Skip to main content

tv   SEC Chair Testifies on Regulating Financial Markets  CSPAN  November 3, 2021 12:58am-5:05am EDT

12:58 am
12:59 am
>> without objection the chair is authorized to declare a recess of the committee at any time. as a reminder i ask all members to keep themselves muted when you're not being recognized. the staff have been instructed not to mute members except where a member is not being recognized and there is inadvertent background noise. members are also reminded that they only participate in one remote proceeding at a time. if you are participating today please keep your cameras on, and if you choose to attend a different remote proceeding, please turn your camera off. i now recognize myself for fourr minutes to give an opening statement. good afternoon, and welcome back to the committee, chair gensler. you have a lot to restore and rebuild. during the trump administration, the commission provided minimal oversight and eliminated key
1:00 am
protections for investors. trump's sec enacted regulation best interest that brokers loved, and investors hated. trump's sec approved proxy advisor and proxy access rules that corporate executives loved, and shareholders roundly rejected. to favor multi-billion dollar corporations, trump's sec did nothing to standardize reporting of environmental, social and governance metrics. even though the financial sector's growth exploded, the number of sec staff under trump was reduced by 5% and enforcement actions against wall street fell to historic lows. and more troubling, working families and retirees, whose hard-earned savings help fuel the capital markets, were ignored. these are only a few examples.
1:01 am
the point is clear: most of the policy and administrative decisions the commission made under trump unsurprisingly favored wall street, large corporations, and their lobbyists. the sec under your leadership also finds itself in the midst of a radically changing marketplace. millions of new and often younger investors are entering the markets, but the rules of trading are stacked against them, providing larger, established participants like hedge funds and others exclusive access to information and trading venues not available to everyone. in addition, the incredible growth of unregistered and volatile cryptocurrency assets, as well as the emergence of cryptocurrency intermediaries, market exchanges, and decentralized protocols, present your agency with historic challenges. earlier this year, when the gamestop trading event raised significant questions about our
1:02 am
markets, i convened a series of hearings to understand exactly what happened. we also passed several bills addressing some of our initial findings, including my bill, the short sale transparency and market fairness act, which provides our markets with greater and more timely transparency regarding the positions of wall street hedge funds and other large asset managers. we also marked up legislation related to gamification, payment for order flow, and legislation prohibiting market makers from trading ahead of their clients. i look forward to hearing an update from you about what the sec is doing, and i'd like to make clear, our investigation into the gamestop event is ongoing and we will issue findings when our review is complete. as chairwoman, i expect the sec will bolster the stability of our markets.
1:03 am
however, i'm gravely concerned that the largest risk to the capital markets and the economy in the coming weeks is a train wreck we see coming. republican members of congress blocking the us treasury from paying its debts. we are now less than two weeks away, and my republican colleagues are once again playing a dangerous game of chicken, even though fully one-fourth of the increase in the debt comes from trump's tax scam, a $2 trillion unpaid tax cut for the wealthiest americans and billion-dollar wall street firms. so i hope that you, chairman gensler, will discuss from your vantage point, what will be the effect on america's investing public and small businesses if republicans' insistence on a government default succeeds. ..
1:04 am
>>
1:05 am
1:06 am
and implementing your regulatory agenda. it doesn't seem to be our strong suit . politicizing an independent oversight board by terminating the chair as raised concerns about your transparency. second, to the point you have spoken about what i want to wait here . i've seen several letters you receive that frankly received less than all wholesome response.
1:07 am
that's not acceptable. members of this committee rightly have concerns and questions about your agency and what you're doing and why it has undertaken certain action. the sbc needs to respondin a substantive manner . this i hope this problem will correct itself and my expectation is it well . you for making it a priority. vacuum chair and i feel back. >> i now recognize the gentleman from california, mister sherman for one minute . >> welcome back chairman gensler. your agency oversees $100 trillion each year in your budget request and i know i know the chairwoman on this quite reasonable account for 1 million forevery $46,000 of trade you oversee . the pandora papers have shown the world that all too often billionaires are able to easily pay taxes and
1:08 am
dictators steel what tax money is collected. we need a financial system that is less accommodating to the correct. francis haugen showed us what's behind facebook. she is an sec whistleblower and i hope you give her disclosure for consideration given the fact that she will probably face lawsuits from facebook. you exercise tremendous power particularly over bond rating agencies, the financial accounting standards board, the two most powerful almost completely unknown agencies in our society. investor protection is notthe guys, it is your guide . >> now recognizing the gentleman from michigan mister rising up for one minute. >> thank you chair and mister gensler, congratulations on your new twitter account.
1:09 am
it appears you were watching the olympics games this summer because in one of your tweets you like and adding company disclosure requirements to the olympics adding new sporting events responding to the desires of fans. my problem with this analogy is you seem to think the sbc power and expertise in disclosure is as unlimited as the ioc's power over the games but i disagree. the cause the sbc generally doesn't regulate disclosure about financial statements doesn't mean it's well-qualified to regulate environmental topics. i have a different analogy. to me the sbc requiring disclosure is like if we required domestics judges to judge the diving events. they're not qualified. i hope you're going to be able to reconsider that and i look forward to this process and i do question the wisdom of the direction you are going on and i feel back now for my time. >> i want to welcome the honorable derek gensler,
1:10 am
chair of the us securities and exchangecommission . without objection the written statements will be made part of the record. you will have five minutes to summarize your testimony. you should be able to see a timer on your screen that will indicate how much time you have left and a giant will go off at the end of your time. i would ask you to be mindful of the timer and quickly wrap up your testimony if you hear the child. chair gensler, you are recognized for five minutes to present your oral testimony. >> good afternoon chairwoman waters and ranking member mchenry. it's good to be back with you and i look forward to the day when we can be here in person and that wonderful hearing room. i'm honored to be here today for the second time as chair of the securities exchange commission and i'll knows my
1:11 am
views on my own. i'm not speaking on behalf of my fellow commissionersfor staff . i've been working since my entire adult life and i believe the us capital markets are the best in the world and there are many reasons we represent 38 percent of the world capital markets but we can't take our markets for granted. new technology continues to change the face of when investors and businesses around our country. more retail investors than ever are accessing our markets and other countries are developing competitive capital markets as well. though i will provide greater detail in the written testimony i'd like to flag three broad areas. one is market structures. our mission at the sec is about capital formation and facilitating capital formation on one side, investor protection on the other but what's in the middle third prong of our
1:12 am
mission is about fair, orderly efficient markets. i think we can drive more efficiency in these markets in the middle and to the extent that we are able to that helps capital formation, it helps investors. i've asked staff to look at projects in a number of areas in the treasury markets which has had pickups in resiliency over the years. non-treasury fixed income markets were possibly driving more efficiency. equity markets security-based swaps and soforth . i think in these critical markets companies and investors will benefit if we get greater competition, lower cost and putting transactions of the dark. second is the rapid changes in technology. we're living in transformational times, perhaps as transformational as the internet itself. you might be thinking i'm
1:13 am
going to say something about crisco, i will the transformational site is in data analytics, predictive data analytics, artificial intelligence, machine learning are taking a lot of parts of our economy and with these parts how can we increase access and choice which is a net positive but also ensure that we make sure that we're still achieving our public policy goals of investor protection and promoting capital formation and the like. ensuring that we protect conflicts of interest or biases in the data or systemic risk. separately as the ranking member said and we had good private conversations from this as well, i don't think we have yet enough investor protection in the crypto finance issue of the trading or lending area. i've asked staff working with fellow relators and other agencies to seewhat we can do here. third issuer disclosure.
1:14 am
since the 1930s we had a basic bargain . investors get to choose what risk they take as long as it's based on full and fair disclosure of the issuers. over the decades we've updated what those disclosures are and i look forward to talking this further through with representative huzeinga but they're looking for disclosures around human capital, cyber security so i've asked to serve the ideas that the commission supports and we put out a public comment and see what investors because it's all about investors at the core of this . i also asked staff to develop proposals around potential issues around as you know the oxley cost about 20 yearsago and there was a basic bargain there as well . you have to open up your auditor, you have to open up to inspections by the public county oversight board and i
1:15 am
know 50 jurisdictions have allowed this. currently china and hong kong do not. the sbc working with county oversight is quickly putting in place things to meet the challenges that congress asked us to work to ensure this wouldhappen . the last month we authorized voluntary return to the office. we've been remote for 19 months nowbut it speaks to thededicated staff of the sbc . i can't complement them enough . the last thing i say is as the chair said we've shrunk about four or five percent in the last four or five years and i would have we might have grown four or five percent and now resources are tight but it would help us to doour mission. i thank you and look forward to your questions . >> you very much and i now recognize myself for five minutes for questions. chair gensler.
1:16 am
as i mentioned in my opening statement i'm deeply concerned about the recklessness of senate republicans refusing to vote or any legislation that would allow the treasury to pay the debts. those same republicans already putting to incur. last week treasury secretary janet yellin said on several occasions that failing to raise the debt ceiling would lead to quote, a catastrophe and send chair alan said it was essential for congress to act quickly. chair gensler, as a former treasury secretary and assistant secretary focused on financial markets as well as department chair with the cftc and chair of the sbc you are uniquely positioned to describe what would likely happen it treasury is blocked by republicans from paying its bills. can you describe what would happen in our markets both in
1:17 am
the coming days and if the treasury is in default and i would like to know what would likely happen to people's retirement investments and to americans businesses trying to raise capital and create jobs. >> madam chair i think we be in very uncharted waters. the uncertainty abounds around this but at the base of our entire capital markets is treasuries. one of the reasons why we are working so hard to fill the resiliency is there but we would be in a period of uncertainty. what would happen to money market funds, what would happen to banks that rely on that market play. the mortgage market is priced off the marketplace. the automobileloans that everybody takes out on a daily basis . and those uncertainties would be very significant. i think that we don't know for sure, we have significant
1:18 am
volatility in the markets and we'd see some breakages in the system. but i couldn't predict which firms and the like. we do know there is such a base of treasury that underpins our entire capital market that if that were to go into default we'd be in for some of the greatest challenges we've seen in our financial sector. much greater probably than what we seen in the past. >> as i mentioned, one fourth of the increase in the debt is directly attributable to the former presidents tasks scan when he passed a tax cut for the ultra-wealthy without offsetting at all. simultaneously the trump administration reduced ethics by five percent and did not provide funding to cover the
1:19 am
sbc operating costs . this has our capital markets grew significantly including the grid growth of the crypto asset . as you know the obama administration sought to double the budget of the sbc. if those plans were thwarted by trump describe how your current budget request would help the agency to fulfill its mission of protecting those who will fuel our economy. >> i thank you for that. at the core of what we are is athree-part mission helping companies, investors and the markets themselves . effectively the cop on the beat and we right now this year i think half of whom in initial public offerings so the more resources we have more ability we have to help the public and those companies that want to go public, ensuring their filings provide the
1:20 am
disclosures for the public. we help the public in multiple ways the markets as you mentioned are larger now than five years ago. this is not just about the crypto markets. this is at the base of capital formation for innovators, for the entrepreneurial spirit of the country so i really believe in the basic bargain of the last 90 years that with our laws and the sbc we helped and hands economic activity. with the robust seconds. >> thank you very much, i've always been concerned about what appeared to be the related republicans actions not to fund sec adequately. and i know that you have are the cop on the block and we need you to be funded in order to do your job so we're working as hard as we can to give you that kind of support
1:21 am
. i thank you again. it is now time for me to bring on the gentleman from north carolina, mister mccamley with the ranking member of the committee. you're notrecognized for five minutes .>> chair, i'm concerned that you're operating on existing law. you stated in 2018 for the committee quote, clear rules of the road will allow firms to more fully explore investing and blocking technology are crypto assets . you also indicated in an interview calling the team stock during the sec will be working with congress to bring a regime to crypto exchanges. what has changed? >> thank you representative mchenry. i think that working with congress would be a help. and as we talked about, a number of times, i think that the sec's authorities in this space are clear but what we could work with congress on is along with our sister
1:22 am
agency or sibling agency that in the trading commission we both have market oversight. they have oversight over derivatives, we had over securities and they also have enforcement authority over commodities and i think that coordination and working not just with this committee but multiple committees of congress wecould address . i think also. >> in your view there is a limitation of around what the cftc, your former job a few years ago and the sbc what permits they have under law to regulate these regimes. is that what you're indicating. >> what indicating is i think that congress ended with a broad brush the definition of security and included 30 or 35 separate areas that are within the definite definition of security. to protect the public against fraud but they also wrote and
1:23 am
other laws for the commodities interest rate commission to have authority and i think that coordination and working with congress would fill some gaps. also gaps around stable coins andthe banking regulatory regime . >> but filling those gaps okay, so along those lines i think it's important that we have some regime in place. under existing law and i think we have to ask how priority in law around whether it's a visual asset. and i do think as you noted back in 2018 you noted in your testimony that at the time the sbc is not does not do bitcoins either as security, is that still your view mark. >> i think you're referring to when i was atmit . david brought up the this committee if i remember. and i was speaking to what the sbc career staff had said. though i'm asking your view
1:24 am
now. i understand all that context. i've done the research and in fact iwas at that hearing . but is it your view now that the bitcoins and ether are not securities? >> i'm not going to get into any one token but i think the securities laws are. >> clear. if you're raising money from somebody else that's the investing public believes and the anticipate or have a reasonable anticipation of profits in the efforts of others, that fits within the securities law. so. >> that's why along those same lines, chairman that's why i introduced the clarity for visual tokens act with representative davidson but based on commissioners persons digital token safe harbor proposal i asked about this before. have you had a chance to review her proposal ?
1:25 am
>> commissioner person and i talked actively about these matters . but i have not yet reviewed, i think you just introduced your bill this morning and i look forward to looking closely at that . >> i was asking if you reviewed her proposal. >> commissioner person, ihad a number of conversation about her thoughts on this . >> so you're not willing to answer that question . >> she and i have talked about her thoughts on this around apotential safe harbor . particularly for the american public it's if we don't oversee this and bring in investor protection people are going to get hurt. >> this is a horrible format for cross talk but what i'm trying to get at is a broader brush view. a number of media interviews, so far we've seen some of those comments thatyou've made .
