Transcripts For CSPAN3 SEC Chair Testifies At Oversight Hearing 20221001

[inaudible conversations] [inaudible conversations] the Senate Committee on housing and urban affairs will come to order for days hearing his usual is in the hybrid format which is inperson with the witness. Mr. Claudio teen mr. Gensler its nice to see you. Welcome back chair gensler to this committee. Workers and their families dont measure the economy by the stock market and neither should we. Its why in the senate and the new Biden Administration we work to create an economy that delivers results for people who get there and comes from a paycheck not an investment portfolio. Raising wages and goodpaying jobs and lowering cost means fighting the corporate pricegouging is so often hurts consumers and the unfair labor practices. It means investing in American Manufacturing and workers and farmers who drive it and means making sure financial economy and our markets are stable. That includes going after companies that try to cheat the market. Chair gensler is doing that very well and it means strengthening foreclosures with risk by Climate Change and look at the practices of private equity and hedge funds as they stretched their tentacles into more areas of our economy. This summer the Senate Confirm president bidens two nominees to be at cc both new commissioners for the commissions dedicated staff at republicans on the committee have elliott about your just ambitious at janda. If wall street and others are complaining you are doing your job. You put americas savings first inning opus on transparency and fairness to concepts critical to making sure markets work for everyone not just corporate executives. The fcc must continue to make enforcement priorities. Bad actors are worth coming up with new schemes to separate people from their hardearned money were to change the rules to gain more for themselves. And they watch the fcc has has fallen to the lowest level in a generation. In april this committee considered a bill that would insider trading. The houses passed the summer though. Last month we saw the results of bipartisan work of Art Committee members to improve transparency and fight fraud. Senator kennedy is sitting to my left more or less and senator van hollen stopped the u. S. Doc exchanged trading of Foreign Companies with chinabased auditors to refuse to comply with our oversight loss because that law jumpstarted negotiations for the accounting oversight or signed an agreement with chinese authorities that will finally allow auditors to begin inspections. In march the person signed executive order establishing the whole of Government Strategy for Digital Assets. While agencies look at how respond to the growth of crypto can best protect americans money we know the sec continues to enforce the law. Going after crypto targets shuts down creek will ponzi scheme. Over the last year in the banking house and urban affairs partly look at how critical assets are used in scams and fraud to play a role in illicit finance but we heard from treasury undersecretary who testified in the presence working group. This morning to ag committee downstairs with senator smith an eye on this Committee Said on both these committees and is considering crypto bill sponsored by senator stabenow in boseman that focuses on Digital Commodities to create regulation in the crypto space for its critical though that tweet be deliberate and jaw drawing jurisdictional lines. We have to close loopholes that could be exploited or abused. Its not easy in the future Trading Commission and chair gensler is admire with why that action is welcome but we also notes not enough. Its a lesson we need to remember to heal the damage that was done prior to when it comes to crypto group regular state to Work Together to ensure investors to consumers and markets silicon servers. Sec Climate Risk Disclosure as an example of how the markets understand risk and provide transparency and comparability clarity in uniformity. Only a subset of companies provide disclosure in whatever form they want that doesnt serve anyone. Investors outside the u. S. Arctic and if it from Climate Risk Disclosure. Secs recent proposal to require more disclosure about corporate stock buybacks will bring muchneeded transparency to the market. Thank you for that. We no stock buybacks are big problem. They funnel profits to executives at the expense of longterm investment in workers. The process allowed for these buybacks has only made the more manipulative. For decades companies enable to announce stock buybacks these choose their stock price and they may provide details month later and how they completed their plans. Under the new proposal the sec would understand my companies are buying their stock in his sacking of sir buying or selling. Taken together with unprecedented steps in the Inflation Reduction Act finally tic tacs these buybacks. I appreciate senator tester and others on this Committee Supporting that and this is the first steps we seem to reign in the wall street scheme another example of a the new president of United States who fights for workers and sides with workers. I look forward to hearing other ways the sec is working to hold bad actors accountable and protect americans with their hardearned money in the markets. Senator toomey. Thank you mr. Chairman. Chairman gensler welcome back to the committee. Its good to see you again. The sec as we know has a Critical Role to play in protecting investors and facilitating capital formation. In foresight some of the secs recent actions and in actions raise concern about how well its carrying out this important mission. They for example the sampling of crypto landing platforms. They were offering Interest Rates as high as 18 of customers with when there had Digital Assets to them. The firms could go to larger textures to make shortterm investments on the market to many borrowers couldnt pay their debts and these platforms grows customer accounts. The sec did take enforcement action against the former activities thus winter in somehow to continue through the spring when both companies blew up and found themselves in bankruptcy with investors during a billions in losses. Where was the sec and where was the sec in verifying the rules of the road for Crypto Market for dissidents . The chairman insists in his written testimony quote the vast majority end quote of crypto tokens or securities. He is also knowledge that the coin is not. Presumably thats because bitcoin is so centralized. That leads to the question where on the continuum does a tokens get security most of these tokens dont have a Financial Plan and its different from the vast majority of ordinary securities. If the chairman is right that most tokens should be considered securities as he himself for his testimony quote it out with the many crypto intermediaries are transacting securities and have to register with the sec in some capacity end quote. Crypto transactions typically can be settled in realtime without intermediaries. As russell crypto intermediaries often serve different customer needs and they have different Business Models impose different risks than traditional securities intermediaries. All that rizo question what is the crypto roadmap for these crypto intermediaries to register . Stepping back i think theres a larger problem. As matt levine the economist put it in a quote chairman genslers postures he should be in charge of writing the rules for crypto. I dont see how that can work end quote and i think he is a good point. Given the novel nature of these tokens congress ought to step in and provide clarity. In particular need to revisit the definition of security as part of a larger effort with the Crypto Market. Crypto tokens have varying degrees of decentralization and they usually did not have the financial claim on issuer and can be federal then realtime without intermediate years. These are important differences in a merit clearly stated tailored Regulatory Framework. While they sec has failed to provide the regulatory clarity its finishing burdensome and proposed rules in the ordinary Securities Market. At the top of that list is the secs exposure rule. Public companies have required legally required to disclose material on Climate Change information. The proposed rule however we go much further to require disclosure of exceedingly expensive Global Warming data in this the data will be enormously expensive to collect. Almost none of it will be material to finance. The an oar reports elan the sec estimates and prevent aggregate issues were increased from 1. 9 billion per year to 5. 2 in billion dollars per year if the disclosure rule is affected. The sec estimates the external compliance of the Company Going public will increase by more than five times a time when excessive regulatory costs or are ready resulting Companies Going public. The cost of compliance will be more material than the information itself. The Climate Disclosure rule is really about informed Investment Decisions. Without equipping climate activists with data to run political pressure campaigns against companies which will lead to the detriment of shareholders to the endgame is discourage Capitol Investment in Oil Natural Gas another can Traditional Industries and we have seen how about well thats working out in europe. The sec is waiting to controversial Public Policy far outside of its mission and its expertise and they are doing it without the Legal Authority to do so. In the process it is easy politicized agency slowing Economic Growth increasing inflation and possibly undermining National Security so given the importance of these decision republicans ever into the sec asking basic questions on how the sec developed their Climate Disclosure rule providing real substantive answers the sec assaulted while the sec may not want to answer congress the sec will have to answer to the courts which should make them nervous. The Supreme Court has repeatedly held and i quote congress does not alter the fundamental details for regulatory schemes for ancillary provisions and it does not one might say the summer of the Supreme Court applied the sensible principle to the West Virginia versus dea case. They cannot use novel interpretations of existing law as they have Legal Authority to support sleeping policy changes including Climate Change. Thats precisely what the sec appears to be trying to do with the Climate Disclosure rule. The sec should be informed that they are on notice. Thank you senator toomey and today we will hear from the securities and Exchange Commission chaired gary gensler. Its his annual trip here and he often does that more and we thank them for that. Shared itzler youre particularly welcome because we have a very good well above average turnout today so enjoy that. Thank you for joining us shared gensler. Chair brown Ranking Member to me and members of the committee and honored to appear before you today. I want to start by thanking you this committee and all of congress for two new commissioners who worked up here on the hill and on the other side of capitol for 32 years, terrific commissioners in its welcome we have a full i want to say im speaking for