tv Michael Piwowar Remarks on Businesses Regulation and the Economy CSPAN July 18, 2017 12:06am-1:26am EDT
>> i think the point to emphasize is over the course of the presidency there were scores of people in illinois who are deeply disappointed in the trajectory of the presidency and disappointed in two ways. number one, disappointed that he forgot many of the people, most of the people that were essential to his political rise. a conversational business regulations and the economy with the extra securities exchange commission. the commissioner took questions at this event hosted by the heritage foundation.
>> good afternoon. welcome to the heritage foundation and the louis lehrman auditorium. welcome to those that join us on the website on all of these occasions and for those here in the house we would ask a courtesy check to see that the various mobile devices have been silenced or turned off and for those watching online you're welcome to send comments anytime by e-mailing the speaker. leading the conversation this afternoon is david perkins senior fellow for economic policy at the institute for economic freedom. before joining heritage he served as the general counsel witgeneral counselwith the natis
association and seven chief financial officer and general counsel of the alliance for retirement prosperity and was a part or at the growth of public policy and government relations. please join me in welcoming david. [applause] >> thank you for coming. it's my pleasure to introduce to you the commissioner michael buehler. he was appointed to the securities and exchange commission by president obama and was sworn in in august of 2013. he was designated by president trump to be the acting chairman of the commission and served in that capacity from january 23 of this year to may 4. his term expires in june of 2018. previously, he was the chief economist for the senate banking committee and was an economist with the council of economic advisers in the consulting group. he works at the sec an fcc and e office of economic analysis which is now their edition of
economics and risk analysis as an academic scholar on leave from iowa state university. he was a professor of finance at iowa state university and he earned a ba in the foreign service politics from penn state and georgetown and phd from penn state. today we are not going to have a set of presentation but we are going to have a question and answer format. i'm going to ask the commissioner questions to get the conversation rolling and then we will open up to the audience questions and answers so that you all can participate in the discussion. we have a new chairman of the securities exchange commission. what do you like to work with and what do you think will be the priority's of the securities
exchange commission? >> thank you david and heritage for hosting this event. i look forward to questions from the folks in the audience and anyone that's ever seen the commissioner speak you know what is coming next. the views i express my own do not necessarily reflect those of my fellow commissioners and that said, it is often working with the new chairman. thinking back to before the election, the way the commission was headed, we were a commission headed by the chair that cares about enforcement first and the march 2. we have a new chair man that has come in and was chosen by the president to have an agenda that remembers that we have a threefold mission that is not only to protect investors and maintain fair and efficient markets but also protect capital formation and if you saw the press release when the president announced the intent to nominate for the incoming chairman and the speech last week to see the
capital formation part of the mission is a broad theme that we are going to continue to work on. >> are you while taking steps to think through your regulatory and also do you have any legislative agenda? >> some of the things we would like to do, he and i and the other commissioner are working together to try to find a formation agenda. there's a lot we can do that doesn't require legislation and it's one example of something we've already done. the division of finance on behalf of the division announced i think it was about a week or so ago that we are going to extend the release for companies on a confidential basis so companies can file on a nonpublic basis so people don't
know they started the filing process. it was something the jobs act added a free emerging growth companies and we announced we are extending that for any company regardless of size and including the insurers don't want to list the united states. the one piece o of that people haven't focused on is that not only extends the confidential filing for an initial public offerings but also follow-up offerings that occur in the first year. i was just announced i believe about a week and a half ago. we already have companies that have decided to take advantage of that. we have companies that are filing on a confidential basis and also even have a company that's filed for a confidential filing for a follow-up offerings we are already seeing some of the things in that space. there are a number of issues we are looking at. i don't want to front from the chair man in terms of these issues. but what's important to note is
the action last week showed that not only are there things we can do at the commission that don't require legislation, the action last week didn't even require the commission voted the number of things that can be done at the staff levels and so i'm excited we have the new corporation finance division director as someone who can direct the staff to actually start moving on some of those items that don't even require a commission vote. so we are under discussion to see what we can do at the staff level and commission level and then certainly what requires registration. >> the regulation is now the largest single means of rising capital in the country accounting for about $1.3 trillion annually. are there things that can be done to improve the regulation? >> s. first of all and foremost, we need to tell the public that we are not going to move forward on some proposed amendments that