1:26 am
have raise questions in the marketplace. and they provided less than made things less than clear. and i point to a couple of things. you've made off-the-cuff remarks that move markets and rulemaking and by putting a statement out without due process, you've essentially run roughshod over american investors and that's what we can talk about, summarily firing the accounting board oversight board members without cause. my question is a general broadbrush year. is your intention to follow the security exchange commission long-held practice of noticing comment on rulemaking and procedures. >>. >> i believe in the administrative procedures act. we benefit by getting the public's intention . >> it's your intention to follow through with the administrative procedures act
1:27 am
? >> we follow it and put up a proposal last week on fund disclosure and we look forward to doing that on many of the things that are unified agenda. >> the gentleman's time has expired. the gentlewoman from new york . ms. velazquez was also the chair of the committee on small business is now going to be recognizedfor five minutes . >> thank you chair. commissioner, volatility surrounding the trading of game stop and other stocks this year have been calling for increased transparency and regulation of shortselling. section 949 says it requires that if they need to develop a rule to increase public's reporting for shortselling activity but more than 10 years later, the agency has yet to formulate a rule.
1:28 am
where does this rulemaking stand on your list of priorities as commissionerand where , when do you think that we will propose this rule? >> thank you for highlighting thatrepresentative . i've asked staff to propose a member commission and yes, we were just discussing if we put it out to notice and comment around shortselling disclosure this is the mandate congress laid out i believe in the seven or eight places that we had fulfilled mandates whether it's an executivecompensation shortselling, stock loans, some mandates in security-based swaps . all of those are on our unified agenda. i would hope and anticipate that though we have an active agenda that we put this notice in combat. >> sometime early next year and then hear what thepublic has to say . >> as you know increasing the
1:29 am
transparency of shortselling activities is a very important issue for me. as i have completed this practice. we have waited too long for this rulemaking and i appreciate that you continue to keep my staff updated. my office also has her strong and consistent demands from a wide group of market participants about the need for mandatory climate disclosure rulemaking. has the sec heard our demands? >> we have. there's hundreds of companies of a majority of the biggest 500 companies apparently do volunteer disclosures in the space and trillions of
1:30 am
dollars of assets under management as they asked for disclosure so this is a place where there's a real consistency and comparability. thestandardization would help both the companies and the investors . again, i put a notice and comment and see what the public says on what do investors really want when they're making these decisions? on climate risk as you say but also on human capital and we have a project on risk as well. >> you have previously stated that the proposed rule on climate risk disclosure by the end of the year, do you see a bill that this is an appropriate timeframe? >> whether it's towards the end of the year or early next year we see things we want to do to finish up our economic analysis, take comments from each and every one of our
1:31 am
commissioners andagain i don't want to prejudge . i think that the commission process is good but in the next few months. >> great so that we don't have to wait 10 more years. commissioner gensler, this committee passed my bill the greater accountability in pay act and the pay ratio disclosure requirement by requiring public companies to disclose the ratio between the pay rent percentage of business executives and its media and employees over the previous year. can you explain how this bill will increase accuracy on debt sources to make more informed decisions and allow the sec to provide better oversight of our demands. >> congresswoman if i could
1:32 am
go a littlebroader . i think investors benefit by understanding and having transparency about executive compensation and there's a number of features including your bill to do that. we still have three important rules that congress asked us to do to finish up on and so we're moving forward on each of those about one was caught called clawbacks, a simple concept that executives got a and financials that had to get revised and some other pay would go back. there's something called pay-for-performance and were going to try to staff is working on that and we last week even had more disclosure with regard to sale and they with funds for disclosure but all in all it helps the efficiency of markets where investors get to decide when they have that full andfair disclosure on executive compensation . >> the gentlewoman's time has
1:33 am
expired. >> miss wagner is now recognized for five minutes . >> i thank you madam chairwoman. chair gensler. welcome back. in much of your commentary on payment for order. you suggested that investors may not be proceeding with execution. can you provide us with more specificity on why it is you believe that the duty of best execution may have been violated by others? >> thank you for asking that. there's the potential for conflict of interest when my order or anybody's order is not grounded in competition with other orders but it's routed to a wholesaler or broker who's purchasing that order flow. so when we back away from order by order competition
1:34 am
and it may well be about algorithms or formulas between broker and wholesaler without transparency, there may not be best execution. >> and one leading brokerage firm found that last year they had billions of dollars of improvement by executing wholesalers with 90 percent of trade finding improvement. this particular broker received payment for order flow but ultimately the retail trader received better than they could havereceived on the exchange. isn't that a good thing ? >> price improvement is a good thing but i think the measure and brought up that price improvement is often something called the national best business offer that does
1:35 am
not reflect the full market. 16 years ago when these rules were put in place they may have been fit for 2005 much has changed in those 16 years. i'm really asking staff to say what can we do this for the 2020s that national best offer has constraints in it. a lot is not in it. it also has an increment can't be narrower than any size so there's a lot of reasons why this may not be the most efficient. >> chair gensler you received significant attention when you are quoted as saying a band of payment for order flow is quote, on the table. can you explain what banning payment for order flow would achieve and if payment for work and do you anticipate that retail trading would remain commission free? >> we're motivated by our three-part mission and the court in the middle is efficient competitive markets
1:36 am
. i've asked staff how can we help ensure even enhancing that efficiency. so right now, as you mentioned about commission or zero commission, zero commission does not mean it's free . it does have some costs inside. some brokers have payment and i know some do not. and also offer zero payment for credit. >> i would have to say pennies. i certainly hope that demanding payment for order flow is not on the table. chair, turning to the sbc adopted regulation on june 5, 2019. it was a culmination of a comprehensive many years long effort to enhance the standards of conduct for financial professionals that advised retail investment. the benefits of the capital
1:37 am
markets are abundantly clear and there is little doubt that investorsare better off today than they were previously . chair, do you have brought on staff clear public record of opposing sbi. you can understand how that would give the investing public the impression that the sbc under your leadership has activated to read the eye and i'd like to point out during your confirmation process you submitted to working with commission staff to ensure it and again i quote, lives up to its best interests label. do you still: surf only to reporting, to supporting the renewed implementation? >> i think that is true today as when i said it. if you ensure that our regulations, regulation best interest and others live up to what's in written down on the page it really is
1:38 am
regulation best interest is that investors are getting the best interests when the broker is making recommendations . >> i'm pleased to hear that. i've run out of time and i yield back i have a question but i'll submit them for the record. >> the gentleman from california. mister sherman. was also the chair of the committee on investment protection, entrepreneurship and capital markets. now recognized for five minutes. >> before i begin i have unanimous consent request. request is to enter into the record letters from the los angelescounty employees retirement association , the healthymarkets association . >> rail 10 certified financial planners board of standards, which expressed support for certain discussions perhaps brought before us today including those to improvethe office of investor advocates . i will begin my five minutes
1:39 am
five focusing on the pc aob. chairman gensler, thank you for mentioning that in your opening statement and thank you for your work in implementing ball holding court companies accountable at legislation that senator kennedy and i letting congress last year. duringyour testimony , in the senate banking you expressed support for a revision to this law which would shrink the amount of time from three years to two years. for us listed foreign companies. basically chinese companies to provide the dc aob with the access it needs to assure that the company's audit is being, was being done accurately. as you know the primary purpose of the bill is to give the pc aob and sbc the leverage needed to reach agreements with the market regulators in china, do you
1:40 am
believe that this two-year timeframe is consistent with the objectives of assuring that companies listed on us exchanges accurate on its . >> we've been at least 18 years now since this basic bargain was put in place and 50+ jurisdictions have allowed the accounting oversight board access to the workplace. and access means unfettered access. they can pick which workplaces to see, they see it and they're not redacted. they can talk to the audits staff and talk to them openly and discuss whether the audit is up to the standards. and there's been a challenge that's not been the case with china or more recently with hong kong. i think that if congress decided the shortage from three years to two years i'm supportive of that.
1:41 am
we're going to continue to work with the pc aob to make sure everything's in place. year one is 2021 presenting ambiguity about that. year two right now is2022 and so forth . >> having been an auditor myself i understand why you need that or the pco b needs that unfettered access. a coupleof comments about points that have been raised . the ranking member argues that crypto is somehow not an investment or not subject to sec oversight. i would say crypto currency is not at this stage of currency. the vast majority of people who are buying it are not buying it in order to know out and buy a ham sandwich with it. they're buying it because they think it will go up and they can sell it for more dollars than they invested in
1:42 am
it. it is an investment like many other investments and investors deserve protection. as the commission of free trade free is illusory and being told there trades are free can lead to high-frequency trading. the investor deserves the best, more than best execution because best execution is a misnomer. they deserve not only pricing improvements but the most price improvement and a system which tells them it's free but doesn't givethem the most profitable price improvement is certainly illusory . we looked at rko says many people focused on the family office issue and i focus on it as a margin issue. the every investor in the country is told okay, you have so much in your brokerage account. you can borrow up to half of what's in that account.
1:43 am
that's your margin limit and that has been the law since people were jumping out of the windows in the 1930s when they saw their stocks go precipitously down. but we found with arcadia state figure out a way to use total market, total return swaps to give themselves eight times rather than you know, only one or even one 10th of themoney . should we even allow ordinary investors to borrow 10 times the value of their portfolios ? or should we prevent big guys like arce goes from doing it or should we have one rule for small investors and another rule for those sophisticated to engage in total return swaps. >> i think that the events of march and the family office raised a number of questions. i think that we should have
1:44 am
in terms of your question about margins more consistency. we do have with congress's authority we do have rules going into effect in november. the commission prior to my getting there voted out securities with slot dealers have to register as of november 1. they had to report there trades as of november 8. some of that will be recorded publicly next february. we also asked staff to do more work and recommended, can we put up a public comment and rule around the aggregates positions. family office that you mentioned, their aggregate positions of total return swaps. >> the gentleman's time has expired. the gentleman from oklahoma is now recognized for five minutes. >> and human chair.
1:45 am
>> has always it's good to be with you again. perhaps onlya few of our colleaguesremember the amount of time when you were cftc chairman and i was at committee chairman . but it's good to be hearing from you . course you always note that things are important at home and today i would like to with my particular perspective on the upcoming climate risk disclosure rulemaking. it's generating a lot of interest in oklahoma but since we are both producers of renewable energy and as well in the agricultural area it consumes a great deal of interest so with that mister chair publicly traded companies are at varying stages of decline and est disclosure. and related recording climate modeling is still an evolving practice. chairman, are you concerned with the upcoming climate risk framework could have an
1:46 am
outsized burden on small to medium-sized companies and how much how might the sbc account for this ? >> i'm looking forward with the support of my fellow commissioners to check with public comment and in a question you just raised to include questions like that to the public as to large issuers versus small issuers as you mentioned and also i think implicit in what you're saying is some recording will be easier to do sooner. there's i asked staff to do a look at qualitative disclosure about governance, strategy but also quantitative disclosure to make sure that the disclosures people are making particularly around greenhouse gases emissions consistency how to potentially even phase implementation amongst large and small issuers and also amongst the different types of disclosures.
1:47 am
>> has many would argue i think correctly the small and medium-sized companies are the real generators of opportunity . so we don't want to harm their ability to compete with their brothers and sisters. that said, continuing to think about this issue. you said your staff is considering quantitative factors such as metrics related to greenhouse gas emissions , climate change , financial impact, advancement versus climate related goals. also i'll mention many times made about the importance of staff we all know that there critical to whatever branch. would you describe the depth of climate expertise at the sbc. are there currently climate environmental scientists on staff and is the commission engaged with agencies such as nola, the epa and department of energy and regarding the climate risk of rule making process? >> the answer, the expertise
1:48 am
at the sec is around disclosure about ensuring that the public looking at the disclosures that they're currently in and hundreds of companies are making voluntary disclosures now trying to bring some consistency and comparability to those disclosures. to your second question yes we've been in conversations with otherpartners , other importantpartners with the us government . >> it's absolutely important and insight of attorneys and poly site people is important these other scientific disciplines be involved in this process. whether it is consulting with the other entities that haven't expertise drawn from somewhere else it's just too important to just create rules and racks, it has to be done and mister chairman you both would agree in a vocal fashion so with that, chairman gensler the ftc is considering a review of
1:49 am
treasury markets properly. would you discuss what this review might entail and how you're coordinating with the fed and treasury departments and how you might think about the cost benefitsof potential changes . >> we've had a number of challenges in our us treasury markets dating back to 2014 when there was problems in pricing in the market but then in 2018 and 2020, we're literally central banks and federal reserve was providing liquidity to the market because there were challenges in the financial resiliency. working closely with our colleagues in the federal reserve and treasury and also the commodity futures trading commission, what we're trying to think through is how we could build greater resiliency in some markets. with 22 $23 trillion markets at the base of everything we do in the capital markets and
1:50 am
right now if i can use the term we have a multimodal system where we have clearinghouse, we have an interview with brokers, big market makers both principal trading firms and banks and if any one of those got into challenges as we saw last spring and fall of 2019, the central banks tends to get pulled into providing resiliency so we're looking can we do this better around potentially central clearing. could we put some rules in place about the trading platforms themselves and the like. >> the gentleman from new york mister meeks who is also chair of the house committee on foreign affairs is now recognized for five minutes . >> thank you madam chair. chair gensler i want to start off by saying i am extremely pleased to see you are serving as the chair of our seconds i appreciate you and i have had an open dialogue
1:51 am
on issues that focus on the committee on financial services as well as the house foreign affairs committee and in my capacity as chairman there including the costs and benefits of the widescale american markets. but i also want to commend you on moving the needle to increasemore diversity and transparency in corporate board rooms . and also over promoting better diversity of human capital practices in the industry as a whole. the sec's recent votes approved new listing rules would ask for more diverse and is a necessary first step. not only because there's a proven positive factor of the company. but also because investors aredemanding that their boards be diverse . and as you know my bill improving corporate governance through diverse the act passed through the house and i'm grateful that you all continue these efforts. the newly approved rules however are just the
1:52 am
beginning. that is specific to nasdaq and they are monies listed on other exchanges that will not need to comply with these rules. my question to you is can you please elaborate on what other types of actions the sec is planning to take with respect to promotingdiversity . >> thank you and it's good to see you. i think we first worked together when i was astaffer . some 20 years ago so but i asked staff to serve up to us to important potential rule makings in this area. one related to the workforce of america and public companies. human capital, it's probably one of the most critical assets of the company and building upon what the commission did last year to give more specific disclosures about the workforce .