myself and i dont speak on behalf of a fellow commissioners were staff in this hearing. Id like to start a discussing two key years in policy making a while back. 1933 and 1934 when chair fletcher sat in the seat and chair brown if i recall but it was in the middle of the Great Depression in president roosevelt addressed a number of landmark reforms reforms in one of them congress panettiere came together to craft the first two federal Securities Laws 1933 president roosevelt also extended the use of the Gold Standard. In those two critical years one could say we have replaced the one Gold Standard with what i would like to say another to Securities Law but i believe the core principals have contributed to americas economic success and geopolitical standing. There was the day sick idea of the day need to decide the recent want to make but there were Securities Laws where there was full fair and truthful disclosure. As we execute our mission to protect investors and maintain fair and orderly efficient markets we cannot take the leadership for granted. Even goldmedalists especially goldmedalists constantly trained to stay ahead of the competition. Out i go back to senator kennedy and van hollen to help us with this issue with china. We must remain excellent opportunities to drive efficiency and resiliency. Markets work best when they are it and in what that mean . That means theres competition and transparency in the middle of the market. The lower the cost in the middle and that means issuers have lower cost to raise money and investors get better return. So we have done a lot but we have not updated our National Market and their equity system in 17 years. Imagine if you had in your pocket a phone that was 17 years old. You would think oh my gosh maybe i should update that phone. We are also looking at the efficiency of our treasury market and the absence of a private fund market. Investors would benefit from greater competition. Second our system works best when theres integrity in the market. Hence we have proposals to bring greater integrity into the market. The insiders trading plans and so forth. Another areas crypto is Ranking Member two main raise to 10,000 Crypto Market it to believe the vast majority are securities. The securities tokens are often covered and given that as the Ranking Member quoted me saying it follows that many crypto intermediaries have to register with the sec in some capacity. I would note when chair fletcher was a it was not Central Electronic clearing and you could exchange it from persontoperson paper form. Staff is working with Market Participants to help ensure investigators get time tested for protections of the market. In that work in any work that congress does i think we have to make sure we dont inadvertently undermine the Securities Laws underlying to 100 billiondollar capital market. Thats the motherload. Thats our Capital Markets. Crypto is 1 100th of that size. Markets work best when they are bristling at in normal times of stress as we have seen in with the stresses of 2008 in 2020th history tells us no doubt will have it in the future. Thats the nature of economics and finance. Thus we have a number of projects and resiliency that include shortening the settlement cycle and includes the work we are doing with the treasure markets and around money market funds. In all our work we are anchored by the laws that Congress Passed the courts interpretations of those laws Economic Analysis and public input and is the commission we benefit great he from public input including from congress and these Committee Members and i would meet with any of you oneonone anytime you want. We listen to feedback. Our Capital Markets to the Gold Standard that keep it that way and i look forward to your questions. Thank you chair gansler and i think what he said think what you said and ive heard you say this before in bigger groups that we can do about the Crypto Market to undermine a 100 billiondollar capital market. Fundamentally thats her job on the urban affairs committee. Youve made improving disclosures a priority in the Climate Risk Disclosure that the enhanced buyback information i mentioned earlier. Addressing cybersecurity risks including visibility and the concentrated ownership of stocks that discuss briefly why its critical we improve these types of disclosures for investments large and small and how markets operate . I would say goes back to one with this basic bargain that investors as long as they get the full and fair to motion disclosure material disclosures they get to decide and you can defraud or mislead them. That lowers the cost of capitol because then theres trust in the market. The second thing transparency does it help out competition in the markets. Competition is the nature things promotes our economies as well and that Competition Among intermediaries money from the public so those are the two things not to mention market integrity. Thank you. It senator toomey can confirm this ive noticed that we will see an unusually high turnout of republicans for this hearing today. I think the turnout of republicans many of whom against all evidence Many Republican senators against all evidence or climate deniers and i will assume asking questions about that. Let me go with that. Climate risk disclosure specifically discuss why your agency is proposing is not quote making climate policy. Improving disclosure. Its because right now hundreds of companies and investors representing not trillions that tens of trillions of dollars in management or in this conversation already. In testers get to decide. We are not a merit regulator. Some people think we might be that we are not. We are disclosurebased regulator. Investors today want to know about time at rest because it matters to the future path of the performance. Financial and other performance and blood are customers going to do and what is the supply chain going to do and what might happen around the globe because their u. S. Issuers are operating in many jurisdictions around the globe. It really does go back into when i buy or sell a struck a stock or a proxy climate risk matters to those investors we do have a role to help bring consistency to those disclosure so there are it happening. You are clearly saying you are not a merit regulator but a disclosure regulator and thats important here and i hope my colleagues remember that you said that. Let me ask the last minute and half crypto securities and banking and commodities laws legislation would give the cftc jurisdiction over part of the reptile market. Remind us why its important and ill ask two questions together. Remind us why its important for financial regulators to coordinate oversight to make sure gaps or loopholes dont exist and would you agree to continue with to work with our committee and banking regulators to make sure we get this right . Let me just say when i say its important to protect ensure the 100 billiondollar Securities Markets work its because thats how we price our risk in our Financial Markets and how investors save. This committee and the House Financial Services committee oversees that wrote the law the definition of security should be i think the exclusive agreement of these two committees and im looking across the aisle at the agency that you set up. If we end up if there are multiple federal agencies defining what security is and another agency tries to define it it could undermine what we are doing is to win as a Treasury Security is security and when the Something Else in the equity market security . Your question about working together we worked together with financial regulators and yesterday announced something that in the treasure market that would work hand in glove with the treasure in the eye was honored to chair that agency but i love the agency of the cftc and id love the ftc. Like my three daughters. I do want to say we worked closely with the cftc with a recent row with put out and there are many parties in the markets that are dual registrants. We have dual registrants that registered with the sec. If Congress Moves forward to get to see it easy greater authority. Savor bitcoin we would Work Together but we party Work Together on a number of Enforcement Actions. Thank you. Your testimony mentioned the enforcement shrunk by 5 of the last years. Despite that they sec is has pursued new cases in crypto focused on fraud and misconduct for professionals and security initiative. That doesnt happen often enough and i thank you for doing that. Thank you mr. Chairman. Chairman gensler in your statement you acknowledged that there are some tokens that are not secured and i know your view whether or not it Digital Asset has circumstance analysis i know you have wrought authority. Youve also made it clear in the past that bitcoin is not a security. Some sec staff had previously said the sec report characterizes the room. Briefly and without getting deep into the weeds and i knowledgeably. Most tokens have a large degree of central control. Generally speaking is it fair to say a significant factor for you and whether or not it Digital Asset as a security is whether its centrally controlled. I looked to the Supreme Court who has often written about this over the course of a dozen times in last 50 years and its whether the investing public is anticipating profits and that includes anticipating profits from appreciation as well as from as you mentioned arise based upon a common enterprise. Another way to put my question that you havent answered is come is it possible to have a common enterprise that is decentralized . Isnt centralization necessary to constitute a common enterprise . Smack you could have some things that are quite open. Still the public is anticipated on the common enterprise. Im careful with my words here to be accurate as best i can. The common enterprise are you relying a group of individuals and look these are not laundromat tokens. You arent answering my question though. Me try it this way. What is it about bitcoin that causes you to include his as a security . One as is there is no group of individuals theres no group of individuals in the middle that are a sick way, and in essence the investing public is not betting on someone in the middle. You are choosing to use the term to centralize that thats what youre describing its the decentralizing nature of bitcoin. Heres my point and im going to run out of time here. There are a lot of projects as you know. Decentralization and centralization occurs annually i think can youve acknowledged the error token squirrel that are not securities. I think its because the centralization that you have come to this conclusion my point is its not reasonable to fail to provide parity and to provide the definition of exactly where am must continue him you have a sufficient common enterprise that qualifies as a security where you dont it bitcoin doesnt did some of your colleagues heads said that appear him doesnt but a reasonable developer who wants to comply with this doesnt know where that line is drawn. There are many factors so its not one term of centralization versus decentralization. I tried to stick to the Supreme Court. I tried to stick to what they