming the automotive sector. Consider under her leadership in the last year alone, gm launched department sharing service, purchased cruise automation, invested 500 million in left, announce the upcoming launch of the chevy volt which is in our atrium mall today, and of particular relevance, gm was the first major car manufacture to form a Disclosure Program. She is the ceo of a fortune ten company with open todays conference and reinforce our mission that Cyber Security is a top priority of the automotive sector and corporate america. Mary is also the first woman ever to lead a Global Automotive company. Ladies and gentlemen, please welcome welcome to the stage, the chairman and ceo of General Motors, mary ybarra. [applause] thank you tom and good morning everyone. At General Motors, we are very pleased to join you and others to sponsor the firstever Global Automotive Cyber Security summit and were very pleased its in detroit. I want to thank sec. Fox, congresswoman, commissioner mcsweeney and all of the other government, business and academic leaders who are here or will be spending time with us today for this very important topic. This event underscores the fundamental importance of bringing together leaders from all sectors to examine the state of automated of Cyber Security and explore ways to strengthen our mutual cyber defenses. Even more important, if if points to a unique responsibility that we have to develop Proactive Solutions to Cyber Security challenges facing society today. Around the world, consumers increasingly expect to have constant and seamless conductivity. By 2020, it is estimated that there will be 50 billion smart billion Smart Devices in use around the world. Or about seven connected devices for every man woman and child on the planet. Growth in the sharing economy is now a global phenomenon two cars and bicycles and apartment tools in highend clothing and jewelry the trend toward more Sustainable Living and environmental friendly policies are as important now as is the growth of urban population centers. By 2020, projections are there will be 41 global megacities with populations above 10 million. Thats up from 28 today. Each of these trends is reflected in todays Global Automotive industry. In fact, i fully expect that the Auto Industry will change more in the next five years than it has in the past 50. At gm, we are very excited to be in the leadership role in much of this transformation. In the area of conductivity, gms Onstar Service has responded to 2. 3 billion request since we launched the service 20 years ago. By. By the end of this year, we expect to have 12 million onstar connected vehicles around the world and by 2020, we expect to have 75 of our global volume to be connected to our global volume. This is just the beginning of where it will take us in the future as we work to expand and improve the Customer Experience both inside and outside the vehicle. Around the world, car and Ridesharing Services are also expanding exponentially. Globally, an estimated 15 Million People use shared Mobility Services such as ridesharing or car sharing today by 2020, its number is projected to be more than 50 million. At gm, we combined a number of our sharing program under a single brand. We now have half a dozen programs in half a dozen cities as well as programs in germany, china and brazil. We have more launches on the way where also very excited about our Strategic Alliance with lift. We believe the convergence of conductivity, ridesharing anna thomas vehicles will shape the future of personal ability. Later this year, we will start the production of the all electric chevy volt ev which you know is available for you to check out in the lobby. This will be the First Electric vehicle that cracks the code of affordability and the 200mile plus range. Traditional inland nontraditional Automotive Companies are making substantial investments right now in the autonomous driving and parts of the industry. This promise has kept greater convenience, lower cost and improved safety. Taken together, these interconnected trends in technologies are allowing gm to stretch the boundaries of what is possible for consumers. They are smarter, safer and for our customers. While tech todays Technology Creates exciting and new opportunities, it also creates challenges. One of the challenges is the issue of Cyber Security. Cyber security is the foundation of each of the technologies i have discussed. In addition, the rapid growth, there are two additional factors that are contributing to Cyber Security risks for todays Auto Industry. One is content. The fact that personal data is increasingly stored or transmitted through our vehicle network. The other is complexity which opens up opportunities for those who want to do harm through cyber attacks. Consider that in 2000, cars on average had about 1 million lines of code. The first generation volt, which was introduced in late 2010 at about 10 million lines of codes. Thats more than a fighter jet. Today the average car has more than 100 million lines of code and it wont be long before surpasses 200 million. We want customers to take advantage of the technology that is changing the automobile and opening up new experiences that were frankly unimaginable when i started in this business. We also want our customers and their data to be safe and secure as they are using all these new features. This protects their privacy and their data. Im quick to add at General Motors, we view Cyber Security not as an area of competitive advantage but is a systemic concern in which collective customers and the society at large are best served with an industry wide collaboration and sharing best practices. At gm, we recognize the landscape is continuously evolving. Sophisticated attacks are designed to attack the most robust system design. The attacks are getting more and more sophisticated every day. Not only is it important that the industry design our products with Cyber Security in mind, but we also need to Work Together to protect cyber incidents, protect against these attacks and mitigate the consequences when and if they occur. A cyber incident is not just a problem for the automaker. It is a problem for every automaker around the world. Its a matter of public safety. This is why General Motors strongly supports the collaborative approach championed by secretary fox, the alliance of automobile manufacturers, the alliance of automakers and members of the auto isaf. We have made Cyber Security a top priority. Weve established a dedicated cyber organization and we have a Senior Executive running our team who many of you know. He will participate later today and the roundtable discussion. We also took a leadership position and we have made a very deliberate decision to embrace the relationship with the white hat relationship community. Earlier this year we launched the core needed Disclosure Program that put out the welcome mat to researchers and Cyber Security experts inviting them to identify vulnerabilities in our system. This is an approach that Silicon Valley has took for years and was very good at but few companies have embraced the on the software industry. Our program is new and we are still learning best practices, but we are committed to expanding and evolving it and working with the Research Community to improve our Cyber Security posture. While all of these actions are important, the single most significant we can make is to commit with everyone here and direct our shared Cyber Security issues