1:53 am
part-time versus full-time, labor rates in the light but also about the diversity of the workforce. us companies now through the evil one filings in the light around their diversity, and i've asked the question would be helpful to the investors to understand that. and in addition you raise the question of outboard diversity and i've asked staff for recommendations around the boards. only 10 or 15 people usually only four for6 to 15 . but it's still leadership and what it's really about his investors want to know whether we should do a rule to be considered by our commission on board diversity as well. >> thank you for that and i look forward to continue working with you . let me also express concern over the loopholes of fissile abuses that exist within the
1:54 am
framework which says that an affirmative defense for insight that in a trade specific plans without it constitutes insider-trading. but the existing framework allows a lot of different types of opportunistic trades so they could have had material nonpublicinformation . >> because they had set up a and b5 ãone frame, does that fit insider-trading. we've seen that executive of most companies canceled their plans were implemented plans and have the trade executed two days later. they end up netting amounts of money. but the question we should ask is why did they cancel their plans for why the implements a plan that allows them to trade shortly after the planwas put in place . if it was because they have some inside information? then we need to address that loophole in theframework . is there an obvious lead
1:55 am
framework to change and care, can you please describe the proposal that exists in the 10 b5 ãone framework and what congress can do to assist the sec. >> i do think there are gaps in this. and in 20 years of this so-called safe harbor affirmative defense or insiders to sell their security, that right now they can have multiple plants. they can as you said cancel them on a daily basis, put up a new one and the like. one of them the best practices that are out there in the many best practices out there is to have a cooling-off and i think my predecessor wrote to congress about this as well so we're asking for recommendations around whether we should have required cooling-off period if you want to say you have this affirmative defense. whether you have one plan rather than multiple plans and the like.
1:56 am
so i think there is work to be done here. >> the gentleman's time has expired. the gentleman from florida. is now recognized for five minutes. >> thank you chairwoman waters. one of the charter purposes of the sec is to facilitate capital formation . lastweek , the administration's proposal increased capital gains tax. qualified dividends and tax rates would effectively pay them for american companies. given your responsibility and the research of the sec my question is how would those new taxes impact the united states to attract capital investment? >> congressman, i think that about the capital markets if it's all right i should leave
1:57 am
the congress to leave other parts of the executive branch to resort taxes. but in terms of our markets about transparency, about disclosure. about protecting abroad and it's facilitating these vibrant capital markets regardless of over the decade congress has decided on high capital gains and low capital gains but we sort of our leave that to others and then try to facilitate our roles the most vibrantcapital markets for capital formation . >> asked a good walk around the block . one of your charter programs is to facilitate capital issues and i'm trying to find out if it's right direction to go. >> again, i do appreciate the question and if i worked in the correct role i might have
1:58 am
a lively discussion as a professor at mit but in the role that i am in right now it's really to facilitate capital formation through this rules that congress has given. it's an fraud, anti-minute election a focus on registering exchanges so that they are really efficiency in the middle of the market. those are the important tools whether congress raises the tax rate for lower tax rates . >> just an assumption. i'm sure everybody in the world is doing this right now but the refusal to say yes, sir no indicates that the answer is in fact the higher taxes put your ability.
1:59 am
[inaudible] >> i respect that, it's just that there's things you want me to discuss and the structure of equity markets, the structure of treasury markets but i think you'd want me to leave tax policy to congressand the executive branch . >> setting the policy is the job of congress and the executivebranch . i think the average common person in the street explains the chairman of the sec would have an opinion about whether we should tax american companies and american people and american families more if that helps you do your jobor doesn't help you do your job . >> it's discussions like this of course and trying to get the right resources to the sec and then working with my fellow commissioners to try to enhance our capital markets given the breadth of the changing technology. i think tax rates again are the well house of congress and the executive branch. >> we will just leave it to
2:00 am
that subject for now. in the time you've been at the agency have you identified anyrestrictions to the capital markets that should be relaxed ? if so what restrictions could be relaxed? >> in each of these reviews and particularly as we review the treasury markets structure and equity market structure what i've asked is how can we in the 2020s ensure that the most resilient and efficient and i think that'sreally a critical thing that we can do . and the efficiency in the capital markets as you said would be turning a dial or changing some of our correct rules . i also say in the crypto space. when i said publicly that these platforms come in, talk to us, get registered. these trading and lending platforms it's highly unlikely with 50 100 or sometimes thousands of tokens
2:01 am
that don't have securities that they come in and say you know that transfer agent rule doesn't quite fit for these custody rules doesn't quite fit. for these new forms of capital formation we should get into those discussions talk about how we stay true to the mission that congress wants us to do but if we need to adjust some of these sometimes very technical roles we are written in a differentenvironment we should see what we can adjust . >> the gentleman's time has expired. the gentleman fromgeorgia mister scott was also the chair of the house agricultural committee is recognized for five minutes . >> chairman gensler, how are you? first thing i want to say german is congratulations. as both you and i are graduates of the school of finance at the university of pennsylvania in philadelphia where we received our mba of
2:02 am
masters in business and the industries we are calling all very proud of you. and plus i think you're the only one now who spent both chairman of the sea sec and chairman of the seconds what an accomplishment. let me start off here because i'm so excited about one of the first things that you have done at the sec is established climate change. as one of your top priorities. and the chairman of our house agriculture committee i make climate change of very important part and we just have carbon hearings to get us started in. but my question is that you have relief released a newly proposed environmental cultural social dominance regulation. tell us how is our financial
2:03 am
and securities system monitor investments andequipment , the floods of north and innew york. there are fires burning out to the west . this is serious. what is the economic and financial impact in your arena in terms of securities? >> ithank you for asking . i would note that on the second person to have this honor the first is mary schapiro who chaired both of these free commissions the reason i mentioned is she's also subsequent to be the sec has done a lot of work on climate risk disclosure were trying to build upon the work of something that investors have come to look to this task force on climate financial disclosure. she's married is now working.
2:04 am
i also want to say that it's really up to investors. investors are looking for this disclosure because climate risk can affect a company and itcould affect their physical risk. i mean, if a flood comes , hurricanes, or other indicia of climate risk. >> .. many companies have publicly they will have emissions zero emissions in a future date but also jurisdiction so what they might be doing what jurisdictions and customers might be doing affect their path in the future so investors want to know more want to get to this
2:05 am
because this is so important and much has been made about stock in robin hood and all of that, what are you doing to protect investors and our security systems second, what can and must congress do to stop this? make it a felony, we've got to get this can protect our financial system is the heart and soul and this is our investment, our stock market that must be held away from this so what can we do to put strong measures and to stop this
2:06 am
behavior? >> the game stop has numerous issues, some of which are in plumbing and infrastructure but you are at another level. whether there were things congress can do to address the challenges there. what we are doing is three or four different projects trying to shorten the clearing cycles, we put out for comment to the public to weigh in on of digital practices -- >> my time is getting short here but i do want to say, i've asked my staff to put together a bill that we can have strong enforcement sensors in will not
2:07 am
allow a social media platform on this foundation of our great nation. our stock exchange. you and i both said we've got to protect our financial system so i'd like to call upon you to get further ideas for gifts thank you, madam chair. >> the judgments time has expired. the judgment from missouri. five minutes. >> thank you, senator karen kerry cap today, i appreciate it i wish chair yelling would adhere to her constitution and legal party actually show up for business, it would be nice if she would do that. if you could talk to her about that perhaps my question starts
2:08 am
with an article on the "wall street journal" yesterday outlining how companies create standards related to crypto currency in esg. i know you examine rulemaking in regard to subjects specifically standards are being set, the participants as well as financial well-being american consumers i'm working legislation to enhance transparency into process so my question, you think it's the appropriate how they are treated in regulators significant notice and,. >> three parts depression, in regard to climate risk and other matters on crypto disclosure
2:09 am
mandates over decades has been in the exchange commission where appropriate and police enhance based upon the process of the claimant. i think it's not just as easy but back regulators, i think without a lot of work to do maybe even earlier discussions congress as well so i'm not familiar with what they are doing specifically in regard to crypto or climate as it relates to the financial statements or footnotes financial statements, it may be that they have a project crypto assets reflected on financials, i would be glad to work with your
2:10 am
situations. i've got proper friends talking to me and telling me there are a bunch of companies who want to be -- for people to invest in if they are going to be with these companies so they add onto their website and they are doing this or that, are you going to set standards for these companies say their companies are investing because of that are actually doing something along that line? to me it's misleading investors on retirement funds investing in frame companies they are putting it on the website say i am a green company without doing things that qualify for that and they are misleading the public. is there a concern for you?
2:11 am
>> we have a project about investment funds and managers. if a claimant of something for the sustainable, climate etc., what stands behind that? i think the markets would benefit and it sounds like we might agree on this, there is rigor behind that same way you made yourself say led by high yield hundred and i think that would help. when i walk into a grocery store, i can look at a label and there is something behind that that's meaningful. when a company looks at disclosures as well -- and i would like to work with you and understand what you think about the company side if there's something we can do as well. >> the sec issuing rulemaking of guidance to regulators, you said
2:12 am
you review regulators. have you reviewed in regard to the guidance? >> i'm sorry, i want to make sure which topics -- sump regulators want to use guidance and set of rules and then go out and enforce guidance should be something more than clarification or faq or something they can get guidance on, not a rule to enforce the law. >> i have as it relates to the sec, as we talked about in the past, i didn't know if you are asking about guidance from regulators on other subjects for instance around climate but as it relates to sec, yes. >> thank you, my time has expired.
2:13 am
>> thank you very much. mr. kuyper, housing, community development insurance you have five minutes. mr. cleaver? mr. cleaver is not the platform. next, mr. green. mr. green on the platform? line will move to the gentleman from florida. are recognized for five minutes. >> thank you, madam chair. this is very good. the committee has had three hearings on game stock. he testifies on this around
2:14 am
january 28. each hearing, the payment as a topic, stated that's, who will make a determination on that product. you agree trade and market participation among minorities and women are concerned about the impacts on zero permission trade and whether it will be valuable? how would you ensure exchanges made for those in participation? >> i think you raise an important point. the project work on try to drive
2:15 am
toward lower cost greater competition and the stock market. this has been used by some, how off but some brokerage firms they say this helps them provide zero permission. there are other firms as well. our focus will be on overall market structure and access to capitol markets. with growing retail participation in the market investing over time on a daily basis often growers returns. promoting that the way they use behavior props and the like.
2:16 am
>> as you know, fec approved changes on private security framework to increase how much issue can be raised. any restriction on communications between this through the office, could you elaborate on that? >> you're right that over the decades, they've facilitated through exemptions, exempt offerings in the public market and private market. the capitol formation and ensure
2:17 am
investors to get full and fair disclosure in public markets spend the basic bargain but even then the private market funds that stand behind it and families and retirees behind it to ensure an appropriate set of resumes to help as well. >> thank you. the transaction crypto currency, they want nothing to do with that over the last year traded on the same platform of security. the fact fact an investor on one and the other and yet the crypto market is under regulated.
2:18 am
can you comment on back? >> i think if we don't get exchanges and landing platforms inside the public privacy framework, going to be hurt. it's a highly speculative idea but may not have any ownership in a structured trading in the marketplace on the efforts of others, the potential in the future it might be worth something to pay for and they are not registering yet so i think it's clear many of these projects within this and will use authorities to get these projects to register and be within this.
2:19 am
>> thank you and i yield back. >> the judgment from michigan is now recognized for five minutes. >> thank you and i first want to associate myself with comments from mr. lawson about his concerns about access for trade. stock price is something apparently on this and it may go way of our free checking account if we're not careful this being released here so i do also need to comment, it might be tuesday product wacky wednesday here on the financial service committee where stock trades aren't free but spending trillions of dollars has no cost and is free yet allowing taxpayers to keep their own money is a cost to
2:20 am
government self it's upside down for many americans looking. i want to talk about pca ob. we can have this conversation later. when the creation of this happened, the word independent appeared ten times. concerned about this dismissal soliciting nominations in these positions, obviously that prompted other commissioners to resign doubts about the independent of this. to date, you have not provided a satisfactory explanation for your overhaul and our investigation hasn't turned up any special reason for those actions. all this creates the appearance to appease partisan groups on the left and people like
2:21 am
senators warren and sanders so is this truly independent doesn't need to be flex. >> thank you for the question and i think the supreme court addresses this about 11 years ago free enterprise. my predecessor the authority of the supreme court that the five-member mission of the sec with this pca ob. rules we review standards yes we can move the parts this is why the format is here, we can't get questions answered. how is it that success is without thinking looking over their i think that's what congress put in place, all of
2:22 am
the standards and rules are reviewed by the sec. that's what the statute says we are supposed to do. >> so that is the structure, okay. as long as we have that established and understood. here i guess is what i would like to know. if the commission has a review of the sec, can you confirm your office or the office of the chief accountant at sec with other materials where the materials have been made public. >> i'd be glad to chat with your staff to understand the question better but i don't think it's a press release by press release. there are rules on the company accountable, we put out to notice it, and will vote on that in about a month or a month and
2:23 am
a half. >> have you systematically required run things through your office before they are cleared? again, as it relates to rulemaking and standards, there is a process. >> it's why it's important for us for materials requested by ranking members i'd like to call on the chair to join we can get all of this information. we will follow up on that. along those lines, i've dropped a bill today called mike company accounting oversight acts that will get rid of the aob folded into the sec. like your review, i don't expect your reaction right now, that might get at what you are talking about so we could be honest with everybody and it's a political appointment an
2:24 am
organization. facebook weekly, is facebook a utility? or could it be treated as a utility? >> i think you are talking about a social media company, that would be up to congress. >> definition, they are publicly traded companies as well, there are certain criteria that makes privately held companies are publicly held companies so i want to know whether you think it's a utility or not. >> the judgments time has expired. the gentleman from illinois who is also vice chair of the subcommittee, entrepreneurship and capital market now recognized for five minutes. >> thank you, check waters. it's lovely to see you again, he spent a lot of time about this
2:25 am
and it certainly seems to be a news of it is particularly social media psychological figures for these behaviors. if you make the algorithms, people will spend less time on it that felt like a gut punch because the algorithm is for facebook is what implication is for robin hood and its created by add revenue for facebook similar to revenue from especially earning a% of the spread. my question is in your digital engagement, i'm hoping you can confirm the issues specifically conflicts between investors best interest and the ways that companies earn money that will
2:26 am
be a subject of the investigation if you can confirm. >> i think it central, the issue that digital analytics are being used to not only optimize for our return but may be used to optimize for the company the platforms revenues and if they are done that way in a rowboat investment advisor or brokerage it creates conflict, it might create a more fun environment for us, that's okay but is also creating more revenue and what is that conflict there and how do we protect investors? >> i'm delighted to hear that and we can follow up on that. our to shift department. some of my colleagues across the aisle whether disclosure would increase small and mom-and-pop businesses.