say a common enterprise. A group of individuals in the middle. That developers in the middle of the investing public outing on batting counting on that even if the token might on 1000 computers. Thats not what the Supreme Court is looking at. Not about the token. Its about a group of developers in the middle. If there is nobody controlling a little thats what we essentially called decentralized. As you know of course it requires all four in order for something to be defined as the security. Let me move on to related issue which is as i said to my Opening Statement i dont think the sec has provided a crypto specific road up to the legislation of crypto intermediaries. One example of the problem that arises is the fccs consumer customer protection written in 1972 and it doesnt address how it holds blockchain keys for instance. The sec claims to provide relief that the relief as onerous onerous contingencies in this timelimited and my understanding if you have been able to comply. I know you have said many times you want to have the intermediaries come in and have a conversation with the sec about this. Wouldnt it be better if the sec came out and laid out how you would apply the rules and regulations to these novel devices . We are in conversations with the a number of these intermediaries across the exchange to brokerdealer the custody space and as i said a year ago people should make no mistake and i think it sounds like senator you and i might agree that the lending platforms are securities but in Exchange Space and the dealer space of i ask that people would not come in and use what was put in place under chair clayton the role that you mentioned. I said to staff lets use everything in our regulatory toolkit to help facilitate and get this industry people will not have trust in the space unless it comes to Investor Protection. Protection. Im out of time mr. Chairman so i would just say my concern is the approach youre taking that these oneoff discussions if it did even result in an opportunity to comply with the this idiosyncratic order negotiate with a Single Company and thats not a good way to pass rules. It ought to be through the apa and a public row. At the chair will forgive me think weve been clear through 70 or 80 actions starting with the orders and there were full votes in the commission. Secondly i look at other times in the history of the sec and assetbacked Securities Market text 10 or 11 years where they did these exempt if orders and did a rule at the end of those 10 or 11 years based on that experience. We believe talked to the industry talk to the Market Participants. Thank you mr. Chairman i want to thank chairman gensler for being here as always. Recently i led a group of my colleagues about your process for significant number proposals that the sec has been working on over the last year. I would think youd agree that its its important for Stakeholder Input and feedback in one of the proposals ive been hearing about is the enhancement standardization the disclosures for investors. You probably know we are farmers and its our 45th harvest and working as a farmer i can understand the importance of considering the impacts of Climate Change. This year was their Second Harvest due to the drought. Last year with extreme weather conditions it was our best harvest. So we have got some issues to deal with. I also know though access to capitol and markets to sell her product and our product is really important. I can tell you understand the burden of reporting the information. I get surveys nearly every day about what i am doing is a farmer. This week there were a number of armed groups that ive visited with virtually and in person. Number of banks and they were concerned about this rule. From an Ag Production standpoint as you know i dont have a lot of options. I wake up in the morning and throw couple hundred gallons of diesel fuel into the tractor does not like i have an electric tractor in the garage. Im pretty well locked in to diesel fuel and carbon based fuel at this moment in time. Under this rule what responsibility would folks in production agriculture specifically montana farmers have for disclosing their emissions . Thank you for that question. Presuming those farmers are not Public Companies that dont come under the rule but we have heard from various farm bureaus and the Farm Bureau Federation and you and i have talked about this and other members know. Public companies would have an obligation under the proposal with regard to Greenhouse Gas emissions and their own emission and then we say that they estimate their supply chain emissions if its material so if it has a materiality, they estimated wayford folks in the Farm Community, thank you the Farm Community that they are concerned so we have taken a close look at that amongst their 14,000 other comments. Let me give you a scenario. Markets are really important and i like to address markets as much as i can. Take wheat for example i sell wheat through publicly owned company and they start doing their assessment on climate impacts and they certainly dont have a problem with by the way one of my is a farmer who sold them grain for example for cattle or pick a commodity, if the company says luck if you are going to do business with me i have to have this information what is my recourse . What we have put out and again we have gotten good comments and we are working through this is that Public Company you sell through does not have enough vacation to ask you specifically. They either need to estimate or if they dont have an estimate just discuss how they are managing that but i would say this is what the Public Comment process is about to. We have heard from 14,000 other people particularly in the Farm Community and how we address this to lower the cost. Its not whether its the Farm Community or their communities they are not Public Companies. They are not under this rule. I got it. My concern my previous statement was we sell to them. The vast majority of the product is sold as to Public Company. And i just bring this to your attention and i dont want to repeat myself. If the Public Company said hey we need you jon tester to tell us how much fuel you use and how much Fertilizer Use in how much input is in all of that addict becomes an issue especially for the little guy who is out there running a tractor or fixing that tractor and doesnt have a lot of time. I will say two things. One is thats not the intent of what we did. Thats the benefit of Public Comment and thats why this helps us and of course well put this hearing in the Public Record and are Public Record as well. As you is my Opening Statement i did been watching it from my office and i want to get back to something that center to me said, we set an oversight ret seven ago and i think a followup on july 21, and looking for a written response the request and chairman gary gensler interoffice in the initial response provided a one page response suggesting that we meet with the staff and i am kind of curious, when we can expect specific written response to the written request that we sent you. We just get ready with this document with your staff to walk through the process and the prospects we have any rule, we put out to the public can that release was in hundreds of pages and Economic Analysis and the rationale the reasons for that. About 500 pages long. That is correct and we stand ready to meet and walking the process with you. Well i guess that maybe you just get a commitment maybe the members who are interested, absent a written response by getting a commitment from you to meet so that we can go through and get the answers to the specific question that we had in the oversight request. We stand ready to have a staff meeting to go through and generally talk with the process and amine i want to be careful because it is really about to talk about it to try to address the questions that you have any concerns but again this roll is rooted in decades of law and it is about conversations that is already going on between Public Companies and their investors and investors i think would benefit if we could bring some consistency to this fragmented disclosure that is having a. We may followup staff but we will continue first again congratulations to your confirmation but were going to continue to press on the answers to some of the specific questions but thank you for that. The u. S. Treasury market is the single most market important market in the world and do you agree without. It is the base upon which the capitol markets is. It does a lot and it is important Monetary Policy is important in protecting the Retirement Savings the u. S. Workers which we can run down this long list think your recent proposal could inadvertently curtail involvement in the quantity treasury market. Im kind of curious doesnt commission will intend to require customers to register. We put out an proposal earlier this year based on the 1986, law about dealer registration a. Im am sending the proposal plus fighting from is a dealer the transaction is more than a specified amount per month and is that true. Theres two prongs but yes, he had over 25 billion a month. So, how would a pension fund that frequently transacted in the treasury market, and exceeds the thresholds of the commission in order to protect the Retirement Savings and vince members be considered a dealer under any interpretation. Is about whether you hold yourself the statutory definition is putting yourself out there regularly and transacting in a marketplace in their is not by the way that never that we go through this economics in the proposal, we not cover Pension Funds as we know it today. So the nature of the trading would matter as well. It is the size and scale the treasury market as large as they are, thoughts that their Pension Funds arent training those types of levels as you mentioned. I have a series of other questions benefiting me probably longer to ask than i have time remaining so we will be submitting several questions for the record and again i want to go back to the oversight request and we need to kind of figure out how we can get those specific answers to the questions im happy to have myself meet with you we would also like to get a formal written response to the request we now requested in response in writing and the discussion is good but we will continue to press for that in thank you. Thank you senator. Senator menendez. Thank you chairman, and chairman gary gensler, last time you came from the many i asked you to move x visually to the adopted management Advisory Committees regulation and last october 20 senators including nine members of the committee since you a letter supporting regulations and asking for immediate approval and can you give us an update on the status of adopting this recommendation. So i thank you senator, we have look at the, for relations and some sub and those recommendations and weve informed your staff about this with regard to two important ones and they are, one is recommendation around guidance stuff guidance to managers are selected years of service and in the management need to be taken into consideration and another one is with regard to eeo compliance