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tv   SEC Chair Testifies on Regulating Financial Markets  CSPAN  November 3, 2021 7:37am-9:31am EDT

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>> 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
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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 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
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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. 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
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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 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
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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. 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
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vantage point, what will be the effect on america's investing public and small businesses if republicans' insistence on a government default succeeds. .. >>
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and implementing your regulatory agenda. it doesn't seem to be our
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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. 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
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. >> 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 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,
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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. 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
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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, 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.
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>> 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 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.
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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 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
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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 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
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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. 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
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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 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
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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. 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
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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 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
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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 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
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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 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
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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 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
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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 . 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.
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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 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.
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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 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
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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 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
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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 ? >> 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
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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 . 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
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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 ? >> 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
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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. 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
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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 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.
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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 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
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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 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
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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 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
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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 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?
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>> 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 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
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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 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.
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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 . 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
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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 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
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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 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
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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 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.
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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 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
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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. 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.
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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 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
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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. 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
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? 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 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,
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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. >> 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
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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 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
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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. >> 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
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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 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.
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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 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
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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 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.
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>> 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 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
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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 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
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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 . 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
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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 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
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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 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
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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. 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
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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 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 .
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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 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
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answer is in fact the higher taxes put your ability. [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
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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 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 .
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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 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 .
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>> 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 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
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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 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
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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. 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. >> ..
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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 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
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investment, our stock market that must be held away from this so what can we do to put strong measures and to stop this 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
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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 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.
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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 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
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appropriate how they are treated in regulators significant notice and,. >> three parts depression, in regard to climate risk and other matters on crypto disclosure 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
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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 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
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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? >> 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
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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 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.
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>> 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. >> thank you very much. mr. kuyper, housing, community development insurance you have five minutes. mr. cleaver? mr. cleaver is not the platform. next test. test. test. test. test. test. test. test. test. test. test. test. test. test. test. test. test. test. test. test. test. test. test. test. test.
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test. test. test. test. test. test. test. chair. this is very good. the committee has had three hearings on game stock. he testifies on this around 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?
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how would you ensure exchanges made for those in participation? >> i think you raise an important point. the project work on try to drive 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.
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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. >> 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?
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>> 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 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
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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. 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
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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. >> 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
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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 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
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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 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
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can move the parts this is why the format is here, we can't get questions answered. how is it how does the successor make decisions without the sec chair looking over their shoulder? >> that's what congress put in place. all the standard rules are reviewed by the sec. that's what this statute says, that we're supposed to do that. >> that's the structure, okay. as long as we have that established, that is understood. here is what i would like to know. if the commission has the review of the sec, can you confirm that your office or the office of the chief accountant has reviewed press releases or other
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materials before those materials have been made public? >> i would be glad to chat with your staff to understand the question better. their role came up to us. we put it out to notice and comment. we will vote on that in a month or month and a halftime. >> have you required pcaob to run things through your office? >> again, as it relates to rule making and standards, there's a process that goes forward. >> this is why it's important for us -- materials that has been requested has been ignored. i would like to call on the chair to join with that so we can get this information. we will follow up on that. along those lines, i have dropped a bill today that is
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called streamline public company accounting oversight act. it will get rid of the pcaob, fold it into the sec. i don't expect your reaction right now. that might get at what you are talking about. we can be honest with everybody that it's a political appointment and political organization. facebook quickly. is facebook a utility? to be treated as a utility. >> i think you are talking about a social media company and all social media companies are private companies. that would be up to congress to address. >> definition of what a public utility is, it clearly -- they are a publically traded company. certain criteria which makes privately held companies -- or publically held companies utilities.
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>> time has expired. the gentleman from illinois, who is also the vice-chair, is now recognized for five minutes. >> thank you, chair waters. you and i have spent a lot of time talking. it's in the news today and in particular the ways social media can drive self-destructive behaviors. if you make the algorithm safer, people will spend less time on it. the incentives created by ad revenue by facebook are similar
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to robin hood when they earn not just a spread fee. i'm hoping you could confirm those issues, the conflict between looking out for investors' best interests and the ways that those companies earn money, that that will be a subject of your investigation. if you can confirm that, then i can go on to the next. if not, i would love to hear why not. >> i think it's central. it's the issue of our day that digital analytics are being used to not only optimize for our return but may be used to optimize for the company, the platform's revenues. if they're being done that way, then that creates a conflict. it might create a more fun environment for us, but that's okay. it's creating more revenue.