the commission did in 2013. so, when the commission listed the prohibition on the general solicitation in 2013 prio and 2o me joining the commission at the same time, they proposed additional amendments that would have some enforcement folks are things that are like the registration process and that's giving people some pause in terms of whether or not it is ts going to go find or not, whether some people think it is finals week at a public statement that says we are not going to move forward on these amendments and give people some comfort that they can move forward on the regulation offerings without even putting a timeout. >> or even withdraw. that would require action on that. but there are some things we can do to signal it. i personally have been in venues because telling people i have no interest in moving forward. >> under the regulation of
course accredited investors can invest in private offerings, but there's also a provision with respect to the sophisticated investors because according to their analysis rarely used. one of the reasons is it's never provided much guidance as to what constitutes the purpose of the regulation. it's been increasing talk of providing a bright line test with respect to what constitutes a sophistication for example that we passed the exam or that you have certain private accreditations or pass the test or have a graduate degree in finance or what have you. do you think that there would be some openness to that if the commission or do you think it is best pursued by congress? >> i don't know in terms of i can't speak on behalf of my fellow commissioners that i have
questioned even the premise of having an accredited versus a nonaccredited so the rationale is that the commission and until we change it believe somehow we are protecting investors by prohibiting them from investing in certain high-risk securities. i've been questioning the premise because we know high risk equals expected returns to what we are doing is actually protecting investors from potentially higher expected returns to securities and you only have to look to silicon valley and see all the uniforms that are out there that are attracting large amounts of private capital. i was just in san francisco and the amount of private capital folks are willing to promote the companies is amazing so at least in silicon valley it doesn't seem like there's problems with access to capital but from my perspective from the mom and pop
investors they are not sharing in these returns to the companies and they are taking much longer to go public and in some cases they are not even going public so the average investor is being prohibited from investing in the end some people may encounter that nsa but it's a higher expected return. they are too risky. but as you mentioned as a former finance professor with the teaching portfolio analysis class is the diversification. a lot of these securities will provide the diversification for investors in the existing portfolio and that is something i've been trying to press the fcc and attorney to think about. it's mostly a lawyer driven agency and for historical reasons, we've been thinking about risks in the individual offerings and over disclosure requirements we have. it's about the risk factors and the securities. as the perspectives of the ten k. or some other filing with us. and i've been trying to get people to think more broadly to
say it isn't just restricted thf security and isolation but it's a risk in the portfolio a customer already has and if this is uncorrelated in what they have been busy high-risk security it can actually get a portfolio diversification. >> you've raised a very good point do companies are not going public with a gargling publicly during their life cycle for a lot of games that are limited to the investors that's the top 7% roughly of the american people. this raises the question of what can we do to make it more likely a company will go public? we have approximately half the companies we have 20 years ago. the numbers measured by an actual number of offerings with
dollar amounts are we down even compared to the couple of years ago. but dramatically down compared to where they were 15 years ago. so, what sort of things do you think we can do to make being a public company more attractive? >> those statistics you rattled off a type of statistics when they met with the president elect those are the type of statistics mentioned and those are the things that were so shocking to the president that he wanted a new chairman of the fcc to come in to try to think about regulatory fixes we could do to try to improve upon those numbers. so there were those that say there is nothing the fcc can do because there's other things going on. there's huge returns to scale and it's kind of a win or take all. a lot of tech companies don't want to go public they just want to get bought by google or those type of things. we hear those stories but i
it's to start a small emerging growth companies that would want to go public because most of the financing is occurring in silicon valley, new york and boston. so i think what we need to do is continue to listen to people and various interest groups out there to think about you tell us what we can do. we can try to dream up what we think are important things to do but what is most important is to get out there and hear from people and what are you finding is the impediments to the capital formation. and on that note, i mentioned bill a couple of times already, the new director of the division of corporation finance. he's been telling people he wants to accomplish three things, make the division more efficient, transparent and collaborative. so on the efficiency front, he wants to challenge the stuff to get the review filing process more efficient for quicker filings. wants to be more transparent in
terms of getting out and talking to people. he was just out in silicon valley at the same time i was talking to a group of people about expanding the confidential filings and he wants to be more collaborative. if you think about the last eight years, the relationship between the regulated and the regulators it's been very much confrontational. but the capital formation space, that is one in particular we could benefit from more and more clever patients we will take more meetings with people, we are going to listen to more ideas from as many people that want to give ideas that we can do in terms of the things we are doing and truth be told, they want to be more and more collaborative and what it needed was a change in the tone at the top and that's the way we are going to work at the commission. >> there's been a number of possible culprits identified. one is the disclosure