and how those complaints are shared with other agencies and mike and i think we made some Good Progress on those who in the sample shortly be putting out the guidance and we continue to look at the others matter. Will i appreciate that you are giving some of these recommendations with your intentions but at the same time, i am disappointed and in so many other areas, under your leadership theyve taken bold steps to protect consumers and the oversight of the markets such as you propose Climate Risk Disclosure rule however, when presented with a max non controversy you unanimous recommendations that would promote mercy in the Asset Management field coming up and as of aggressive and so can you commit to make concrete progress on these recommendations by the end of the year. Senator, i think very seriously how important that Diversity Inclusion equity is important and probably at our society but to the agency, our Senior Leadership is probably the most diverse and inclusive that we have ever been as an agency we continue to lenient to try to make sure that our agency that everybody can bring their best self to mark and that we get the benefit of the talent across this great nation and in terms of policy, is held up in court right now for the last year selfregulatory and nasdaq in place in a sing requirement with regard to the reports as the directors had diversity and that was their decision not ours and we uprooted that and there were four Committee Recommendations as i said i think we have made some pretty Good Progress on two of them and think that guidance will be found in the nature and we continued to work on the other. Will i would like to highlight one of the recommendations that i thank you so particularly impactful in. [speaking in native tongue] committed that the se under fcc require enhanced disclosure by invest in companies and Investment Advisors regarding diversity within their workforce and leadership and you and i have spoken about the importance of leadership diversity in your confirmation hearing managers heard your comments now. I think the disclosures about diversity are incredibly important which is why i introduce the improvement corporate through the diversity act and you agree that enhancing diversity disclosures for Advisory Firms and Investment Company boards and consultants would empower investors and Fund Managers to make more informed decisions. Again as i said, i think that we benefit in our will and our organization at the fcc great nation tapping into the details across our diverse nation. We continue to look at this recommendation of a map with regard to disclosures. One of the key findings next that he is god calling summa is an advisory for that is created under the believe it is the fcc so one of the findings is that Investment Performance five diverse Asset Managers is equal to or greater than the Investment Performance that lack diversity and ownership with the Senior Leadership despite the differences in size and length and track record and that is why i recommended that the fcc issued guidance clarifying the performance of the fiduciary duty does not require automatic exclusion of Asset Managers in the industry do not meet a certain threshold of assets under management in your view, is it necessary for fiduciaries to automatically exclude you are smaller Asset Managers in order to fulfill their duties. Senator, guidance, i share what you just said and i think that is the guidance that the staff is working on put out in human rights,. [speaking in native tongue] is a federal Advisory Committee and is under the committee. Let me close by saying, fundamentally using the excuse fiduciary duty to include the women and minority firms run contrary in a max study the host of other studies getting others have repeatedly shown the diversity led firms out perform their non diverse counterparts and so given this data, i think great new smaller Asset Managers being automatically excluded under the disguise of fiduciary duty is actually not helping investments, it is harming them and so that is why im pressing these issues will continue to work with you we have to hope to have a robust response by the commission that you. Senator kennedy from louisiana is recognize. Thank you mr. Chairman and thank you for being here today and i want to also thank you for you and your good word and work on the infamy holding portable under Foreign Companies act can you give us a quick overview about where we are and im trying to understand as we are coming to the negotiating table new negotiated statement of protocol. Can you give us an update on your good effort. Getting it on thank you senator Brown Van Holland human shepherd that through i think that act chemically additional leverage to work with chair williams with new under numerous meetings with the chinese we said the chinese last august a year plus ago that we would not be willing to send the inspectors over to china to look at audit work plus we could get a very prescriptive detailed statement critical for the roll of congress and of course, Company Trust the numbers from the Chinese Companies must there is a million u. S. Is auditing the auditor so to speak and technically inspecting and investigating and they just signed that is important to get that sign. Pco is sending inspectors over him for advice tomorrow or somebody the 19th, and takes about a ten weeks to get through, somewhere around think seeming early summer and i dont know if the chinese will comply and they have told me, totally directly on webex goals and chinese securities tory commissioner said it will comply and is pretty clear, no reductions in the workpapers and take testimony from and they can show the information can pick whichever companies they want to look at. Im not sure they comply either they moved further towards compliance and at any point in the past and sender bound holland and i have a bill to pass at the senate as you know, be considered by the health to move it like from three years down to two years with respect to which if they dont comply, we tell them to leave our exchanges and i think that might help we can get the past and i appreciate you and your efforts are in my last two minutes my wanted you shipped years. On the Climate Risk Disclosure. I dont mean to be critical, i am trying to understand because i thought the senator raise good questions, what is your best guess the cost of compliance with Climate Risk Disclosure rules team excel, one can i do support the accelerating holding the Foreign Companies to your under three years data to please i think will continue to have the right leverage even if the chinese authorities and regulators allow for compliance this year and what about next year and next year and so i do support that i think you. And in terms of climate control, we lay out in this proposal, all of the Economic Analysis nadeau me to speak for the numbers and that, by the company. What is your best guess and im sorry to interrupt you here only have a minute, what is your best guess of the cost of it to comply. So, probably, we lay that out depending on the size, just want to miss become a couple hundred thousand cash in total cost i think sooner to make accurately quoted, many were in the room, he measured in the single digit billions across the entire economy so we benefit from is also people are coming in and giving us critical analysis. [inaudible]. Im sorry to interrupt going around his time and heres my question, it will cost billions of dollars to comply. Those are scarce resources to the extent of people like the senator has to spend the money to comply the kinsman the money and Something Else pretty presumably, the purpose of the rule, is to focus the investors attention on risk of Climate Change so it was a man the comps do a better job in the purpose of which is to lower the world temperatures. Actually present the purpose, i can speak for the fivemember commissioner but also from myself, not merit regulators of the purpose actually is not to do what you said. But. [inaudible]. I think the people supporting the rules,. Is alive supported. Welfare enough but i think up most people expected that you put pressure on the companies to disclose shareholders put pressure and people do better jobs. But i would like to see what youre asking the senator tessler nevers to estimate, i would like to see some sort of estimate of how much of all this money spent on compliance will lower the world temperatures. And we are spending and i believe in clean air and good water and when it these 11 doors but what bothers me is why we are spending these trillions of dollars of scarce resources, india and and china gets 60 percent of its energy from has 3500 coal fuel power plants and we have less than 100 when any kind of agreement with india or china for them to reduce emissions so we spent all this money in the world temperatures are not reduced. I will answer the question weekly. The good news is that is not what our authorities are or what motivates this commissioner, actually helping investors get more consistent information even if you want to invest in what might be a brown ss rather than green assets, they will get consistent information probably lower some of the great wash after another things like guessing i think you for your indulgence. Center van holland of merrill is reckon i. Thank you mr. Chairman, going to see you mr. Chairmans going to see you from the great State Government under maryland. Let me just pick up that senator kennedy raised in terms of invitation only Foreign Countries account black i just want thank you for pursuing that is also a great to shorten the time down to two years online think sooner kenny for his work on this in the idea to protect investors specially small investors by ensuring all Companies Listed on exchanges comply with our account coming rules you very tough negotiations with china i think you for keeping us informed the ultimate proof is in the pudding right, execution of it but i do want to salute you and your team for all of your efforts on that and i think you for moving heaven rulemaking to crackdown on abuses to be 52020 plan for insiders and the beginning we introduced legislation under rulemaking and you did when monitoring that carefully and i dont know if you saw the wall street journal, article back in june, i think along with other studies revealed clear abuses by insiders in these areas. When they benefit, the investors lose often because sometimes these are games you take gaze before the overall value of the company it decreases the stock value sue i think you forever monitoring doubt announcement thank you and your team for recognizing the real issue of fraudulent scams and security scams often directing his seniors in up to 3 billion every year when a bipartisan bill here but i know the chairman of drinking at work are tired of hearing uppity appreciate their i think support the bill which would power the state to crackdown fraud by creating a federal flip to the fcc to help them out and weve heard testimony on behalf of the state features commissioners and securities image commissioners and strongly in getting this work we recognize this is a big