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what is that conflict there? how do we protect investors? >> i'm delighted to hear that. we can follow-up offline. i want to shift the climate. some seem to think the question is whether disclosure might increase the compliance cost for small mom and pop businesses. i would suggest that's not in the top 100 issues that are caused by climate. putting that aside, the bill that i introduced that we passed on the house floor is similar to what you are doing on climate risk disclosure, was driven by three issues. there's investor demand. almost a third is under management ideas. let's give investors what they want as long as we are espousing the supporting interest of the investor. investor protection, i would echo that as long as a company can stand up and say i will be net zero by 2035 and their auditor has no way of knowing
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what that means, that we have a gap. i'm delighted to see you starting to put boundaries around what those are. the third one is one -- i'm not sure this is subject to your jurisdiction. it's a question of financial market stability. if we don't have data from the effected firms, then we don't know where the risks are, where the cash flows are going to happen from. we are looking at huge cash flows. it's more directed at treasury, to figure out how to calculate that and put it around the financial risk. one of the pieces, as we have dug into this, i haven't been able to get a good answer, picking out where the monetary flows are going to be is an easy question. figuring out the capital
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structure is really hard. if i know a certain company is going to be a huge loss of value but i don't flow how much of their capital structure is tied to equity, debt and trying to figure out where that fits, because for public companies sometimes the precise rules of the credit agreements are not always disclosed, so my question is, in your work on climate disclosure, are you going to be considering requiring companies to provide details of their capital structure in addition to their contribution of exposure to climate change? is that better asked to other financial agencies? >> it might be good to follow up and chat offline after the hearing. our focus is what do investors demand and want to make their investment decisions. for public companies, it's around that and the climate risk qualitative and quantitative disclosures. i would like to better
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understand about the capital structure, because companies -- public companies expose a lot about capital structure. it sounds like you have thoughts that -- how should i say, it's falling short. i would like to understand where that's falling short with investors as our clients are the investors. >> i apologize. i'm out of time. let's follow up. i would like to request consent to include into the record the following letter supporting many of the graphs. >> without objection. >> thank you. i yield back. >> the gentleman from kentucky is now recognized for five minutes.
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is mr. barr on the platform? if not, let's go on to the next person. next we will get mr. williams. the gentleman from texas mr. williams is now recognized for five minutminutes. >> thank you. i want to -- in full disclosure, i didn't go to wharton. but i'm a business guy. maybe that will help your thought process. in any industry allowing the private sector to innovate is key to bringing new products and services to the marketplace. this has been true in the capital market space where the advent of zero cost trading. this has allowed a generation of investors to enter the marketplace for the first time and made zero commission trading the new industry standard.