2:27 am
the bill i introduced we passed on the house floor to correct the work you're doing on this was driven by three issues. number one, almost a third of assets and management plans so let's get investors what they want as long as they have the support of investors. investor protection, i would echo what he said as long as a company and stand up and say it will be over 2035 and they have no way of knowing what that means, we got a gap and i am delighted starting to put some boundaries around what the rules are part of the third one is ons subject to your jurisdiction but it's a broader question of market stability. if we don't have the data from the firms we don't know where
2:28 am
risks are. financial structures for this happened from a huge cash flows and we've got a bill separate, it's more directed at treasury, to figure out how to calculate and monetize that in financial risk but one piece as we've dug into this, whether monetary flows will be is an easy question, figuring out the structure is really hard so if i know there is a certain certain company but i don't know how much capitol structure is senior debt, junior's desk and trying to figure out where it is because stephen's public companies sometimes price ice roles are not always disclosed
2:29 am
so in your work on climate disclosure, are you going to consider requiring companies to provide details of their capitol structures in addition to exposure to climate change flex or is that better asked and other financial agencies? >> the clock is ticking, it might be good to follow-up off-line after this hearing but our focus what investors demand want to make their investment decisions congress, it's around that and quantitative exposures but i would like to better understand about capitol structure because companies are exposed, a lot about capitol structure you have some thoughts that it falls short in some ways i'd like to understand where it falls short with investors, our clients are the investors
2:30 am
assist. >> i'm out of time so i can follow-up off-line. i'd like to request unanimous consent to include to the hearing record the following ways of supporting this americans for financial forms from ohio public retirement system. >> without objection. >> thank you can i get back. >> gentleman from kentucky now recognized for five minutes are you on the platform? if not, let's go on to the next person if mr. bartlett is not there. next, stir williams, gentleman from texas mr. williams is now recognized for five minutes. >> thank you and first of all,
2:31 am
in full disclosure, i didn't go to wharton, i'm a business guy and increased taxes, that that and when you cut taxes. in any industry allowing the private sector to innovate is key to bringing new products and services into the marketplace expense especially true in the capital market space at zero cost trading because payment the partnership has allowed an entire generation is best to enter the marketplace for the first time in training the new industry standard for insta pass, defend recognized in payment for order flow at significantly lower cost environment retail traders in trade studies have shown proactive result in $3.7 million in master along retail investors despite these benefits, spc probably a complete ban on this
2:32 am
practice expanded definition to include the exchanges. it seems like a response to misdiagnosing the entire game stop saga that happened earlier this year so you again and as you look at making changes, i urge you to also consider benefits has given all retail investors can you describe the overall growth retail investors is your commission rating and what you think would happen if order flow or rebates were eliminated? >> thank you for that and retail investing has increased probably for months but just even the facility, the ability to trade on the phone with ease has facilitated as well regardless
2:33 am
of price, a number of brokers your commission and do not do payment or for rebates on the platforms, stock exchange and the like, is this the best to promote competition and efficiency? is of the best to promote execution? imagine price improvement measured against the old measuring stick on national best offer doesn't include agenda dark market being internalized and doesn't include everything on the new york stock exchange or nasdaq. so look at this for investors companies raising money to be more competitive, transparent and efficient. >> thank you.
2:34 am
we see a troubling trend within the democratic party calling on and acting their agenda when they realized they were never be able to progress. we've seen lawmakers urged the banking regulators to force regulated to do you think regulators on our political favor such as oil and gas or the gun industry. we are now seeing calls coming into your agency which is in charge of reviewing disclosed 7000 publicly traded companies and $120 annually within capitol markets to expand the climate policy so calling on stringent regimes, we are trying to turn the promise and financial experts to environmental science to force companies to adhere climate change goals from whichever party controls the white house. as we create more uncertainty surrounding what information will be deemed material, i am
2:35 am
concerned everyday investors will be hurt by the activists might be the loudest in the room but not personally invested in these companies so how will you ensure investors are not going to be harmed because of activists pushing their agenda into a space where they do not care about any individual security? >> i will say how i will be motivated, it's about investors and what congress asked us to do. within our lines, disclosure is what congress has asked us to do. what we have now in 2020 is increasing large numbers of investors with information about climate risk so we can play a role to bring consistency, comparability, make sure decisions are useful earlier discussions and the committee today and make sure folks are
2:36 am
just think they are green or sustainable and they are not. i think it can help buddies and investors so to me from what congress has asked us to do. >> thank you for your testimony and i took my time back. >> thank you, gentleman from connecticut, international abutment and monetary policy muscular recognized for five minutes. >> thank you, madam chair. i have a question but i want to take a second -- not a witness here but my friend on the other side of the aisle on the preservation of payment for order flow, i quickly it more bluntly, yes when a broker uses payment for order of, you do pricing improvement but you see price improvement opportunity lousy price, a terrible price
2:37 am
and it's in our capital market that institutional players much better pricing. the entire thing in the industry is designed between the retail investors and what institutional is that? what i would love to see happen rather than the preservation of misleading concept like price improvement to dive into the question of why they set better pricing on almost every product individual do. i just want to say that. when i want to do with my remains minute, when to ask you to step outside of your comfort zone because you are more knowledgeable than almost all of us and probably all regulators on the currency and subcommittee
2:38 am
but i want to turn over my remaining minute here to ask you to give guidance on the topic and what i mean is there is information flowing around on this construct, you'd focus on exchanges, demonstrating the ability very little these days, i will ask to take my time to give us guidance how we should prioritize the legislation we propose between exchanges, the work of defining of who should regulate prepare currency, give us some guidance on how we could fruitfully use our time to address those areas.
2:39 am
>> twenty seconds, i think number of innovations and why i am focused on the platforms and the landing platforms is because investors basically give ownership rights up. they transfer private to the platform and most of them in the platforms custody and platforms either trade on our behalf or lend to us in the like so attornment amount of activity happens or in a place to get better production and customer protection alike even in decentralized platforms, there is protocol and those other
2:40 am
places can get maximum amount of public policy whether under mony laundering. regulating these platforms like we regulate money gram should china alike but that doesn't make sense we are talking about financial stability and investor protection. >> house is not a foreign process to us. you have to work closely to analogies between the currency changes in existing legacy exchanges or do we need a whole new structure? should reuse existing
2:41 am
regulations? >> it will be for congress to decide hoarding my testimony, we have regulators and honor to share each of them. we have different authorities and derivatives and commodities, i do think we don't need another regulator. there are things to be done to ensure the smooth list between the two agencies and we've been talking about that even if congress doesn't act. >> gentleman from kentucky is recognized for five minutes. >> i've appreciated your comments earlier in the hearing funding exchange commission because they were on the beat, i want to note for the record the
2:42 am
chairwoman for funding the police. appreciate that. mr. chairman, thank you for appearing and i appreciate our conversations about materiality in respect climate risk exposure. earlier this year, issued a request for information on climate risk disclosure, a common theme among respondents for the importance of maintaining this long-held threshold. i agree with these sessions but materiality must be preserved. i want to say materiality is determined by investors -- not a lot not to satisfy leadership of some large institutional investors not necessarily aligned with retail investors in terms of their demand to bias
2:43 am
the market against unfavored industries. that's the difference between standard of materiality versus what some investors demand. how do you plan to ensure climate disclosure will maintain special of materiality does not burn investors with an avalanche of this information? >> i share your view that it's about investor demand whether it's shares of stock for a fraction or large asset managers and pension funds that are investors as well. he manages the representing the rest of us representing the public and i share that. >> how well do you think they represent how well do you think
2:44 am
it actually reflects the demands and desires. >> our job at the sec make sure it represents through duty of care and loyalty, 1940 that's really important that managers are representing through their fiduciary duties. >> as we discussed as i talked to advisors in my district, it is a very low priority. retail investors care about returns and i want to ask you if you agree with the analysis and public record, many of these funds at 43% higher than non- esg funds and retail investor returns, things that trouble you?
2:45 am
>> i have to make sure that managers claiming to be sustainable acclimate free, but stands behind that we should put out some roles on back and fellow commissioners agree, who will put that in public, but as i can think, how do we promote greater competition to bring down some of those fees in the management space? i think being clear on naming and what stands behind it can help in the competition on themselves. >> onto address the importance of the standard and what is so to rely solely on comments that coming and ignoring materiality, i think we've missed the mark because it's about investors need the actual need for the
2:46 am
information to make allocation decisions. it's not just about large institutional investors desire to name and shame politically incorrect companies so i encourage the commission to look at this from traditional legal standard of materiality means. in terms of production, i do worry about subjectivity of us concept of disclosures relying on these metrics might you have plans to provide liability protections for issuers and what are your plans to ensure these disclosures are preserved exclusively for informing these decisions not hijacked by enterprise frivolous lawsuits? >> they are based upon, as you say, but investors want, what do they take into considerations for fire member, substantial
2:47 am
likelihood reasonable investor in the mix of information for an investment decision and that is the important thing. that's why we put the comment that investors get their way in. >> the judgment from -- the gentlewoman from new york. oversight in free-form, you are now recognized for five minutes. >> thank you, i had to apologize for the oversight committee, i just got off back. the currency you called highly religious assets, you think -- it's like a security? >> good to see you again and
2:48 am
based on the fact that circumstances will promote many of these are basically saying to the public, give us your money and we have a small group of entrepreneurs and computer scientists that will build something based upon facts, there is hope and anticipation of profit in the future. my predecessor set it in testimony that most of these are many of these, that definition. >> so you think it should be regulated. >> i think i've asked project to come in talk to us because can't say it fits together about but some of the intricate of underpinnings of our capitol markets. congress painted with a broad brush to protect against fraud.
2:49 am
>> do you believe sec has the authority it needs to regulate the crypto currency? or doesn't give you more authority to regulate crypto currency? >> i spent asked a little different earlier, i think it statutes are clear painting with a broad brush but working with congress, there are some apps and places we can work whether it our relationship with agencies in the market revelatory space but also stable value and how to think through that with back regulatory regime as well.
2:50 am
>> it's growing and probably. can you give the committee an update on current safety regulation best interest for fiduciary rule and what you intend to take further action in this rulemaking? >> i think it's important this role that live up to potential best interest really does mean best interest. working with staff and corporate financial hired an excellent person, senior advisor to meet directly is to ensure retail public is the best but i'm also asking the staff to consider how we ensure the investment managers understand their duties under that rule and ensure they are the best interest.
2:51 am
>> okay, that sounds good. the diversity proposal, they've implemented it. earlier, the chairwoman and many others, we passed a bill to call upon the sec to disclose diversity both for gender and minorities and other information and you could do a lot in that area and it not been for senate. you intend to do anything in the diversity area? >> i've asked staff recommendations into areas related to this. one in regard to the board and board diversity, what recommendations we as a
2:52 am
commission, meaning investor demand to do but also more broadly the workforce, the entire workforce capitol disclosure, that's not just about part-timers. it's full-time pay rates but also about diversity in the workforce as a whole. earlier about regulation best interest, if the rule doesn't work ultimately, we will look to make sure brokers ensure the investing public truly gets best interest so i want to make sure i put up, on back. >> thank you for your time and i built back. >> your time has expired. >> are recognized for five
2:53 am
minutes we met thank you, madam chair, appreciate that and appreciate the hearing. it's been an educational hearing. following up on the industrial complex out there in mutual fund management industry advertising branding analysis, i think it's important any testimony reference on it asset allocations -- [inaudible] >> did you go mute? >> madam chair, we cannot hear him.
2:54 am
>> i don't know what happened, i just reverted to mute i apologize. >> we can hear you now. >> i don't know what happened there. i don't know what you heard or didn't hear from -- >> i heard you complement -- >> good, thank you for that. i appreciate bring the subject up and i don't know why i was on mute, like i said. the labeling there is important but it's the law that's we are not misleading investors in providing real value not overcharging. i look at esg fund that has .9777% correlation with s&p 500, it makes you question whether or not it is an esp fund.
2:55 am
you recognize public issuers have a duty to expose every material asset. is that right? >> there is environment of foreign affairs on the items. >> you talk about asking on the quantitative issues on the quantitative -- [inaudible] >> madam chair, thing beauty without me touching chair that time i noticed that. on the issue of quantitative you have read the report with
2:56 am
quantitative on climate disclosure. [inaudible] >> thank you for that and you note that they question scope one, spoke to endoscope three and recommending other changes with legislation demanding mandating it. looking at all sources, not just scope one my two or three? >> we are and i hope -- [inaudible] >> on the qualitative focus you have when you try to have companies described in their financial statement, qualitative factors about the climate resiliency planning, how do you establish liability standards for that? is at same as material financial
2:57 am
statement? >> we have -- [inaudible] [inaudible] i think it would be -- [inaudible] >> one of the biggest challenges in the financial task force report on private disclosures is that it really is not possible to do -- make it comparable and accurate -- [inaudible] there it goes again. i'm going to yield back because this is frustrating and let me say again, i hope we will have hearings in person and that we will stop these kind of online issues. you've heard members today talk about they can't have a fair and open interchange with witnesses
2:58 am
and we have technology that simply mutes itself, any technology the committee is using, i healed back. >> the judgment yield all of his answers to you in a three-part -- [inaudible] >> the gentleman is out of order. mr. foster, also chair of the task force is now recognized for five minutes. >> make you and in my visible here? >> yes, you are. >> well, thank you. are you making contingency plans dealing with the market that may result? >> thank you for the question and i want to say it's representative bill would like to meet with me in the next few days, i'll be glad to do that.