problem was you with. I do the broad as you said in the communities are sometimes Infinity Base broad, we see all too much of it at the fcc and weekly enforcement meetings. Im sure you want to pass this legislation we saw the state to crackdown on this kind of fraud. Working with you on the ticker legislation as well, senator scott from florida and i want to ask you about something is nice have spoken about before, which is country by country reporting disclosures by the national corporations. Missing jurisdictions around the world including the e. U. And australia move towards increased disclosure of an enormous for large multinational corporations disclose the countries in which the book was pay taxes way to mitigate risk to the investors we have a changing International Tax environment and clearly companies in elevates and putting their profits and sketchy tax savings, there investors are at risk. That is why we believe as part of providing investors with necessary information, we should provide country by country disclosures and i was pleased to see the fcc take to the steps to protect the investors investment by allowing them to put forward a proposal of amazons cheer Shareholder Meeting the company to disclose the country by country reporting is my question is are german this rapidly entered hundred changing cooperation tax, can you look up just question about whether the investor disclosures are needed in this area. So senator i think you we are looking at it and as i discussed with you when we got together on the phone Financial Accounting standards for companies in particular is sometimes let them know and was a publicly here, i support the project around breaking out in tax reporting for Public Companies and i believe i want speak them but next handful of months, they will go forward and it breaks out i dont think every country but i think that the top couple of handfuls countries and it will sort of promulgate that fact to the Public Feedback back and forth and so that would be a productive approach to have such disaggregation the vastly is considering right now and is active object going to thank you may have some questions for the records when i appreciated thank you. Thank you, sen. Catherine cortez masto. Thank you is concealed let me talk a little bit about crypto relations under your ten year the fcc and the actions against Crypto Assets and however few cases have been brought against the exchanges Crypto Assets are treated primarily through the exchanges the fcc has proposed that and should be regulated under the exchange act so could you address this, why should Crypto Assets intermediaries and exchanges be regulated under the exchange act and if you would, when the investors in the Market Participants benefit from regulating Crypto Assets under the exchange act. So thank you is actually fairly straightforward because of these 10000 crypto focused without jumping anyone of them, i believe the vast majority are securities because there somebody in the public is betting on a Better Future and betting on it is betting profits on a common Enterprise Group of entrepreneurs in the middle and then given that, these intermediaries often have 50 or 500 tokens or one or 50 tokens, when you have a bunch of securities in the form and have as a benefit public coming it is a timetested protections up these Crypto Exchanges would protect against front running and manipulation and transparency so you going to the New York Stock Exchange or the nasdaq or like, his committees work the loss long ago, i complemented fletcher here 1934 candidate but long ago, the very reason of the Public Benefits right now, theres a amount of noncompliance so we will continue to try to work with these intermediaries and get them inside regulated need the user story toolkit to adjust and facilitate because there are some differences that the center and i talked about earlier. Would you be able to identify potential Money Laundering activities. Is more from the treasury however, one of the key things under monday and many hundred positive exchanges, the brokerdealers, have certain compliance obligations over with financial crimes enforcement and the treasury in one state register for they should an team and if they dont register but they are legally required to have to comply without. Thank you. We jump back to you because i do think senator kennedy and i appreciate his willingness and put forth to the understanding the issue of yesterday and reform understanding thank you for your position how you proceed regulation but because now with a new generation of investors, really conscious about green and going green, there are new industries note looking for ways to invest the crack. There are also investors because of climate risk, could affect Financial Performance of the company and vector supply chain and competition and future relations of the thinking about how to value today that future transition risk. And then there was also conversation i appreciate this is what about the issue of greenwashing and i know some major bubble Asset Managers stated that the integration label could greenwashing risk and can you talk a little bit about that and address that. So, there Asset Managers managing trillions of dollars that was saying to the public that we will invest your money, your money and something that is Carbon Neutral in korean and the lichens of the me is about truth in advertising and so we put out some proposals earlier this year to address with stands behind his name, literally, the name of the fund and argue living up to the obligations that you made a commitment you made to your investors when you asked for the money. I think thats really wanted about the integrity that would address some of this we sometimes call the greenwashing. The ambiguity is left with guesstimates and so forth is something i really think you need to take a second look out. Quick senator i concur with you as we talked in the anteroom earlier. We thought the proposal had the right balance because we said it is only an estimate. Its only material or they made a commitment to it. If they have a big safe harbor. But we heard a lot from the farm bureaus. That is what we do. We take a look at all the Public Comment since he had that does not ensure those private actors. Text that is precisely what he really wanted to talk about. Its one thing with the rules its another thing when theres an expectation once the rules have been established. If they are really ambiguous. That means each time they have to go back to regulator to ask whether or not what theyre doing is accurate or not. That causes some serious concerns for people that want to invest. I simply save your making rules on these clearly you are making rules. A lot of them. Lets be as precise as we can and then think that would eliminate all the questions coming up sir. Let me go into a couple items very quickly here. It is speech or delivered last week you closed just of candy saying no honest business should fear the sec. Given the nature crypto investments i recognized may be appropriate to be flexible existing requirements. Openly question the sentiment for bloombergs and scc has been suing crypto products for illegally issuing securities for about five years now. Put in that time it is not issued any rules or put anything on the rulemaking agenda about adapting the securities for crypto projects. After mr. Levines comments you want to regulate entire marketplace but clearly i does not appear youve got rules in place to do so at this time. In my mind this is simply unacceptable. I know your background on the private sector mike youve got a great history of the private sector. This is kind of confusing to us. Apart from a variety of companies that claim they try to work with you and with your organization. You turn around and hit them with some pretty heavy Enforcement Actions hurt or slow walk the process. Mr. Chairman, you keep telling crypto entrepreneurs and the companies to come in and to register. Has anyone extra tried to do that . To answer your question there are six of companies that actually registered under the disclosure regimes. I would say this, not liking the answer from scc does not mean there is not guidance. Most of these tokens, the vast majority are securities and thus intermediaries are likely to be noncompliance with laws right now. So, we are really trying to work with them and talk with a wide swath of these organizations right now to get them properly registered. To get them inside. This is what we do. With all respect to mr. Levine we have been pretty clear. My predecessor was. Through Commission Actions and his public voice in front of this committee and others about this matter. We are going to continue to protect the public as best we can. Thank you. As of august 2022 the sec had proposed 32 new rules in just 11 months. Fred is preparing at least another 19 for release in the next year. These are complex rulemakings that will impact markets and capitol formation. In addition to that these rules are being implemented and overlapping timeline effort of the same or interconnected products and market sectors. Despite the linkages the sec as assess the Economic Impact independently and in isolation from the others. Implementing disposal simultaneous without consideration of the cumulative and cross sector affects one will most certainly lead to unintended consequences. Mr. Chairman, was the sec not consider the cumulative and the cross sector affects one simultaneously implementing these proposals that most certainly could lead to negative and unintended consequences for capitol markets and broader economy . Editor, we actually do consider even within any one of the 30. As of yesterday is 34 to bring you uptodate. Moving along. I would note chair clayton during his four years did a little over 60 final roles. We have about 50 on our docket. Jared shapiro and chair white were the same 40 60 year range during the four years. We might have been a little sooner getting them out to proposals. We do consider those cross issues. Sometimes we reopen proposals for that reason like they did with stock lending and stock buyback. We reopen because of the cross consideration. When done and some other areas were looking now whether we should do that in some areas and reopen some of the cross consideration. Lastly i would say we get comment letters after the Comment Period as well. This is over the years and we do it now. The staff reads them. They put them in. It tends to take us month sometimes a year to 18 months to finalize a rule after it is proposed. Thank you i wish we could continue the conversation. Once i think you still my cell phone number you can call me anytime sir per. Thank you. Senator smith of minnesota is recognize progress thank you chairman and Ranking Member. It is interesting senator rounds comments and questions about crypto, i was not here earlier because of the Banking Committee we are having a conversation i was at the Egg Committee pardon me, i know where am i . Im a little confused of been running around. Anyway, just a note there are a handful of us, senator brown consider warnock at night sir from both agriculture and banking housing for the issues of how we should create a Regulatory Framework for cryptoo commodities as well. The chair is turned out to get to the Great Depression comes of this would dispute that probation with the rest of us. This is especially important to have investments at the market. Including the retirement states. The committee probably as a set of routes this belief is to happen next with leaders. Company investors are considering it. Take your cancer risk. Take lots of might change the past. On top of 500 or 1000 Companies Cap operations are overseas. They take it that starts at 300 of the assets under, and his special back and got up and slipped through the city. Most of the fact thousand, is the best service. I decided to strip the companies managing it well they might say the market is overpricing a stop at that mindset what to sell that stock because i do not think i think assets are committing a lot of inventions are still likely really profitable but that is up to investors. Another topic i want to touch base on, most plays to the sec take action to increase transparency and accountability the private fund market. The private funds including private equity and hedge fund that an outside presence and our economy. 