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despite the benefits, the sec is contemplating a complete ban on this practice and expanding the definition to include rebates being offered by exchanges. this seems like a drastic measure that is a response to misdiagnosing the entire saga that happened earlier this year. good to see you again. as you look at making changes to this practice, i urge you to consider the benefits that this has given all retail investors. my question is, can you describe the overall growth trends of retail investors since the advance of zero commission
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train training? >> i thank you for that. retail investing has increased probably for multiple reasons. zero commission and just even the facility, the ability to trade on a mobile phone with ease has facilitated it as well, regardless of the price. there are a number of brokers that offer zero commission and do not do payment forward. these rebates on platforms, stock exchanges and the like, is this the best to promote competition and efficiency? is it the best to promote fast execution? you mentioned price improvement. price improvement is measured against an old measuring stick, the old measuring stick is called national best offer doesn't include what's in the dark market, what's being
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internalized. it doesn't include everything on the new york stock exchange or nasdaq. how can we look at this and look at that for investors and companies raising money both to be more competitive, transparent and efficient. >> we have seen a troubling trend of calling on financial regulators to enact their agenda. we have seen lawmakers urge the banking regulators to force entities to de-bank legal industries that have fallen out of their political phase such as oil and gas or the gun industry. we are now seeing similar calls coming to your agency, which is in charge of the reviewing and disclosing over 7,000 publically traded companies and $100 trillion traded within our capital markets to expand your footprint. by calling on more stringent
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regime, we are trying to turn the many financial experts at the sec into environmental science that will force companies to adhere to a moving target of climate change goals coming from whichever party controls the white house. how will you ensure that investors are not going to be harmed because activists pushing their agenda into a space where they don't care about any individual security? >> i will say how i will be motivated. it's about investors. it's what congress asked us to do. disclosure, full and fair disclosure, is what congress has asked us to do. what we have now in the 2020s is
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increasing, large numbers of investors want information. we can play a role at the sec to bring consistency, comparing, make sure they are decision useful as earlier discussions today were, make sure folks aren't just -- saying they are green and they're not. i think it could help companies and investors. it's staying within what congress asked us to do. >> thank you for your testimony. i yield my time back. >> thank you. the gentleman from connecticut, the chair of the subcommittee on national security, international development and monetary policy, is now recognized for five minutes. >> thank you, madam chair. i have a question for the chairman. i want to take a second -- i'm not a witness. i could use more blunt language.
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my friends across the aisle are obsessed with payment for order flow. when a broker uses payment for order flow, you do see price improvement. you see price improvement of a really lousy price, a terrible price. it's a truism in our capitol market that businesses get better pricing -- across the board on everything than retail players. they are designed to make profit out of that gap between the priing that retail investors get and what institutional investors get. rather than seeing my friends stand up for the preservation of a misleading concept, like price
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improvement, to get into why they get better pricing than individuals do. what i want to do with my remaining minutes, i know -- i'm going to ask you to step outside of your comfort zone because you are more nnlable than almost all of us. i want to turn over my retrain ing -- to give us guidance on the topic. congress is demonstrating its ability to do very little these days. i will ask you to take my time to give us some guidance on how we should prioritize the legislation that we propose
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between exchanges, between the work of defining who should regulate what type of cryptocurrency. >> i thank you. i think that what we have here is a number of innovations. why i'm focused on the trading platforms and lending platforms is because investors basically are taking ownership. they transfer a private key to the platform, most of them. and the platforms take custody. those platforms then either trade on our behalf or lend to us. i think such a tremendous amount
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of activity happens there. it's a place we could get better investor and customer protection. even in the decentralized platforms, there's a centralized protocol. though they don't take custody in the same way, i think those are the places that we can get the maximum amount of public policy. whether it's for any money laundering, whether it's tax compliance, whether it's for investor protection, which we so care about at the sec. i do think the platforms would like to say, not us. we are regulated by 49 states under money laundering. i think regulating these platforms like we regulate moneygram, that should shine a spotlight. because that doesn't make much sense if we talk about financial stability and we are talking about investor protection. >> regulating is not a foreign
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concept to us. we have a few closely analogies. do we need to draft a new structure? do we use current regulations as our basis? >> it will be for congress to decide. some were quoting my testimony of prior years. we have two great market regulators. i'm honored to chair each of them. we have different authorities, commodity, securities. we don't need another regulator. there's things that could be done to ensure that the smoothness between the two agencies -- we have been talking about that even if congress doesn't act. >> thank you very much.
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the gentleman from kentucky recognized for five minutes. >> thank you. i appreciate your comments earlier in the hearing that you wanted to make sure we were funding the securities and exchange commission because they were the cop on the beat. i want to note for the record that the chairwoman is for funding the police. just appreciate that. mr. chairman, thank you for appearing before us. i appreciate our conversations about the importance of material materialalty with respect to climate risk exposure. you requested a request for information on climate risk disclosure, a common theme among respond ends to that rfi with the importance of maintaining this threshold. i agree with these suggestions. materiality must be preserved. i want to point out that
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materiality is determined by investors' needs. [ inaudible ] it's not in order to satisfy the leadership of some large institutional investors who are not necessarily aligned with retail investors in terms of their demands to name and shame companies or buy up against politically unfavored industries. that's the difference. how do you plan to ensure the sec climate disclosure rule maintains the threshold of materiality and does not burden investors. >> it's a bad investor demand.