2:59 am
i was hearing the echo as well. as we get close what secretary ellen put out, we need to understand and markets could get cash they do things we don't expect as mutual funds and big banks and hedge funds capitol market participants start to anticipate what congress will do or not do, will be in uncertain times and god willing everything works out but if we were to end up with this, we would have a lot of uncertainty and major market participants several days before as we move into that uncertaint-
3:00 am
>> i understand -- i understand you can't go into detail but would you be willing to provide a confidential briefing to the members of the committee on that as it approaches? the deadline approaches? >> if we could follow-up, i want to work with chair and probably secretary yellen on that because that is where the main authority is but i would say -- i'm not taking the uncertainty to start develop around that. >> so the view of the market, is there any downside you eat in response to all of this, the debt limit is either outright repealed reconciliation simply raised on a number of dollars that makes it irrelevant? >> however congress addresses it in by lowering the markets, he
3:01 am
was usually lower the cost of capitol. >> i would just like to mention in terms of this, i have a bill and fall back over 50 household sponsors which would simply do that and i welcome all from all corners, i'm just getting part of this that we made up ourselves. i would like to turn to this, a zero commission trading is not free because the retail customer often pays for in terms of less than optimal or execution. the difficulty here is that there is no transparent market between trading platforms that includes good knowledge for investors of the quality and total cost. there are two possible responses to this that i would like reactions on. simply first is requiring retail
3:02 am
customers along with order confirmation, anybody with commissions plus summary of how the price they actually receive compares to a fair estimate of the market price. the mid or sophisticated essence in this would allow investors to see over time for the cost of trading was better or worse than another and move the business to the platform and invest total cost of trading so that is the first suggestion and a second possibility to allow retail investors, the platform executed made public. the platform identity self also the time they placed the order it was received. this will allow third parties to look at additional publicly available data for high quality evaluation of which platforms
3:03 am
total cost retail investors in different markets so you have any reaction, are the impermissible? i would imagine they would in the market. >> if it's all right, i'd like to suggest to your staff to review this. i've raised how can we make the markets more efficient and competitive? i think it's probably would help to hear ideas sort that through outside of the hearing to see whether they are. ...
3:04 am
>> and thank you, i want to thank you for this committee today i appreciate your time. and topic that i want to go over again, their millions of americans as you know the whole crypto currency specifically over 55 million americans are now engaged and the value of these crypto currencies and value of the market his approximately $2 trillion pretty and even outspoken in that you think that most crypto currencies on the market are secure. i could not disagree with you more i believe most crypto currencies. but for the purpose a better understanding your perspective, and several quick questions that i would like to run through during my term i would appreciate quick responses for each question. patrick and celeste avenue issued a token agrees with you
3:05 am
and thinks there token is a one register it. at the registrant, can they traded it on the new york stock exchange or nasdaq. >> it somewhat depend on nasdaq and new york stock exchange role in how they register but there's multiple ways to register, new york stock exchange nasdaq with yes, must be facilitated nobody has done that as far as i understand pretty. >> actually the answer is no. and a can a broker dealer like charles schwab another question an additional asset for the registration. would they be able to trade these digital asset securities. >> the custody really the issue with that you mentioned, then we have not been able to sort through the feature crypto assets which is the private fee
3:06 am
transfers ownership is a feature but also creates challenges as some would say about the future and a bug of the custody of those crypto assets pretty. >> again oblivious fresno and i think earlier today, use the term, stable value collections there is no such thing. value is a term that you put in there. there stable going. enter as you know there are about 100 with about a million dollars in market capitalization you have one of these coins the billion-dollar cap and tens of thousands of investors are secured. what happens to those investors. >> if the coin 40 come in and actually register, then there's investors get the benefits of the series right now they don't have the benefit of that but a basic bargain that we protect them against fraud and manipulation in a federal marketing printed and full and fair disclosure not getting that now.
3:07 am
they're fallen short of people are going to get hurt. >> chair, actually what will happen and that scenario is the value of the token of employment and they invest in the very people that you're protecting will be able to trade so i guess where i will go with this if there is no path for them to be traded anywhere, when the investors be hurt by enforcement actions and what are you doing to solve this problem. >> what i said probably, i mean, this is come in and work with us and if the rules were written in a decades, they don't quite fit the digital investment contracts added that is what many of these are, they are entrepreneurs and computer scientists are raising money from the public the public is getting profits and that is why were painting us with a broad brush the public is relying on some group of entrepreneurs and computer scientists for the prophets and
3:08 am
work with congress and if you want to repeal the law, as they are so that people are protected against the fraud in these markets pretty. >> i appreciate the answer i don't know we still disagree in the security aspect of it i think the vast majority are but it's really important for the fcc to develop a framework commits one of the highest performing decades retail investors in a new space in your job the sec's mandate, is to protect the investors maintain fair and orderly and efficient markets and facilitate capitol formation. when you make the public statements and regulate to enforcement action, you jeopardize the mandate and i encourage everyone to take a look at the bipartisan bill that the securities act which with a new definition, the investment asset so that the fcc can work with issuers to simply determine
3:09 am
as part of the securities a foreman what is not going to thank you again chair and i yelled back the balance of my time pretty. >> and i wanted you to know that i appreciate your expertise on crypto currency and with that from iowa also the vice chair subcommittee on housing and is now recognized for five minutes pretty. >> thank you and thank you for being here and for your willingness to work on modernizing our and looking at getting this on trading platforms pretty to 99 very focused on equities for the people and want to invest in a appreciate you wanting to make sure there's an opportunity for people across our country but i want to dig into the aspect of the investor russians and we are talking about crypto today and terminal want to know you briefly describe the securities
3:10 am
investor protection corporation does pretty. >> the securities investment protection is sometimes now to set up by congress to protect the retail public the left money at a brokerage firm and it was not properly giving that money segregated and protected and went bankrupt in assets and the loss of them i come. but it only to be a full expert and i'm sure i've missed some part of it but i think that is the basic part of the market and pretty. >> so basically when the owner security and brokerage account have some protect pretty. >> that they didn't take that security given to somebody else and like any still have market and individual market risk that they didn't protect them as i understand it. >> so i want to get to is i don't think that applies to commodities for some others.
3:11 am
[inaudible]. >> i think that is correct. >> so here's what i am wondering, about forms you drink crypto literally right next to us are born token that it is not insecurity printed on the differences in protections for those investors look at the stuff in our platforms. do you think these investors only five forms are likely to know that these protections are different and i'm hearing you say they are different. it was a difference between crypto and stock and did folks realize that is part is investments go pretty. >> i think the investing public is not getting protected right now whether it's a digital asset the security and many of them i think our wild representative. we do have a difference of you on that would pass in the securities but as you say, a few might be commodities and the
3:12 am
commodity does have enforcement authorities around commodities as the commissioner for their put out a paper recently and highlighted that they don't have regulatory authorities pretty to write the rules of the road for these exchanges so there are gaps there. and there are the commodities in the gaps with the exchanges if they're not registered at the new york stock exchange is registered rated. >> affecting the payments and overflow on securities the broker has to disclose balances paid and how those orders do and i think they're not really sufficient will be a lot better but chair, are there any such disclosures like this for the crypto assets pretty. >> but no disclosures in some of the brokers are trying to do some voluntary disclosures on things that are basically similar to the crypto but you're absolutely right, they are not
3:13 am
doing so in the fullness as under our securities law pretty. >> something that caught my eye that they're making from just a quick to and if i'm correct, i think the robin hood made more than half of the revenue from doubt in the second quarter and yet we don't have the same disclosures about how that is hard for them now the users might be doing these orders so other steps that they can take to ensure that investors understand these with a half when trading and information that they might loosen certain areas on the platform or d think that those to make sure that anyone trading on those platforms have the same protections regardless of what they trade and the disclosures or do we need to be moving in a different direction pretty. >> i think the decisions that call was made long ago, i think the sales and trade today that the trading platforms in the
3:14 am
exchanges they come in and they register and follow a set of rules of how they expose these to each other and how they compete in the marketplace and how we protect people against front running and how we protect and promote market through transparency as of these platforms in a regulated space, would be better for investors right now, we don't have that this is a highly respected class of crypto tokens and truly think that were going to have hearings in the future probably on what went wrong here in one of the things that will be these do not come in and regulated with the appropriate authorities. >> thank you and your time has expired. so the chair now recognized the next person for five minutes. if not, the next person let's
3:15 am
see. let's go to mr. mooney buried mr. mooney. you are recognized for five minutes. >> okay and thank you very much and appreciate hearing any opportunity to participate, some important issues here right chairman i would like to focus on the difference between what is considered guidance and considered rules pretty changes in the rules and enforcement have large implications for participants both large and small and imported for investors understand the difference between binding and nonbinding directions for the fcc in your predecessor was very clear on this issue and released a statement in september expect to find how close, all staff are
3:16 am
nonbinding and create no enforceable legal rights for obligation and would you commit similar statements clarifying that all staff statements are nonbinding pretty. >> images say in my own words, i think that the rules in the notice and comments to the public benefiting from the economic analysis is what we are trying to do in many of these issues that we have talked about today pretty guidance can also be an important tool in an agency like the fcc or markets commit and say, there is a rule already and can you please issue guidance that's within that rule said, the guidance about things we been using this for many decades others in the accounting area for the auditing area comes sometimes investment management really think this is important but is always within the rules
3:17 am
that are already outstanding rated. >> okay thank you for that answer. i think that doing so would provide clarity for investors make sure they understand the rules. in the me just give you an example, with lower reforms adopted in 2020, codify existing procedures and improve the sec's ability to provide awards and incentivize whistleblowers to step forward in august, the sec under your leadership believes the statement that regarding the whistleblower rules, they are able to provide to make changes that obviously to the comments as we just discussed. but in this case, it appears the commission attempted to nullify the existing rules to a public statement in response, the commissioners said erased a dangerous precedent sand produces a certainty of loss pretty so chairman, in this
3:18 am
case, significant change of policies under the commission statements and how is that not the way to avoid the notice and roles and comments rulemaking process that we just discussed rated. >> was lower program is really important program to help protect a market. what they have to do is look at our programs and sure that the whistleblower releases last year and the prior rule said are the things needed to ensure that whistleblowers and in such a critical program and not only the basic protections but also as congress laid out that they when it's appropriate under the rules, to get there awards which range from ten - 30 percent and with the nature of the award. >> thank you. seems the whistleblower what it
3:19 am
would need to more and more change in the rules through seven making public statements and i worry commission consider precedence the public statements override establishments and cause marketed investors to suffer read noticing the comment rulemaking enforces the regulators to listen to the public before finalizing the regulations and commentaries getting the roles right. i heard you talk about the plans as you have in your tenure and remind you that congress makes the laws of the agencies and saw within your power to make new rules. and i yield back. pretty. >> you hear from the public the complications as far as the agencies work pretty. >> okay and thank you. >> thank you the gentleman from texas, mr. green is also the chair of oversight investigation and is now recognized for five
3:20 am
minutes. >> thank you very much. and chairman i thank you very much and greatly appreciative of what you been able to accomplish and i'm especially gratified that you have supported the production reform act of 2021, something that our office is been able to sponsor and work with the general counsel over the fcc to strengthen and it means a lot. and also to have a level of cooperation that we received from you as you well know, edification of others might know this legislation expands upon what we did in the last congress. in the past the floor with only 12 persons, in opposition and this act revise the burden of proof and authorizes damages for whistleblowers who are not fired
3:21 am
but who suffer other forms of retaliation and protects them and the whistleblowers who report orally the do so in writing. the significant piece of legislation and very grateful the public citizens has expressed his support freighted if you can, given that we have legislation, what do you think this legislation will do in terms of being helpful to the extent that the other legislations who did not get through or could not get accomplished pretty. >> congressman, i look forward to looking at the details of the legislation but i think that in this direction that you just outlined, the support that we can give to those whistleblowers when they come forward it is is a hard thing to do pretty working in the inside of the company and working inside of an asset manager or others and to
3:22 am
say that something is going on here that's a mess and you come forward talk to an agency of the fcc and takes a fair bit of gumption if i might say so anything that we can do to help support individuals to do that, it's really important part of the oversight of the markets and we get other sources and we see things in the media we have a terrific staff of examiners and enforcement and economist rated with the whistleblower piece is an important piece of our overseeing the markets. >> thank you and i concur with you totally and i would add something in addition. and knowing that whistleblowers are protected will also act as a deterrent within the corporate structure and i think that
3:23 am
whistleblowers who have added protection will come forward but knowing that they can come forward i think will make a difference as well printed so anytime there's a deterrent effect rated. >> i thank you so important and i remember when senator grassley was leading this back in the don frank act and working across the party lines, i think that having whistleblowers be part of the examination enforcement and having income from manipulating markets also helps companies could of the actors to draw better. because is not certainty for investors rated. >> i'm inviting and requesting by colleagues to play support the legislation and congress can
3:24 am
weigh in and have a significant impact pretty so grateful to you and i think my colleagues and i look forward to working with you and thank you for your support. >> thank you very much and the gentleman from georgia is now recognized for five minutes. >> thank you and can you hear me now yes okay and thank you. [inaudible]. thank you for this opportunity. you testified in this committee that you and i discussed the consolidated trail and the most that the investors information that was originally going to be including social security numbers to be collected because they were working on that data however, it appears the changes still have not been finalized unless they are, only the pi will be collected and the
3:25 am
question is when will the fcc finish the rule for the most pi from cap. nineteen. >> if i can follow up after the hearing and find out those exact dates i concur with you that removing the data from the pack is important to know that in the docket and i've met with the people in the market division working on that in the number of times and she when i last spoke but have to follow-up with an update as to which month we will finalize that rated. >> appreciate it if you could follow up with us because as you can see as we all can say that the cybersecurity is a critical issue right now with all of this going on is just going to continue to get worse i think it would definitely have an effect of the pi as investors so if you would get back with me i would
3:26 am
appreciated last year the fcc finalize commitments with rules regarding whistleblowers pretty and it appeared to me that you decided that the fcc would not enforce those rules and that they commission statements and not rule making it into the other commissioners noted that the fcc has a reputation as a steady regulatory she because they saw with the rules and known to justify reopening them so it appears that there might be some a portion of which rules to ignore based on which ones you like and which ones you don't like printed and the direction is to go to the fcc ad jobs to selectively enforce the rules based on and had a justify that. [inaudible].