18 trillion in assets. Answer portion that includes Retirement Savings health and Pension Plans for teachers and municipal employees and others. Content ownership and private funds has been on the rights. Third chair gensler recently proposed amendment for pf the private funded roles . And how they interact with the limiting conflict protect investors and protect the market. Approximate liberals are deprived of god. One to promote greater efficiency. That means lowering the cost of this transaction ground 21 trillion. If i would take evidence the hundred billion dollars plus. And that means that as teachers, firefighters, pensioners are getting a little low or potentially so it helps them. Theyre trying to promote efficiency transparency and side letters. He mentioned form pf form a private fund. That was put in place after the crisis. Congressman bobby sec more information about these funds with regard to mitigating and monitoring for systemic risk. The big crisis of 2008. We are updating those forms. Thank you, thank you very much mr. Jared. Cork senator from you will recognize execute mr. Chairman. Appreciate you holding this hearing on the important work of the scc. Chairmans pregnancy again. I want to dive in to a component the Columbus Gillibrand village had a chance to see that deals with section iii zero one of that bill. I agree with the statement had made the National Point offerings were Digital Assets are sold to investors expecting to profit from the settlers cap, should be considered an investment. Senator angela brett and i share concerns about information gaps later and traded by others and the need to ensure its risk informed decisions in the market. We believe its those that raise the money through International Sale of Digital Assets and those that continue to provide essential management efforts to be held responsible to provide disclosures to the market and secondary purchasers that may or may not be aware trading securities be subject to strict liability. So in our active responsible innovation act, rather than attempting to impose new complex rules on secondary perch and yours, not involved in fundraising transactions. Provides for Robust Technology neutral disclosure obligations that would really hold responsible those who benefited from that fundraising. Not the innocent users of Digital Assets who have no way of knowing what the sponsor is up too. So, my question is this. Do you have any thoughts on the need for disclosure in the Digital Asset market and section iii zero one of our bill . Its a thank you for your question but is good to meet with you to discuss as well. I think they disclosure as you say is key. We are setting up a new Industry Office to help the disclosure in this field and or Corporate Finance area. I do think that as you say the innocent purchaser the public does not have a disclosure they buy a stock on the New York Stock Exchange. Is not the public that should have a disclosure obligation if the bison crypto security token. But the entrepreneurs, the sponsor, the promoter, the entrepreneurs, that is where the disclosure ought to be. We have authorities now to facilitate it actually have a different set of disclosures for just as we have in other fields with different disclosures on assetbacked securities that we do for equities. But i do think where i might respectfully differ from what might be in the question is in the secondary market five years after stock is issued there is still a disclosure obligation. I think that is what congress did. Congress knew that was not enough for the health of the cover the secondary market. Cover the intermediaries like the Stock Exchange but also say theres got to be known as a periodic reporting the and no report. Maybe there is no difference here for think the investor should not have an obligation. That is the intermediaries on the enterprise of the folks in the middle. Quick so you think in the disclosure option or obligation would be similar or initial coin offerings or should be under our bill similar disclosure options as were instituted in 1934. Lesson think similar and kind but probably there are some things. It might be a little bit different list. There might not be a board of directors and things like that. I really do think your bill had a list we might differ on that list. We might have other things to put on that list. Its not everything that a big multi companies doing. I want you to know that senator and i want to continue to work with you and your staff. To make sure the extent we do not philosophically delete that any of those sorts of gaps that you have identified in our bill can be addressed. I do not see our bill having an avenue to come before this committee or congress before the end of the year. You intend to reintroduce it in january. We want to make sure between now and january we have worked with you and your staff to make sure we can address items that we can mutually agree. I look forward to that. I actually do not undermine the market, the definition of security, but are really under this committee and stay under this committee. We talked about unintended consequences of our bill before with you. We want to address is unintended consequences. You see things and maybe we dont because of your perspective. Mr. Chairman, thank you, really appreciate being here today mr. German brickwork thank you. Center also from georgia is recognized by. And give your testimony brickwork center also good to see you again. Ive routinely answer this question brave also put this question periodically to chair powell and secretary yellin. What do you see is the most significant threats to Financial Stability . Or in another way what keeps you up at night . You do not want me too say my daughters. We are living in uncertain times. Both the war and Eastern Europe and ukraine, was Central Banks around the globe moving from accommodating to tightening with the remaining challenges, geopolitical challenges between great nations and also with covid. All of that in the mix. What i look at and think about the relationship between the Banking Sector and the Hedge Fund Sector Banking Sector and commodity traders. That is called a prime brokerage relationship. I really do think resiliency in the market thats all you have a dozen or 15 projects money market funds and open end funds shorting the settlement cycle and the like. I think if we do our job well at the sec, we will build greater resiliency for the stresses that come in the future. And those stresses come because that is what an economy, we always have ups and downs in an economy. We have longerterm projects but nearterm it is the issues i just raised. Us talk a little bit about the treasury market. You highlighted that in previous testimony. You issued proposed rulemaking in the last several days. Can you please break down into laypersons terms the nature of concern with illiquidity pressure markets and how the actions are proposing would address them . Is a big market. It is a quarter of our entire capitol markets. You can think of it as the base the foundation of our financial house. Everything else is built upon the treasury market. If had real disruptions, call the jitters in the house. Like there are termites somewhere in the foundation. Weve had them in the last six years and it puts pressure on the central bank, the Federal Reserve that sometimes then opens up and provides the Balance Sheet liquidity as lender of last resort. We can lower the risk in the marketplace by ensuring all of the dealers the High Frequency traded dealers are registered and regulated. Secondly or the trading happens trading platforms are regulated. Some arent. Really importantly something that sounds boring its called clearing. It is called the back office which lowers risk in the system. Thats the main things work really could with secretary yellen and chair powell and his team on those proposals. You think they persisted concerned about liquidity and treasury markets threatens the feds ability to open Market Operations in a crisis . I think i might say if we do the suite of proposals to the treasury market as a group of primary dealers and that started to broaden out to these principal trading firms, highfrequency trading firms and others. I think we will build greater resiliency and also increase some competition in that marketplace. Okay, lets follow up on this ill have my office get with yours. I would love to have a meeting too. My brief remaining time particular concern to george as we have thriving, veteran communities in georgia. Health Emergency Action to shut down a multimillion dollar ponzi scheme that targeted reach permit funds held by veterans. I like to ask for your commitment will redouble and intensify its efforts to ensure that within your jurisdiction you are identifying and cracking down on schemes and harm veterans. All georgians and veterans. If you see something we have a whistleblower system let us know. We are understaffed. Let us know will try to follow up and pursue those leads as people see them for. Will pass that along. Senator hagerty from tennessee is recognized brickwork thank you chairman brown. Chair insular, i was reviewing your testimony last night. I was struck by a term used as you described the nation Securities Laws and regulations. You describe them as the Gold Standard. I dont believe that its true anymore but weve seen here in america over the past two decades as the number of publicly listed declined by more than 40 . If you the share of global ipos, we shrunk to less than 20 of the last decade. Why is that . It is because every new regulatory requirement you impose adds to the arctic crippling cost of operating as a Public Company the consequence of these regulations is to encourage companies to stay private look abroad to their ipo. He rolled out 32 proposed rules last including the disclosure rule which would cost hundreds of millions of dollars year in Compliance Costs and created tremendous