and concerns. They released a summary identifying best practices for the Auto Industry. Based on the principles issued by secretary fox in january, i want to apply these efforts who put in a tremendous amount of work to get us where they are today. I will support all recommendations in the executive summary and we commit to implementing the actions and best practices outlined in this document. Above all, we strongly agree with the call for a commitment to expand our collaborative effort to Work Together to mitigate threats to potential risks and society at large. Let me also say at gm, we are also committed to collaborating proactively with a shared goal of enhancing the atmosphere for everyone. The industry has made a concerted effort to Work Together through the development of best practices and at gm we are committed to this valuable collaboration as we move forward. A very important point i want to stress is unlike another number of industries that have been seriously affected by Cyber Security, the Auto Industry has the opportunity to address Cyber Concerns before we experience a serious incident. We can Work Together today and tomorrow to mitigate our risks and learn from companies and industries that have already address cyber threat on a large scale. Im extremely pleased that we will hear from tom kerch motter at General Dynamics about how one Company Started a goal to approach Cyber Security and mitigate risks. I believe we can learn a lot from General Dynamics experience that can help the Auto Industry before we face a fielded threat. I believe we have a real opportunity to Work Together today and in the months to come to move the industry forward. The Global Industry is changing faster today than it has in 100 years. Many facets of the traditional industry are being disrupted but this creates new opportunities to rewrite it for the benefit of our customers. I believe its essential for leaders of a wide crosssection of industry from automotive to aerospace Work Together with government, law enforcement, academia, researchers, and the Cyber Security industry to deliver Proactive Solutions to the challenges we all face. I believe we have a real opportunity to do that here today for the safety and security of our customers and society in general. Cyber security is one of the most serious challenges we face and we need to make it an industry priority. This summit is an example of what we need more of, all of us working together to achieve what none of us can do on our own. I want to thank the sag Cyber Security group for their role in bringing us here today and thank you for your commitment to being a critical part of the solution. Lets Work Together to leverage our collective strengths and knowledge to protect our customers, their privacy every time they get in a car. Thank you. Thank you very much mary for a terrific opening keynote and kickoff to this event. Now i would like to introduce to you, our next Panel Moderated by john allen, the principal at Booz Allen Hamilton and the active director of the auto. [inaudible] if each could come up now, i would appreciate it. While they are coming up, john allen was the Program Manager over booz allen to form the first Cyber Security gathering. They will release an important overview of the best practices tomorrow. On the panel is as john will introduce our top executives from General Motors, toyota and honda as well as josh,. I will pass the microphone along thank you so much, and thank you all for joining us. This is an exciting time in the industry. I am amazed at how far we have come in two years, having a ceo talk about vehicles Cyber Security and having the gentleman on the stage we have right now, its really a testament to the leadership of many on the stage and many in the crowd that have gotten to where were at. We are going to have a conversation. All im missing is my living room and a bottle of scotch. We will have a conversation on Cyber Security and given conversation about whats going on and talk about information sharing and how we can improve that. How how we will mature as an industry and where were going next. Well talk about what happened with the release of best practices but its definitely an exciting time and hopefully you will get something out of this to know not what weve done but more important, where were going as an industry. This is about you all in the room and how we protect the ecosystem as one team. Many of you know, really the experts across the industry, finley has been instrumental being part of our best Practices Team in a real leader in this whole space. Its great to have you and thanks for flying in from california to be with us. Josh, our researcher on the panel, we can keep all automakers out here. Many of you know josh as the founder of ion mccaffery but hes moved over to the olympic council. Hes come to the dark side with us in washington. We will have some great perspective from josh on how we can use the Research Community and other parts of the system. Steve is another icepack member at the board. Hes a member of Business Development for honda. Another one of the point guards on the board. And we also have a chief Information Security officer for gm and hes been a huge advocate and leader out there. Two level set for just a minute so everybody gets the speed of where were at. For those of you who dont know, the automotive icepack is the information sharing and analysis center. It was passed to allow industries to collaborate around vulnerabilities. About two years ago, alliance and global came together with the Automotive Industry and said, you know what, when many came together after a cyber attack, after a major incident, lets get together before something catastrophic happens and lets start working together as an industry. That took about a year to get everything lined up to build perspective and build that culture of trust. It was one of your go this week that it was announced that we were going to launch the committee. Its took a little while to get the organization up and running. We became fully operational in january of this year and started sharing cyber threat vulnerabilities and intelligence but it wasnt just happy about that. They wanted to take it one step further. Every company is doing Amazing Things within the cyber domain and it really came down to how to we share best practices about what we are doing. We heard them say that this is a competitive discipline. An attack on one is an attack on all. We came together and released the executive summary of what the best practices will look like and what the main playbooks will be. 98 of the cars on the road today. Soon after we realized the supply committee is very critical to this entire endeavor so we expanded it out and invited the supplier community. You may have seen press releases on that. We are continuing to stand out in the Partnership Program and looking at how to use others like them in our researchers in the community to come in and help us in other areas with that in mind, we did an exercise yesterday about how to share this across the oem. I couldve never imagined this two years ago, getting everybody to share. I want to start with you, hows it going . How do you see the transition occur with information sharing across the oems . I think what youre talking about and organizing and coming together as an industry, the trust started there. Just so we could understand what the common goal was and tradition into this is not a competitive space for the industry. This i