3:27 am
>> i think in part the shareholder democracy was really an important feature. that many get advice from the proxy advisors and as you rightly said, there is a role that was finalized last year when i asked the staff to do is take a look at that. in making recommendations and again, to nursing comments whether there should be any changes to that so again through the notice and comments here that's when i announced earlier this year, but ask them to do. >> okay. >> something that i would like to note as a measure of hijacking and security and push social and cultural issues but based on the agenda, which included climate change in diversity and appears them to do exactly those things printed we often say the disclosures but in
3:28 am
2020, shareholders and proposals for some fill in the average was in favor of the only 30 percent was in favor. >> only at the same number. [inaudible]. how can you avoid using disclosures of security disclosure to push and recognize this and already required to disclose material information to the investors and without i yield back. >> thank you very much and a gentlewoman for massachusetts, also major the subcommittee on consumer protections. and now recognized for five minutes. >> thank you for convening the syrian since 2008, financial crisis, industry has exploded pretty they manage from
3:29 am
$1.5 trillion - $4.5 trillion and while based certain reporting requirements on this asset, private equity firms do not have to provide the same level of transparency. no subject to the same regulatory scrutiny and the benefit from that read. >> what tools they using to better monitor activities that a lot of these by private equity firms and hedge funds are engaging in and considering their great impacts on the economy and consumer facing business. >> i think you and it's good to see you again. but in terms of private equity, you are right in our capitol market as a public market and private market, and the intersection of the two and i have asked the staff to ensure to the best that we can, that the arrangements between the general and people managing the monies in the investment managers and their investors often limited, those
3:30 am
arrangements have the appropriate transparencies and that the investment managers are living up to their responsibilities and duties in their contractual duties but also the duties under the law in terms of representing those investors i think that is really important. but also like to ask whether we should update the data we collect and might not have been the of your question but on that form on the private funds. [inaudible]. >> yes and then my question which is would you be expanding the requirements of the sound like a yes and if that is true, could you or how mean do you plan to take those steps, timeline rated. >> in terms of timeline, only to come back because sometimes i can't remember every month and everything living meeting last week, more meetings with staff
3:31 am
on enhancements and what we call private fund and also a separate project in terms of the responsibilities and obligations between the investment manager team and the allocated group and i would have come back and say when the staff will serve up those to the commission. >> that is fine we look forward to speaking with you off-line and certainly just looking for the necessary action here and the affordable housing crises and economic and racial and housing a matter of life and death and vulnerable institution during this pandemic and 93 percent of the counties in u.s., including ones that i represent, full-time minimum wage workers cannot afford a one-bedroom home. this nationwide 40 percent spend more than one third of their income on rent so massachusetts ventilation worker must work 87
3:32 am
hours a week to afford a one bedroom home and meanwhile the living lavishly and profiting off of them the facts of these hard-working families struggling to keep a roof over their heads. well-documented other project in it and in an economic crisis of a millions of people foster homes to foreclosure and other reasons, and deep discount, late arrangement to maintenance and using aggressive collections and strategies and now they control at least 1 million apartment units in at least 250,000 family homes pretty nice are not high-end homes of these are entry-level homes in the most affordable housing low income families can and lack and from families occupying this is what families can afford to buy a home the economy is down, and they they buy the neighborhood god said in the rents it. in a higher price predict so we need to be concerned about the
3:33 am
common equity, placement of families during this global pandemic, no less. for example blackstone the most called out by the u.s. [inaudible]. aggressively pursuing evictions and fueling the global housing crisis so chair, it doesn't have to be like this housing is a human right and i'll are chairwoman a grace and for you to take action to have a grace these egregious behaviors and look forward to follow up off-line and thank you and i yield back. >> thank you. the gentleman from ohio is now recognized for five minutes pretty. >> thank you and ranking members and the chairman thank you for your time here today. in 2018, there's new york times article that discusses your views on block chain in various democrats is one of the crypto
3:34 am
currencies discussed in the article was and in the article you said that the problems with security from because some of the first tokens were sold by the foundation before the network was actually functional and you want to say that imperium could get off the hook from securities fraud due to the fact that it developed into a centralized network pretty repeatedly said if you believe initial point offering tokens are securities pretty sore right here is sounding like you're acknowledging these transition from one of been a security into a commodity was a network is adequately decentralized pretty can you clarify when a token is sufficiently decentralized in a longer a security in your view rated. >> thank you for that and getting back to an article from three years ago, i was honored to study research these issues that were at mit and when i was,
3:35 am
wanting on, was a process that the fcc was going forward on and i think van had a corporate finance was talking about in that timeframe and so without going into one token, what i think the court is and is a test of the supreme court is taken up new response to the broad, raising money and the investing anticipating profits based upon the efforts in some collective group of individuals and that central task, called howie task on their zollo hundred also brought brushes with this as well to when something is note. and the marshall a few decades ago and fundamentally, the fcc is here to help protect the public from the broad nice white congress face it with a broad brush to protected from fraud pretty.
3:36 am
>> and fourthly congress did not create it, the courts did reducing with and frankly, the patchwork of regulations by enforcement obviously there are people who feel that a particular token like either is treated differently than one like xrt for example and so matter of before you right now because it's the same thing, centralized or is it decentralized in u.s. control. thank you so really gets to the issue, congress should clarify the bipartisan legislation called the token act and drafted since 2018. it would provide a status that would apply and in a 1950s law case law, to modern digital assets and provide some of that clarity we could you see generically speaking talking about the short comings of enforcement actions or even threatened the enforcement
3:37 am
actions. versus the need for clarity. it may be a rule making process that would establish this on because what you refer to us come talk to us at 11 kind of third world way where every individual has more deals with the marketing is really clarity. wouldn't that be better than threatening enforcement pretty. >> will actually think that the leather clear this and i think that issues come in and register but what is happened over the last four or five years is chosen not to or they stood up in singapore or hong kong or other countries and offered their services and directly through virtual private networks, not all them, some of them are here in the u.s. as well. and i think that are securities laws were written for a reason to protect the public. >> i think you're right, we should protect the public but
3:38 am
frankly we should do it in a way that doesn't destroy the market review are talking about living the leading innovation america has led to market aftermarket aftermarket and in the field of technology from the eight revolution in industrial on up to the internet age and why would we want to destroy this revolution in and push it outside of the united states when we can foster written a refer to your enforcement action on yield products for example we should go through rulemaking process or congress should add drafting a bill to be submitted shortly to clarify yield products and how it should be protecting the last thing that i say certainly not all stable going to be considered and i think you've referenced that but i look forward to working with you in your office to provide clarity for the markets and i yield back. >> the gentlewoman from north carolina is now recognized for five minutes predict.
3:39 am
>> thank you for being here and as you may know, recently introduced an act. [inaudible]. in recent years there's been an increase in demand for it and you brought up this providing benefits to the market exposure while simultaneously offering protections with the market volatility. and including companies in my district here in north carolina that the lack of a form of registries as their abilities to market these products effectively in the consumer federation american council of life insurers and others who have endorsed bill, and shown bipartisan support and members of the committee so i wanted to displace for you as i in your last hearing but i look forward
3:40 am
to working with you with this information on be happy to hear your thoughts that you have on this matter. >> thank you and i think the senators for playing at the last hearing as well and i think that the index linked to annuities, pat, and her securities laws for quite some time but which you are flagging is the forms that they fill, could be find a way to basically change the forms the fill out the fcc and it's in a of actually asked the staff to consider some of the things that you and the senator have raised in the make those suggestions. >> thank you. so this committee is been advocating it for the office of minorities and women in and cross financial regulators. these offices are to ensure income staffing and procurement policies are inclusive and encourage all regulators and
3:41 am
follow suit. so what did you and the office doing to increase this pretty. >> well, the head of our - it is a terrific ally internally and in terms of trying to have more of a minority and women inclusion in our hiring and are promoting in our senior ranks and think the fcc probably made progress there still a lot more progress to make. and as an agency were also beyond that and looking to see what we can do as if we talked about earlier in terms of various questions that we put out to the industry as to what they are doing this in regard pretty. >> have you considered making these mandatory or do you have any other information to
3:42 am
encourage those to participate. >> i think would be good to have greater participation in cancel that i think that while we are moving forward and i hope that staff will make recommendations and my fellow commissioners will support the narrative, disclosures around the board and the workforce diversity, think until we were to do that, would really be up to congress to have the participation as you said, mandatory participations of these current industry. >> thank you and i yield back. >> the gentleman from north carolina. it is now recognized for five minutes pretty. >> thank you pretty so china's been on the warpath against currency since 2013 and we have
3:43 am
seen bands on mining, and coin offerings and crypto currency en outright ban on crypto currencies themselves pretty so do you support with china has done an is the planning on implementing similar bands. >> unfamiliar with the number of the things you mentioned it in terms of the people's republic of china and i think the approaches really quite different and it is a matter of how do we get this field within the investors and consumer protections and we have also working with bank regulators and others and how do we ensure that the treasury department has it within any money laundering the tax compliance and of course the financial stability issues the stable points could raise as well. but that you're interested in implementing the mccs china has
3:44 am
done really to funnel everyone through their own currency. >> no, it would be up to congress and what we are really working with the authorities that you've given us i said this i think that many of these tokens are based on the facts and circumstances that many of us are under tokens do need making an investment contract or a note or some other form of securities that would bring them within the investor protections remix of the fcc. >> thank you rated talk about innovations for a moment, maybe the u.s. marcus in the entire world maybe major innovation that we have in referring back to the banking, you stated in your current role, animation is that acts as an economic
3:45 am
activity and gives so many of us better opportunities in life. and so as the commission continues to review this we commit to balance any changes with the impacts that will have on everyday investors. >> i think that is our three-part mission but also to balance the economics that innovations as i said it does help increase our economy and access to capitol. that is why a study did not fascinated to study this is mit, the intersection of finance and technology but i think that new technologies rarely last long if they try to stay outside whenever the public policy lays out and investor protection is worked for us for nine years i think it's an important piece of whether crypto currency is going to survive or not.
3:46 am
and meet its potential whatever it might be. >> thank you and he said multiple times and fcc has a great deal of clarity on what exactly what is a security given the fcc's approach to using enforcement as a way to regulate, he stated before the committee the agriculture committee in 2018, fcc will need to decide if they want issue rules and interpretations specific to the crypto space. so now that you're leading the fcc will you tell us about what you plan on additional guidance and enforcement. >> i want to say that i think the enforcement actions, six or seven enforcement actions by the predecessors and continue to do, help to protect the public and in terms of working with the exchanges to come in and try to
3:47 am
register, is really to look at our rule set to ensure we achieve the core of our rule set that some pieces of it that do not fit rated use things like transformation others because they're easier for some to understand it might not fit really with these new digital investment contrasts. >> okay, i yield back. and thank you. >> thank you very much and the gentleman from california. is now recognized for five minutes. >> thank you very much and thank you and ranking members of this committee hearing and especially thinker witnesses today. in chairman, i believe regularly somehow failed and the potential environmental exposure and climate change rated and they delve into what i believe our team and serial surrounding the
3:48 am
corporate governance policy such as asthma diversity but a lack thereof. in response, hr 1187 the corporate improvements and investor protection act the bill included the disclosure simplification act for 2021 which requires public annually disclosed to shareholders certain environmental socials and their connections to their long-term business strategies. on march 4th, the fcc announced the creation of the climate and task force and division of enforcement the task force focuses on developing initiatives to proactively identify related misconduct and identified material gaps for misstatements in the issuers disclosure climate risk. so chairman, can you provide the committee with an update on the task force findings and an additional, you believe all the public nobody should be required
3:49 am
the most relevant concerns i know that you talked a little bit about big and small, could you elaborate more on that. >> i do think that investors are increasingly over the years as for greater disclosures on climates and on the workforce. we have a separate project which by not fit into your question on cyber the last time that the fcc put out guidance, was an 2010. in the task force that was an march of this year it was to ensure that investors were getting the benefit, not just that 11 -year-old guidance but the companies were following their responsibilities under the disclosures but i think that really now is the time to put something out to the public and the public away and and how could we play a role to bring
3:50 am
consistency, comparability and yet the decision useful information around the physical and transition risks and climate and many of these companies are facing and around the workforce including the diversity of the workforce. i think the investors address before but again, will find it would make put things out, we will see what people say pretty. >> he said the investors are asking for but even some companies are providing it pretty at different levels but are they already doing that pretty. >> yes, i think you for saying that because your absolutely right on the top 500 companies i think it is 80 - 85 percent right now, putting out the disclosure some voluntary basis. and then that helps those companies flee bring in consistency and comparability to it and imagine of the companies for 500 of the leading companies in u.s. just putting out
3:51 am
disclosures about their financials but also deciding different ways to report their financials in different ways a report their executive compensation so we have a role to try to standardize that and bring some comparability and so it helps the companies as well as the investors. >> i agree and i think that's why the investors are asking for it a lot of large companies are 91 ask, i know a number of my colleagues really hot in this crypto stuff would have to tell you, people ask me all of the time how did that help the dollar and help the united states. for anybody other than traffickers, terrorist, or people trying to make a quick buck. how does it help us help and have this crypto currency. i understand it could help development how does that help us, all of these crypto
3:52 am
currency. >> we have around the, 180 currencies different countries have these country has more than we have the u.s. dollar that happens to be the leading currency around the globe. it's unlikely that five or 6000 it private forms of currency will persist for it is just economic history tells us is unlikely to a lot of these are not really currencies and not being used to buy a cup of coffee at starbucks but they are most of them are investments vehicles ways raise money entrepreneurs and thus they should come in and see within these laws and handful that might be competing with gold or silver is a digital value, over the century gold is an or but not many of them. most of them are investment vehicles partied. >> the gentleman's time has expired the gentleman from
3:53 am
tennessee is now recognized for five minutes. >> thank you pretty days hearing and thank you for appearing today mr. chairman and if i could, the column that you wrote several weeks ago, the chinese needs to open their books. i'm just going very broadly, what exactly are you saying of the 270 companies, you said that maybe the prohibit from training by 2024. what are you seeing a blessing with us companies. >> so as a basic that entered into on a bipartisan basis about 20 years ago. the president bush signed into law instills greater trust into
3:54 am
our markets after the fiascoes nets about the accounting fraud and the company's auditors needed to open up their books and records to a new entity tell the companies accounting oversight board and be oversee the pca oh bank and nearly 20 years later, 50 plus jurisdictions allowed at that to happen from europe and asia and africa to south america and north america rated to jurisdictions currently in route, china and hong kong so congress came back together last december and said instead of this pc aod, you can see those records. there's 214 things, that the selected which companies in the air inspecting and they have to see the workpapers and see those at the auditors, not redacted or selected but actually you need to be able to talk to the
3:55 am
auditors to basically instill greater trust in the financial in this case of the china related issuers. >> in a follow-up, you mentioned 270 companies. by 2024, were some of those companies predict. >> easily companies that i call them china related companies because many are actually incorporated the cayman islands they don't actually own anything directly. but many of them were large internet service providers in china for internet companies that are similar to our large internet companies here that provide retailing in an online services but there is also some insurance companies and some oil and gas companies and related to
3:56 am
china as well pretty. >> if i could ask the same question in a different way, you didn't identify the number 270 pretty. >> is investors a number of companies right now in china related and based upon statistics that we can see from outside services, the nasdaq and others just a whole list of companies and i can certainly follow up and give you them. we as an agency actually have a congressional mandate that each year the three-year clock was ticking we would publicly identify specific companies so in the early part of 2022, taught and hong kong are not yet compliant, then we would identify the specific needs of the companies and we would do this on your later than a year
3:57 am
later. >> to anticipate that number could grow. >> it could grow if there's more companies from china where the affiliated companies and cayman island this many of these are actually cayman island issuers who entered into her rent was variable interest arrangements with china companies and so it could grow. but actually we could has the disclosures around the so-called structures. >> my remaining time, all of them to go you stated the investors advisory committees, the commission staff to work on new disclosure requirements. have you gotten the recommendations yet and if not -
3:58 am
>> i have gotten them in terms of preliminary recommendations but only full role that i can put in front of my commissioners but i can say that we can try to address some of these larger issues around the fact that the retail public really well these are very costly vehicles were companies raise money for the retail investing public rated winter transparency and address some of the complex but i could follow-up as to which month i think the be in front of our commission. >> thank you the gentleman from new york is now recognized for five minutes. [inaudible]. >> thank you, it is a pleasure to see you and have a question
3:59 am
about neither admit or deny policy, do you find that a company is in codependent engaged in wrongdoing the taken enforcement action accordingly and is unfair to the fcc to have engaged in wrongdoings. [inaudible]. >> is a fair and transparent and accountable rated. >> i think you raise and it really important point for the agencies like civil law enforcement agencies that with the limited resources no matter what congress did there's always a limited amount of resources on how to best protect the marketplace and that is why thank you so so important and remarkable in the division i've said this that we hold public companies accountable but individuals accountable that we have a full rendition of the facts the public understands why we might enter into a settlement and i think usually in the
4:00 am
context of the settlement and then we even use all the authorities in terms of individual boards and where appropriate of medication . [inaudible]. >> if i could intervene. let's get to that resource question, do you thank you so fair without requiring admission of wrongdoing because i believe i suspect the majority do. [inaudible]. [inaudible]. because the consequences that come from this and if you defrauded your customer have the right to know is if you allow them to neither admit or deny the company easily say that i never did anything wrong and he never admitted to doing anything wrong, just like paid off the fcc to go away. >> i think you will find that a march agreement and the challenges of an agency if they
4:01 am
were not the only federal interagency the spaces challenges of resources that what is really important is to have a real road block rendition to the facts and use the authorities around individual rights and to go beyond the fines because often it used as a cost of doing business pretty. >> i want to move on to another topic so are you saying. [inaudible]. >> you are cutting out. [inaudible]. do you think that it makes it impossible to rethink the possibility of settling cases that the emissions of wrongdoings. >> i think i heard most of what you said and i apologize because you are cutting out but i do think that what is really
4:02 am
critical is the use of resources and we do this is best we can delete and to ensure that we have a full rendition of the facts of the case and use our industry bars and yes from time to time as you said, to consider whether to include that in the settlement as you know in many cases we take into litigation and into the courseware is not the case. in the court to find different things the court decides and opinions are written. >> i don't know with whether mrm and it looks as if he dropped off rated can you hear me. >> i think something has happened. i think he is coming back now predict you may continue. >> are you suggesting that this
4:03 am
is possible to settle cases without requiring more pretty. >> i think with his lively discussion, there is the challenges and trade-offs as part of why we sometimes take the cases directly into the court so which are highlighting and i think the shared vision here is to use all of the tools we have in our toolkit to ensure that the market participants say on the right side of the law and that is in times taking things into the court litigating them fully and occasionally a settlement and to ensure that when we do the settlements there's a full rendition of the facts and we also use industry bars rated ... ...