uncertainty in the marketplace but this will undoubtedly make matters worse. America had such a big lead in terms of having the worlds best capitol markets, capitol markets have allowed business to succeed here and thrive. It is been in spite of this increasing crushing red tape. For the preeminence of capitol markets to die a slow death. We continue down this path there will not be any investors left to protect. American workers American Consumers retirees that cannot afford that. Under your tenure at the sec you have rolled out in an unprecedented slate of aggressive role proposals. Among the many troubling spirit spanning purview under the guise of consumer protection. Because not all markets are accessible its traditionally differentiated event market to most egregious its happening now of the private funds rule at the announcement it would begin to force significant Disclosure Requirements on fixed income including those regulated under rule 144a. Your staff claims these new rules will enhance Investor Protection. He of the qualified investors invest in these products are not unsophisticated. They do not need handholding. Yet these new rules will pose significant new costs. Will ask an impediment to innovators who need capitol to grow. My question to you is do you think the distinction between large and Institutional Investors versus momandpop investors is somehow unimportant . Is there some other motivation dedicate so many resources is investors all the predecessors have given a degree of its economy today. Senator i think there is a distinction between what is called accredited investors and a non accredited investor. I do think in the private funds rule if i can address that, this is now a 21 trillion general partners, the Asset Managers, who oppose what we are doing. I understand that. Those Asset Managers probably collect over 300 billion the issuers are on one side and the investors are on the other side give us responsibility to promote competition and efficiency in the markets he did 1976 redid it 1996 and allowed twice that we have that responsibility. In that proposal took a lot of the recommendations limited the treasurers said how can we promote greater competition through transparency to those investors, those sophisticated investors. This is going to lower the cost of an investment cosmic is going to increase increase the cost, or youre going with this . Brexit think we might have a healthy debate on this. I think actually of general partners taking 30 billion out of the economy, this will help promote greater competition for. Increase derogatory costs in the sophisticated market i do not buy that one bit too. Its Greater Transparency to the investors of the fees and performance for. These are sophisticated investors mr. Chairman. This is damaging to the marketplace. On the other side of the table there, Small Companies need to access capitol to grow are going to be deprived of that capitol because of this type of overreach, thanks mr. Chairman. Ex senator warner from virginia is recognized brickwork thank you, mr. Chairman. Understand this topic for a moment. I do think from historic bases of tact and its good to see you again mr. Chairman. You are in that range of what your predecessors have done. It is an aggressive agenda. A lot of it i support. I may disagree so my colleagues on the other side. But because you have been moving quickly, one of the things i like to respond a little bit i get to fill in a little more both on how you make sure you determine appropriate comic times. Some of these regulations youve extended some the comment times for semi feel have been too short. I would like you to give me a little more specificity on this interaction. Not simply in terms of total economic cost. Possible conflicts and going to come back and followup for a moment on cybersecurity areas. I would like to get the sense if all of these get surpassed by the commission, how are you holistically looking at in the and operability . It is a good question. We do a proposal by proposal the Economic Analysis. We benefit from the Public Comment. We have a long tradition regardless with the Comment Periods, 60 days or whatever the comment. It is when come in after the comment. The staff considers it. We write it up. We put it in. If it comes in not one day before we are finalizing it, generally on average takes a year or year end a half to finalize these things. So, i encourage people to continue to save you see that interaction. But secondly we also occasionally publicly reopen something we did that earlier this year. There is security lending and a stock buyback we should have reopened. We said those are so closely interrelated, lets do that as well. Again you are focusing within your purview. Let me give you an area ive got to wellintentioned rules. I worry about conflict. I am chairman of the Intelligence Committee think cybersecurity issues and might litany of things that keep me up at night that keeps me up that is what im surprised about seymour from washington bipartisan way really hard to get acrosstheboard mandatory cyber incident reporting. In trying to find the right timing of when you make that report ministry do not interfere the criminal investigation. We got a similar sec public requirement i believe a lot of the cyber incident fall into materiality. Want to take a few minutes i would schedule question after this. Take a moment to tell me how you do that potential interaction between something that is outside your purview the dhs versus your cybersecurity . Is a very good question Securities Laws about the investors understanding material risk and material events. So we put out a proposal as you said about corporate Public Companies making cyber disclosure. They manage cyber risk when they have a material incident report that within four days. Ive also been in conversation with the department of justice or department of one security. You know the particular leadership there. Had really good conversations. We included one important question in that proposal about National Security. It would take more of the 52nd slated to tell you about that. I work with the Department Justice on them. Carts the more you can spell out, maybe not just here but the process of the intersection between in agenda i generally support makes sense. To say that i would use my last 30 seconds of touch on the topic you are predecessors started down this path for you and ive talked about a lot before encourage more action and human capitol reporting. We have discussed many times. Many of my colleagues in her me go to the litany how assets on a Balance Sheet have changed dramatically from tangible to intangible. Jerry brown and i have disclosure legislation on this bed bed a big advocate. Talk to me a little bit about how you think moving forward . I do think human Capitol Investment is materially listed their workforce is the most important asset. Speak to that pickwick you are right. Sure clayton did put out a rule. We now have two years following of that rule and human capitol. Were looking at that to see what worked and what didnt and everything i know this for my days when i was on wall street. You bought or sold a company there were the two or three key pages with Key Statistics about the workforce. Turnover rates, what they got paid, what were the benefits et cetera, what is the Training Like . Are they unionized . These are the key things when you buy and sell company. Why should the public shareholders get that similar information. You wrote recently about a letter a number of former sec commissioners from joe grant to Robert Jackson and others wrote were taken look at that letter as well. Encouraged to look forward to working with you on that bird thank you, mr. Chairman for. Center daines for montana. The disunion senator. [laughter] we did not do that on purpose but even though you think we did. I hope not. I would never assume that mr. Thank you, senator. Alright, chairman i want to cut right to the chase here. I dose of my colleagues have talked about the disclosure rule polluter ive looked looked at it. Think its truly beyond unreasonable and recommended be withdrawn for the massive burdens it would place not just on Large Companies but also Smaller Companies is going to have major downstream impacts on the companies with whom they also do business. I really would to zero in on these go up three missions a problem. The question, do you really think its reasonable to Ask Companies to collect, analyze, reconcile, report on things that literally whether the Company Employee is a tesla or a pickup . That is in essence with the commission is doing when it expanded with the scope three rules and omissions. Greg senator, what we have right now in america is we have many companies. Hundred center Greenhouse Gas emissions to the public. There including also, not all of them but many around scope three. This is the downstream are your suppliers. And so what we are trying to do is bring some semblance do that. Standardization. We have said is not a mandate. If you have a commitment. The rule would give the companys leeway. Whether they expand to scope three or not. Is only a proposal per the adoption sills not happen. I mandate on scope one and scope two. We took in a different approach for scope three. The company deems its material or if the already made a public commitment to manage scope three. That is totally voluntary on their part. Then we said you had to estimate. We have gotten a lot of comments on this. There is no goal to touch. Had a good conversation. There is no goal to touch farmers in any of the state to represent or ranchers. Was a big carved out explicitly question requests you talk scope. The very, very wide net as you know. Is in the public point of view. You make a commitment to the public on how you are managing it . This Public Company and then how are you estimating it . We did say estimating it. We said there is a safe harbor. We to put some Legal Protections on it. But again we are look at the 14000 comments. We are trying to balance this out. We had to ensure the Public Companies that are saying this or that about scope three are not misleading the public. Box i hope you hear us out. Youve heard a lot on both sides of it. I look forward to more conversation. We all watch whats going on in europe, california, it moves from Climate Change to standing baseload issues and creating an existenial threats to the economies. Their National Security and i just do not want to see our country follow the same path we have seen in europe. The spent a lot of time talking to european leaders they wish they had a redo on this. We want something here in the u. S. That we adopt a role it is sustained in court. Large u. S. Issuers hundred 50 million year old of sales in europe, you got to comply with their regime. The kind of a really, really tough winter. Maurizio pridgen i pray for a warm winter in europe. I want to talk about for a moment. Providing credit to midmarket businesses as well as run the country. Estes and several years as the application of the sec fired fund fees and expenses free to getting academic rules the pvcs. Simply by over counts the true cost