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>> how well do you think they represent the rest the us? how well do you think the proxy process reflects the demands and wishes and desires of those retail investors? >> our job is to make sure that it represents through duty of care, duty of loyalty, the 1940 law passed that are really important that investment managers are representing the public. >> the reason why i ask is because as we discussed, as i talked to the investment advisors, it's a very low
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priority of most retail investors. they care about returns. what troubles me -- i want to ask if you agree with this. many of the funds have fees that are 43% higher than non-esg funds and cut into the retail investment returns. does that trouble you? >> i have asked staff to make sure that fund managers that are claiming to be green or sustainable or climate -- what stands behind that? we will put that out to public comment. a second thing is, how do we promote greater competition to bring down some of the fees in the fund management space? i think that being clear on the naming and what stands behind those names can help in the competition on the fees themselves.
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>> as you move forward, i just want to stress the importance of this materiality standard and what it is. to rely on the comments that come in i think and just ignoring what the legal definition of materiality is would miss the mark. materiality is about investors' needs, the needs of the information to make informed capital allocation decisions. it's not just large institutional investors' desire to name and shame politically incorrect companies. i encourage the commission to lock at materiality from the traditional, conventional, legal standard of what materiality means. in terms of liability protection, i do worry about the subjectivity of this, the concept of climate risk disclosure relying on subjective and untested metrics. do you have plans to provide liability protection for issuers? what are your plans to ensure these are preserved exclusively
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for investors and making the ris sh/reward decisions are not hijacked for frivolous lawsuits? >> they are based upon, as you say, what do investors want, what do they take into consideration? that decision is important. that's why we put it it out and investors weigh in. >> thank you. the gentle woman from new york. >> thank you. >> i had to chair a government oversight committee. i just got off of it.
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i want to ask you about cryptocurrency. you called it a highly speculative asset class. it's a speculative investment. you think it should be treated like a security? >> good to see you again. i think it's based on the facts and circumstances. many of the projects -- there's five or 6,000 of them, many are saying to the investing public, give us your money and we have a small group of entrepreneurs and computer scientists that are going to build something. based upon that, there's a hope, anticipation of reward or profit in the future. my predecessor said it in congressional testimony that most of these or many of these fit that definition. >> you think it should be regulated like a security?
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>> i have asked them to talk to us. i can't say it all fits together well in our transfer agent rules. some of the intricate underpinnings of our capital market. people are raising money from the public. >> do you believe the sec has all the authority that it needs to regulate the cryptocurrency? do you need more authority to be able to regulate the cryptocurrency? >> i thank you. i think that our statutes are clear and congress painted with a broad brush what is a security. working with congress, there are
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gaps. there are places we can work, whether it's our relationship with our agencies in the market regulatory space but also what's known as stable value coins and how to think through that with the regulatory regime as well. >> i would be happy to work with you in this area. can you give the committee an update? >> i think it's important that this role -- it live up to its potential that best interest does mean best interest. working with our examination staff, working with our division of corporate finance, we hired an excellent person who is a
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senior advisor to me, is to ensure the retail public gets the best. i'm asking the staff to consider, how do we ensure that brokers and investment managers understand their duties under that rule and to ensure that they are actually the best interests means best interest. >> this summer the sec they implemented and earlier with the support of the chairwoman and others, we passed a bill that would call upon the sec to disclose diversity on board, both for a vendor and minorities and other information. you could do a lot in that area just on your own.
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it is in the senate. do you intend to do anything in the board diversity area? >> it's probably more than you would like to ear. i asked staff for recommendations in two areas -- >> we will leave this taped program for live coverage. to capitol hill now as fbi and homeland security officials testify before the house intelligence committee on the agency's efforts to counter domestic terrorism. this is live coverage on c-span3.

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