4:04 am
what is your perception? >> i would say this, we already have coming down -- >> is it a systemic risk? >> i think the $25 billion we have right now at the casino and make create risk in the system of crypto writing and monday that if this continues to grow, and it's brought about tenfold in the last year, it can present systemic wide risk. >> thank you. >> the gentleman from ohio is now recognized for five minutes. >> thank you for your time today and i want to thank you for our time last week, it was a good conversation. i am extremely excited about
4:05 am
opportunities for our economy opening up opportunity. when i look at those in the crypto space, it seems to be more diverse, it's completely unlike traditional dominated by those in the best schools have the right pedigrees. crypto is enabling opportunities in a traditional way, recently products individuals have for the platform, it far exceeds 0%. i've been speaking with multiple companies, a common theme in these discussions as they want to come in and respect their privacy. however, they are concerned for
4:06 am
potential enforcement action and they see comments about these products stable coins at the casino suggesting a certain presumption of guilt so it's an open door conversation is not something they believe they are experiencing so my first question -- first, it seems to me that when you think about these points and whether they are a risk, it's in the quality of the reserves and what backs up the stable coin. should be determinative whether it true or a junk claim. if you could, would you disagree with that characterization? if so, please explain why the high quality set of preserves,
4:07 am
by that would somehow be that? >> we have regulation in many states of the land about new jersey my own state of maryland some two decades ago regulating casinos and certain safety and protection for the public. so we've found our way to that policy issue and we can fight our way through this as well. >> there is a different product is not true with crypto how are
4:08 am
people advertising seven% or sometimes 21% returns on crypto platforms so i think that is what we are trying to do, and trust the public is not defrauded what stands behind the claims. the stable., i confirmed there are different types of., wrapping it around your money, it could be directly around test process and think of the other
4:09 am
end of the spectrum, it could look like a money market around treasuries and paper earned certificates of deposit and so forth so it depends on underlying asset and as you said, a way to ensure reserves are appropriate in the banking system but other issues and we already have digital money in this. they are giving the war if they are not a way to avert tax collection and compliance and monday money laundering. i do think a lot of these stable coins grew up over the last eight years inside trading around the globe tax.
4:10 am
>> my time is up. >> the gentleman from pennsylvania recognized for five minutes, it's a pleasure to have you here, thank you for providing us money for the committee and discussed the needs of these and take rich resources and budget requests. i wanted to give the opportunity to talk about your budget request. a little more than $2 billion in appropriations on your 2023. a little more than 8% increase compared to 2022. the final statement in your written testimony says and more americans access capitol markets we need to be sure the commission has resources to protect them. i agree with you budget is
4:11 am
priority. with funds in your budget request, will it offset staffing level decreases suffered 2016 i believe your agency reported about 4% decrease in what key areas of staffing are needed budget request? final piece believe it is a neutral budgeting statement in terms of sec progeny. >> we are because under congressional authorities on various security actions in terms of levels of staffing the
4:12 am
opposite of management budget on that 2023 request and it doesn't quite get it, we had shrunk to several hundred people, 200 plus people since 2016 and this gets us just below where we were in 2016. i would prefer an agency that's grown four or 5%, that's not shrunk for a 5%. it gets as above where we were five years ago and it's a market continuing to grow. the last thing is technology. we spent give or take 300 million a year on technology which is probably what some of the big banks spent in a couple of weeks if you check the numbers. that is one important factor. most of them spend more than that certainly in a month so
4:13 am
it's the nature of congressional appropriations. we've asked for more but it doesn't quite get us where we would like to be. >> as you can step up and focus on diversity across the board at all levels. >> it's a really important focus in terms of recruiting people but also promoting the senior ranks. i've tried to do my best with a handful of people we've hired whether in my front office but also to work office of minority inclusion and work with senior officers and every time we have to allow people opportunity to
4:14 am
recommend the notion in spirit from ultimate investor protection inching forward in this potential catastrophe in reaching the debt ceiling, do you recommend this? >> i have to leave some of that to congress and the executive branch but i would say this, in a couple of days hopefully we don't, but if we get to a couple of days before that, my twin brothers and five birthday, what that would be. as we get closer to that, i think we will start to see praying in thelace there is great uncertainty on our debt
4:15 am
because treasuries are punk the rest of the markets test the foundation of the house and make sure the foundation of the house and the rest of the house will have problems. >> i wish since i have a birthday and any member of congress on this. the gentlewoman's time is expired. mr. gross is now recognized. >> thank you for your testimony in today's hearing. i want to welcome you to the committee and remind you that historically sec administered federal securities in a bipartisan fashion and it's my hope that you continue that
4:16 am
tradition has i believe security small are not where we should hold debate about change things like racial inequality. obviously as we review market event in january, we've restarted the conversation regarding payment for order flow. i'm not necessarily in favor of banning payment order flow legislation my democratic colleagues have posted you have set it on the table especially without proper due diligence. i feel like we haven't gotten a lot of just. in the previous hearing, you agree with me transparency key and set your staff would examine payment for order flow and make. you have said you've asked for staff recommendations over the last five months, how far have
4:17 am
they gotten in the examination and what were their findings and when can we expect a report from you and the sec on the? >> thank you, if i could separate in terms of the january event, the trading market staff and division of risk analysis that's shared with commissioners and through that commission discussion, we will have that report shortly. there's a little bit of moving around. in terms of broader public policy in the report, i share the view of and by economics, what's best to make the markets more efficient payment order
4:18 am
flow for other parts of the comr you put a market order in, it's not likely, it's highly unlikely it goes to the stock exchange or nasdaq stock exchange, it bought by an internalized her and a handful of internalizes so is that the best way is still competition in this market efficiency to address what's inherent in this statute system. >> earlier this year i asked the witness what he thought reforms put implement to increase transparency retail investors and he suggested regular 606 report.
4:19 am
specifically during work to provide better public transparency. is your staff looking into additional changes that these reports? if so, what changes? >> on the table as well but the question is whether disclosure alone by enhancing disclosure amount payment order flow trusted. united kingdom, canada, australia, i know we have pick different markets and systems and we even have letters gotten over the years articulating why it's not good for our system we need to consider that the only in the context of the entire market structure in terms of exchange and what they are paying. how do we look at the national offer because often what's used to measure price improvement
4:20 am
swords are measuring stick or rod to look at. >> my time is short. in a challenging global economy, the strength of our capitol market is vital for long-term economic growth get regulatory burden and redtape prevents small business from thriving american innovation. the advances seen over the past decade in technology have improved the way americans and businesses informed financial activity due to these investments, we see more investors have historically been left out active in the market. we should not stand in their way. i held back. >> the gentleman from new york, ms. alexandria cortez is recognized for five thank you, madam chair for hosting the hearing and thank you for joining us today.
4:21 am
i want to take a few minutes to discuss buybacks. during the pandemic, i and many others on this committee introduced pieces of legislation either banning practice of stock buyback or regulating cap a wide spectrum in one of the issues banning the practice for any corporation receiving public assistance, getting bailed out and mandating workers in equity state or public granted any of those public ways. i want to dig into this a little bit. for folks at home, he set this up buyback practice of a company using profit or margin to
4:22 am
purchase shares of its own stock as opposed to whether investing raising wages, research and development etc. >> if i could brought up that, i think the comedies that use dividends stock buybacks have made decisions to send money out of the company's to their shareholders or buyback shares rather than investing. i think it's usually a two-step process, one is whether to invest in innovation and so forth or send it out and usually a second decision for diffidence or share buyback. >> thank you so much. we saw during the pandemic was same corporations as spends about $6.3 trillion on stock buybacks between 2010 and 2019 also denied workers hazard pay,
4:23 am
personal protective equipment claiming it was too expensive. production of medical equipment necessary during the pandemic was also delayed due to many years of under assessment in research and development in these companies using it to purchase a great stock buyback makes no contribution to productive capabilities of the firm. >> again, stock buybacks are awake management and boards send money out of the company to shareholders so there is some trade-off between that and what they are investing but our goal is to bring transparency to these considerations.
4:24 am
those of you in congress, whether to change the rules but we trust bring transparency and ensure there's not brought or buybacks in circumstances where a company has better information. >> president reagan's role henke 18 cap limits buybacks on history volume of the amount a large company spent on buyback on a daily basis is often in the hundreds of millions of dollars. this allows a company entry safe harbor. do they actively monitor for the these productivities remain within a safe harbor? >> we try to use resources across the agency to ensure compliance the laws. i've asked in terms of buybacks,
4:25 am
about the disclosures -- >> i apologize but does that mean is that a no resource issue? they do not actively monitor? >> we pursue -- i want to say more nuanced than that. use enforcement examination corporate finance staff to look at what we spend but there are 7000 public companies in the u.s. >> what they consider rescinding issuing new guidance that clearly states corporations may be held liable for stock buybacks for potential market manipulation? >> it's clear right now in a position could be held accountable.
4:26 am
what i've asked the staff to do is more probably because we have no authority to get more transparency in this area as well. >> thank you very much. >> thank you, the judgment from south carolina is now recognized for five minutes. >> thank you for taking your time to be with us today. in may, securities and exchange commission small business capitol formation advisory committee made two specific recommendations to use not simply to semitic capitol for small businesses make it easier for women and minority and raise capitol for entrepreneurial. the advisory committee note institutional investors are known for making investment decisions to replicate patterns for successful entrepreneur in the past. unfortunately, this box out
4:27 am
minorities were traditionally successful. the advisory committee increasing amounts of capitol contributions pretend millions of dollars and creasing allowable numbers of investors 250 to 600 prequalifying capitol funds. i introduced approving allocations for newcomers in 2021 and what has he struck relations, we know capitol is the lifeblood of office especially so personal physicist. would you support codifying fees for accommodations and increase number of investors from 250 to 600 for qualified capitol funds? >> i want to look at your legislation try to work with you
4:28 am
on it. as a balancing act in august how we ensure investors have appropriate disclosure for the cap venture capitol funds or otherwise so it's important investors get back but i look forward to working with you in looking at your legislation more specifically. >> i look forward to working with you and we will get you a copy after the hearing. i want to amend my time responding to comments made in opening statements today regarding the debt load. she says we are insisting on that default and we are applying dangerous game of chicken. two things are out here, no one wants to if there is a game of chicken going on, it takes two to tango. yesterday president biden set republicans raise the debt limit for him was hypocritical, dangerous and got me,
4:29 am
disgraceful. the height of hypocrisy, then senator biden voted against raising the debt ceiling times during george w. bush ministration 2003 and 2004 and 20063 separate times. republican's traditional raising the debt ceiling has been there for months now. feelings of dollars on tax spending bring in a partisan manner than they should have to raise in a partisan manner as well rejected these partners president barney was sworn in. this is not how that works. congress raised the debt ceiling to recognition and it can do it again. this past week laid out the process for doing so. republicans will not be complicit in the democrats discretion part socialism in america.