thereby misleading investors. We access to Small Business investor which move a one 100 of the disclosures to a footnote on the feed table. They cut to the chase on the question. Does the sec plan to fully address the disclosure that aff v for bbc investors in lieu of the current unworkable rule the sec has proposed. Would you agree investors deserve the parity of disclosure . There is a lot there. There is a lot there. I look forward to helping with Technical Assistance on your bill. But also on Business Development companies being owned by other funds. Mutual funds. There is transparency in 2006 rule on this way before i got here. There is a transparency i see the others at rolling up those costs. I think thats what youre trying to address on your statute for. Think im out of time here. Chairman read. Chairman are you still there . Senator reid from rhode island is recognized for. Thank you very much. Introduce legislation s4857. Private markets transparency and accountability act. Based on legislation would require nations largest Important Private Companies with the scc. They would substitute appropriate Disclosure Requirements. I think it is necessary we are seeing the decline in public registrations and extraordinary increase in private private companies he described the main differences pin the public mark in the private markets when it comes to private Investment Protection . Public markets and private markets are in my dad never had a company that would be caught up in your bill but he had a Small Business that had 30 employees. Until i think that is been very helpful pray there is a difference in disclosure and as you said Investor Protection. Because Congress Gave this agency a remit about Public Companies that the disclosures there and you have fraud and manipulation but that is of course it different if it is a private company. Not that my dad would have done this when he was buying and the stock with his partners. Again when the scc came about most of the private companies are private owned and that is not the case today. It is estimated by outside public sources theres 1200 cold unicorns 4 trillion. Not the same level of strength. Is interesting is not under our remit. The disclosure to the holders or what ever is privately negotiated between the holders and the companies. And so its not at the same level. I just want to quickly shift gears. This is the 20th anniversary, i think you are quite familiar with that. Thats two enron, worldcom, and demonstrated why investors one concerning trend is the big four Accounting Firms also lucrative Consulting Services to Public Companies there also responsible for ordering. So what steps is sec taking to make sure the order is prioritize independence was sitting in the seats you are over here. [laughter] but i think what senders our brains and senator graham voted for that bill actually. But they tried to do in that bill was to ensure the separation between the audit function and so forth. I have asked because i think there has been some lessening of that separation of this 20 years. I have asked a number of things the office of chief accountant at the sec ive also asked the board. Ive told all five of the members there could you put on your agenda as well to update the standards about the separation and the independence. I also know our acting chief accountant, paul has given some speeches on this recently and leaned into this brickwork just a final question. Thereve been several major cases with Accounting Firms over the past year. After the lapse of professional problems. Those findings are basically not disclosed to the public. They are maintained by the regulatory agency. Senator grassley and i have legislation that would make them public. I think that is important. Its important to know whether a firm has been engaged. I think it would be. As one of the compromises lay between the senators as i remember appeared. Like you senator reid. Senator warren from massachusetts is recognized. Thank you, mr. Chairman. So in march the sec proposed a disclosure road take the big steps toward increasing the efficiency of the economy and the Financial Markets are requiring companies to inform investors of the climate really related risks that affect their businesses. Now because part of the role the sec proposes to Companies Closer Greenhouse Gas emissions. In company submissions are classified into three different categories called scope. So chair, just so we can set a baseline here, lets run through an example. Lets say i am exxon. My scope one omissions would be from things like my companys vehicles and methane leaks that occur at the wellhead that i own. Scope to omissions or be those from electricity i purchase for example in order to power my operations. Scope three would cover upstream emissions from the production of what i buy like the chemicals are used to refine my oil into gasoline or diesel fuel. And the dark downstream admissions from what i sell like the refined gas or the diesel my customers by the pump. I basically have that right . Yes. Good. So, you need all three scopes because otherwise a company could just stop doing the filthiest part of their business and hire some smaller nonreporting company to do the same filthy work and then report themselves as greener. So chair, for a fossil fueled company like exxon, what percentage of their total admissions are scope three emissions . I suspect you might know that better than i. I have not looked at. Its often over half. Some companies, i do not know excellent some companies it is much as 90 . You are close on that last number part according to an s p global analysis, about 88 of the omissions of fossil fuel Companies Like exxon are scope three emissions. So, in other words oil and Gas Companies have scope three emissions that on average proposed in march army gives companies and might wait too much wiggle room from scope three emissions. But evidently that wiggle room is not in a benefit for exxon. They and their trade ive been fiercely lobbying the scc should drop scope three disclosures entirely from the final rule. Exxon wants to change the sec proposals of the company would have to tell about admissions when their own work trucks were on the road. But not admissions from all of the other trucks that are fueled by exxon d so when they are on the road for or to say it another way, Companies Like exxon do not want to have to tell investors or the public about nearly 90 of their missions. And if exxon and the American Petroleum institute get their way, investors would make in the dark about how companies will be affected down the line when policymakers get serious about tackling Climate Change and for example put significant restrictions on trucks that are powered by fossil fuel. So if a Company Discloses only 12 of their total admissions to investors, do you think investors have all the information they need in order to evaluate whether or not that company to succeed in a greener economy. I look at it this way. Many companies today are already making commitments to all three of these scopes. More on making commitments about scope one and two. More on making commitments to our proposals if you are making a public commitment how you are managing it, you ought to measure it. How do you manage that which you do not measure question we also said if it was material, using Supreme Court test of materiality you would have to measure it. But we did get a lot of comments you are right. I understand this. The question im asking is much narrower its a straightforward investor question. If climate admissions are going to become more important in valuing businesses as the Regulatory Environment changes, if you only have to disclose 12 of your omissions does the investor have the information they need to make a good Investment Decision . Again ill quote if we look at the top three or 400 letters that manage tens of coins of dollars in assets, most, i do not member the most are supportive to have all three scopes part of this disclosure that straight from the investors rather than from me. Think thats exactly the right point. For months and of the big banks to Pension Funds and Investment Management companies have been asking for this scope three information because it is crucial to making good Investment Decisions. I appreciate that you are working to protect investors and not some particular industry. Because that is the job of the sec and we are counting on you to do that. Thank you, senator warren. Senator toomey has the last two questions. Thank you, mr. Chairman have no secret of my concern people in this administration and congress for that matter who wish to use financial regulators as a tool by which they will advance a liberal agenda. Ive criticized this among other reasons is so undemocratic. Its so undemocratic to un elected Unaccountable Agency bureaucrats making a tough decisions that should be made by the accountable parts of our government. I have criticized the fed, and others. Mr. Chairman im putting you in this category. The Climate Disclosure rule is the example. You know very well the Supreme Court held West Virginia versus epa case at the epa lacked the authority under the Clean Air Act to regulate Greenhouse Gas emissions for the relied on the major questions of doctrine that the court held given the economic and political significance of the asserted authority the agency must point to clear congressional authorization. Among the factors that used to decide something is a major question the court noted it involved a novel approach. It involved technical and policy expertise not traditionally needed by the agency for such a consequential decision is unlikely to have been left by congress to agency discretion. In the atheist had adopted a adopted and rejected several times but looks to to me the climate rule you have proposed under the major question doctrine just does not have the congressional authority. So my question is, like the epa versus West Virginia case, have you given any consideration to resending that rulemaking . Thank you, senator. We take seriously the courts and particularly the Supreme Court. We are considering 14000 plus comments in that comment docket. And we are considering it and light of our authorities and the law. I would say most of the comments are supported. Investors are using the information now and they want the information. It does fit into 80 or 90 year history of how we do disclosures per the disclosures are already being made. What i want to finish on as we have a role to ensure not only Investor Protection but as the law said, fair dealing. The actual disclosures are not misleading and the like. As i predicted if you go ahead with something substantively similar to the proposed rule you are going to find a very unsympathetic court with regard to the authority that you have it. Think you senator toomey. Thank you gerry for joining us. Both record those are due thursday september 22. Chair, for per Committee Risk rescue responded to questions within 45 days in the day you receive them or thank again the committee is adjourned. Thank you chair, thank you Ranking Member toomey. I spent. [background noises] thank you. His back. ]