4:30 am
they control both houses of congress and executive branch. they will only default if it happened but i don't think it will. i do believe democrat will come to their senses and use reconciliation to get this. the only reason democrat have a path of reconciliation is because they know it will be tough infusing reconciliation my the exact dollar amount instead of simply suspending a period of time. no one wants to be on the record by $7 trillion in democrat friends are going on the spending spree and that's exactly what they will have to do. i hope my friends figure out exactly how much money they will spend on this soon because i hate for them to not raise the debt limit high enough to find themselves in the same position when the bill comes. with that, i yield back.
4:31 am
>> thank you very much. the judgment from illinois is now recognized for five minutes. >> thank you, madam chair and afternoon, thank you for joining us. represent a working class district in chicago, many of my neighbors lost jobs during the covid pandemic they lost their business but so far we've avoided a financial crisis, that wasn't luck. that comes from robust protections congress put on the baking system frank active intervention regulators. people in my neighborhood worry about losing their homes from of the stock market and crypto currency market are going up and down and you can see the instability. with respect to billions, they
4:32 am
are bigger than that and make up a tremendous part of the market currency and the same investors who buy crypto currency are in the stock market and affects our whole economy. we know the risks are there but it's up to us to protect our market because my constituents can't afford another financial crisis. are you worried they might pose a systemic risk to our economy and is it something they are looking into? >> thank you, i think the financial the body, my colleague and good friend secretary yellen, we are looking at stable rates right now. in terms of a number of manners, you ask financial stability, we are also looking at how it
4:33 am
relates to guarding against illicit activity and investor protection and there are issues in all three, not just financials devoted. $125 million in coins right now. there are four or five big ones and for coins are intertwined and crypto trading they are only about six or 7% of the market value and represents probably three quarters or 80% of transactions and crypto and that's why a poker chip at the gaming tables are used to violent other crypto currencies. it's roughly tenfold in the last 15 months so you can see where could start to undermine things that continue to grow and undermine traditional banking
4:34 am
payment systems if it's not brought inside banking and undermines some of that which we do invest protection. >> as we have seen in el salvador, the president announcement to make big.national currency, given the volatility we've seen in bitcoin, it seems a risky move. the announcement, did you think speculation and regulatory arbitrage are important drivers in the price of bitcoin? >> well, big.bitcoin in the
4:35 am
middle of the economic crisis in 2008 is a highly respected asset but it's a store value people wish to invest in as people would invest in gold but i think you are right that it used not just bitcoin but other crypto currencies to try to as you said, arbitrage between regulatory regimes. stable client and crypto currency became intertwined frankly to avoid another digital type of money and it's called the u.s. dollar. it's a digital form of money. we already have digital money. at store value, yes.
4:36 am
they raise money and are investment digital investment contracts on the circumstances. >> thank you and i yield back to my thank you very much. the gentleman from new jersey. his you are now recognized for five minutes. >> thank you for being here tonight. we heard several specify how the fat was not taking the currency even as they continue to examine potential digital central-bank digital currency.
4:37 am
the u.s. financial system particularly digital payments and what you feel should be the sec's role in this process? >> it's good to see you again, thank you. even poker chips in regulated environments a good thing. poker chips at a casino to serve a purpose provide greater transparency at the gaming table and even lower security risks of the money being stolen at the casino so i want to caution how it's economically being used. working with colleagues across the working group, we are coming up with recommendations but i do think to the extent stable coin is directly tied type of digital
4:38 am
payment system if that's all it is then we can put up banking around it. at the other end of the term might be investing in security and characteristics like like money market and others repacked challenges money markets are larger about instability and money market when there is stress on money market. last, used inside trading platforms and blending platforms, it's been used in part two of her around tax compliance in this activity.
4:39 am
>> thank you, specifically because of the financial industry including businesses in my district. in march this year, you stated the banking committee if not previously studied proposals from imposing financial transaction. i'd like to ask you have follow-ups statements and if you have thoughts have transaction hikes might negatively impact broader u.s. economy. >> i have not had occasion to study more. you're probably aware, we are an agency of about $2 billion a year funded by securities and transaction pieces at that level to fund the agency, i think it's worked smoothly in the market but i haven't studied anything,
4:40 am
debates have been larger than that. >> i'd be eager to hear back from you when you spent some time and it's always good to see you, thank you for your leadership. >> thank you, i hope your family is staying well in these times. >> you, too. thank you and i yield back. >> thank you, very much. have a gentleman from michigan is now recognized for five minutes. >> i'm sorry i have to be in the car like this. thank you for the support hearing, i've been passionate about accountability and i'm a large alarmed about the comments regarding reserve officials making transactions during the pandemic but i believe violated
4:41 am
the fed's guidelines and may have violated the law. as you know february 2020, vice chair. 1 million to 5 million out of bond funds to stock funds. the next day as you may know, jeff powell issued a statement on the pandemic that was a wide-ranging central-bank rescue to ultimately push prices. so we learned president of dollars made major transactions involving security market supported by the fed during public. the guidelines set officials should avoid even an appearance of conflict, the interest of the system and public interest so they don't have the appearance of conflict and they are
4:42 am
conflict of interest so are you aware of these is the sec's looking into potential inside trading? >> if i could speak to this in the generic because it wouldn't be appropriate to speak about any individual circumstance but we have one you put in place in congress that we would pursue what's known as trading not public information for the people are at a company or within other agencies we have in the past and will continue in the future and helps protect the integrity of the market. >> do you mean -- need an official letter from me or something? what you need from me or others? i know senator warren has had
4:43 am
some concerns because the american people are angry, they are in a position of public trust and using that position for their own personal interests or tell me what i need to do so i can get a yes answer? >> let me be precise, we as an agency look into things brought to our attention on many matters but we are not allowed in this setting to talk about, to say we are investigating or not but i want to say generally speaking whether somebody in the government or outside of the government that's what our laws are about and we pursue those and we pursued them in the past
4:44 am
when the administrative or official sectors as well even occasionally state and local actors in that sector. >> so would prohibiting government officials like members of congress and the president and members of the board of governors are trading from holding training individual conflict of interest trading? >> as a policy matter, members of congress enact eight or ten years ago if i remember but more broadly, it could instill greater confidence. we are going to do what we do and do it well in regard to upholding our laws. there is transparency authorities put in place that those of us have to file.
4:45 am
>> file to find out there was conflict are obviously -- i want transparency, i'm always about complying with that but what happens "afterwards", we don't find out they were held accountable and it continues in the process to work people don't trust us anymore. the chairwoman dose how passionate i am about this but i don't think we should allow public officials trading stocks. if you're put in this position, it's a sacrifice that has to be made because it's about public trust so i appreciate -- i appreciate you coming before the committee but i do hope you go back to your team and let them know this member from michigan is concerned in the hopes that you are investigating this.
4:46 am
>> thank you very much. the gentleman from texas, ms. garcia is also vice chair of the subcommittee on diversity and inclusion now recognized for five minutes thank you for being here with us today. thank you for your patience and perseverance with us today. i appreciate the work you've done so far she in leaving the institute back in this direction. the issues presented are far ranging and while this discussion is involving generally and discussion today, i want to get insight from you and your colleagues are framing this discussion. the stable coin market is worth 127 billion. compare this 2017th --
4:47 am
2019th with a stable coin market group 10.25 billion so it's skyrocketed as you noted in the last couple of years. despite intricacies he of stable coins, is imperative we recognize systemic advocates of this to the market. your letter to senator elizabeth warren you stated in my view, the legislative priority should be on crypto training from lending and platforms, regulators to benefit from disciplinary authority for guardrails, crypto training and fleming. could you discuss a couple of examples of measures you have in mind to protect the financial authority of our market as it pertains to stable coin? >> as it pertains to stable coin, they have provided an
4:48 am
alternative way trade on these trading platforms and they are intertwined inside crypto trading around the globe. initially it was about eight unk accounts at various banks around the globe, i think they revolved the epicenter of trading and lending platforms to work with congress around please. it might just be something digital around the digital dollar. we already have a digital dollar, it would be misleading to say we don't. it's something an additional
4:49 am
digital wrapper around the digital dollar, what is a provide and how do we protect it? any money laundering and financial stability. at the other end, it looks like money market funds and how do we protect the public for investor protection? your our arrangement even if they are over one and protect the public in terms of these financial stability and i do think the lending platforms, crypto trading platforms where there's five or 6000 cover crypto currencies, non- stable coins so to speak are highly palatable, usually investment vehicles, we need to get around that. >> i want to shift gears.
4:50 am
this committee has been advocating for the creation of office of minority and women inclusion across all regulators. as easy as almost 1500 of the entities recommended to complete voluntary diversity assessments, only 5% responded with a request. what are you doing to increase it is a patient? have you considered making implements yearly and mandatory for using greater participation? >> i do think we can do better than 5% but we have to encourage and make it easier to participate separate from that.
4:51 am
that is important but we are also looking at investor demand and more about workforces of american companies including companies listed here and those disclosures i've asked staff to consider disclosure of forms shared with department of labor diversity disclosure. >> would you consider regular yearly rather than other years? >> i like that, can i get back with you? >> you froze there for a minute, i didn't get his response. >> you are way over time.
4:52 am
would you these follow-up? >> yes, i yield back. i apologize. >> mr. taylor is now recognized for five minutes. >> thank you. i can see you and the texas flag. >> thank you, chairman. i appreciate his hearing. i want to talk about crypto but i think that's been very well covid by my colleagues so i'll skip ahead. he talked with the u.s. fai in the markets, did i hear you're using an exchange presently? >> we have a good analytics group but i always say machine learning is limited compared to capitol markets which are using them increasingly to even follow a hearing like this.
4:53 am
everything we are saying would be a% of an analysis depending on how you are i speak could be sent into computers and see whether markets move up or down but we have very limited, i hope to do better in the future. >> are you using a.i. machine learning in your anti- training efforts. >> where using data analytics which i would rather not discuss in public today but i would say we are behind capitol market participants, high-frequency trading, fake asset managers vesicular data analytics like machine learning. >> the reason i ask, i was in new york yesterday,
4:54 am
unfortunately back in texas today but meeting with bloomberg, they had an incredible data analytics and fair during the as a market service to sell their service and they have 150 people working around the clock trying to value and they are tweaking a machine, the a.i. figure out what the proper value is and it seems there are some applications for a.i. within the federal government. have you given thought expand your operation and whether it stopwatch. >> i think there are multiple places and i am sort of a
4:55 am
finance and markets person but i have this opportunity for a few years, i think we could use it not only in market surveillance which is what you're talking about, there's a lot of stuff throughout the examination and enforcement were we can look at data and patterns what machine learning and artificial intelligence is that is extracting patterns and finding the patterns in market surveillance or other examinations in many market participants are using it to maximize their returns. have a second think we are looking at how firms are using it to engage the public and are they optimizing revenue based upon the data or whether my
4:56 am
social media work elsewhere, if they optimize their revenue if they optimize for engagement, that can be positive but can also raise conflict maximizing for their revenues rather than public investment returns. >> i look forward to working with areas to modernize as easy a.i. artificial intelligence machine learning to find better ways to do your job whether it training, finding irregularities in the market and that's an important opportunity as you have said through his hearing enjoy the greatest capitol markets in the world having a sophisticated sec prepared to do its job and make sure they have advanced tools to do that, that only makes sense so with that,
4:57 am
i. >> thank you very much the participant for massachusetts also fights chair the full committee, you are now recognized for five minutes. >> thank you, i appreciate your thoughtful answers today almost done. you've been very clear in your verbal testimony that you want to bring crypto into the case of bargain as you describe it where investors think our own decisions how much risk we take on companies have to report useful information. you want to bring crypto into that bargain and fear most of these major crypto players have a least some elements of security should operate on that and you would like each crypto
4:58 am
actor speak with the sec on a one-on-one basis and get feedback from you on what regulations think that. everything you've outlined sounds like a reasonable way to approach this industry. i think we are reaching a tip where we need more stable broad-based law does not require a phone call with the sec but shut up with their counsel in this perspective so we need congress to act my question to you first, what's the most helpful for congress to create a new class of security has a separate regulatory apparatus for congress to divide crypto between the sec?
4:59 am
>> i think the laws are pretty clear with regard to these entrepreneurs and their lawyers and they don't even have to squint. they can look, the supreme court has said investment contract. between the sec, we have good been talking about how to coordinate better. there is a need to set something new up but i do think that if something is security, people raise, can we follow everything written for traditional bonds and stocks? want to hear that and think about that. i would note congress carves this out, it undermines economic
5:00 am
success and 7000 plus issuers now. his regulatory arbitrage, somebody raising money in the capitol market operating like security but they have a different regime. >> i will come back to you because i haven't heard or asked about what congress to do to make your job easier, i think you and i are in agreement with this crypto. i agree with a new regulatory, i believe a lot of the law settled counselors would examine it they have investors that deserve the how can we help you? let me say to everyone all one
5:01 am
regards to stable.all the way over at this end that are just investing in cash, not operating money market fund. i know and i let them speak for themselves, there is more we can do with congress and even the ones all the way over on money funds have to take into consideration. i think in terms of working cftc sec from we have robust authority over exchange, somebody trading securities on their platform. they are derivatives regulator but they have enforcement authorities over commodities so what happens when we have a platform that has a few commodities but mostly security
5:02 am
and coordination between the two of us and oversight? also authorities in that regard. i would say secondary and third level issues as well. >> i appreciate that and before i run out of time we've heard colleagues on the republican side of the aisle talking about this and a debate about climate change, i would just say for the record as a debate about evolution by natural selection, you can debate up at the science is clear. making it more transparent should be continued. i'd like to get back my time request unanimous consent under the letter for investment association international association of personal finance. >> without objection, so ordered. thank you.
5:03 am
are there any members on the platform who were not recognized because of their absent early on and they have returns now? if not, i would like to thank our distinguished witness testimony today. without objection, enters from the security administrators association, the council of institutional investors california public retirement system and will all be included in the record. ...
5:04 am

23 Views

info Stream Only

Uploaded by TV Archive on