requirements on the regulation the fcc recently released a study that was required by congress and some of those are also a function particularly of the fully motivated disclosures with respect to the conflict minerals extraction, ceo pay ratios and so on. >> those are my favorites. >> i figured that. >> do you think there is room for meaningful improvement in disclosure regime in the companies at this point? >> those are my favorites because when i was the acting chairman and i tried to start the process for us to make the rules less burdensome should congress not choose to repeal those. i think the first test from my perspective is that congress would help people by getting rid of the special-interest motivated disclosures that have nothing to do with materiality
or giving investors the information they need to make informed investment decisions. the first would be for congress to repeal those which would be fantastic. in the absence of that, there are things we can do to try to make it less burdensome as possible so that's why on the conflict minerals and pay ratio to get feedback from the public in terms of we kept hearing anecdotally from folks that they were particularly burdensome the things we can do to make them less burdensome. we have exempted authority in a number of spaces, potentially providing some sort of scaled disclosure or outright exemptions for the companies, some of the ones where the burden of the fixed cost of compliance fall disproportionately high. >> the fcc estimated that its $4.5 million a year in compliance costs which means if you are a small company, that is
an insurmountable burden it seems to within normal ratio it's like $15 million. >> one of the things that was striking to me, there was a 1 billion-dollar plus valuation and a private company, the entire department is to people. imagine that there were 12 chefs because they're a bunch of millennialist, so it was 6-1. >> it's a good number to look back. >> it was striking imagined a company that size would have an army of people in the legal department. >> another thing that is
constantly referenced as a problem and of course rising growth companies and jobs act, the controls reporting in the plaintiff's fact you see a tremendous number of companies that went private after serving and the decline of the companies really dramatically accelerated at that point. do you see room for improvement perhaps making the emerging growth company permanent instead of a five-year layoff? >> or even revisiting the threshold for which they have to apply with sarbanes-oxley. >> it is clear that sarbanes-oxley did have benefits for investors and public companies, but the cost was a lot more than anybody anticipated and the costs are high costs no matter what size
the company is there's a lot of things they all have to do so those costs are disproportionately on the smaller companies and so i think that it would behoove us to find out where that sort of cost benefit ratio is. for some companies they outweigh the cost and it's okay for them. my preference would be if the private ordering and with the company's sort of figure that out, that sarbanes-oxley has been the law of the land for a long time now. if we can at least exempt smaller companies up to a certain threshold and not prohibit them. if there are certain companies that say we are willing to incur the cost because we think the benefits in terms of the information is out there or in terms of investors being more comfortable on the capital, find and let them do that but i would behoove us to actually increase the threshold to the point we can sort of see where the companies benefit to justify the
cost. >> former commissioner once wrote a law review article called blinded by the light the premise of the article being that the disclosure documents have become so massive that the relevant information is getting lost in roots of pages of legalese into the disclosure documents obfuscate rather than inform. the length is dramatically increased. i've seen some estimates could say that by a factor of two. so do you think it's a fair criticism of reforming regulation that's going to hurt investors or do you think it can be in a way that reduces the burden and improves accessibility of the information?
>> the latter. i couldn't agree more with the former commissioner. if you look at the size now in the perspectives to try to find useful information, it takes forever to find that information. somebody recently gave me the perspectives of wal-mart when they went public in the 1960s. the entire perspective was 28 pages long and one of them was a page that said i was intentionally left blank just to flip the page over. there is a lot of useful information and reports it to it to your point, there's a lot of freedom and information. we have some rulemaking i rule-n process that would help clean up some of that and allow the material information to sort of rise to the top for people to find that information. unfortunately it has become politicized from a number of folks on our left but somehow the less redundant information is going to be getting less real information to shareholders than we've seen in the pay ratio and
there's this useless disclosure that's being thrown and that's not providing good information to shareholders and it's something that we just need to constantly be vigilant about and it's something we can do before we can get rid of some of this stuff. accounting principles change over time come industries change over time and so it is up to us to keep up with all those changes. .. .... .... ....
>> blinded by there light. it is amazing to me how far we sort of come in that that was a 9-0 decision saying he need to hold the line and how we keep getting more and more special interests wanting to turn the fec into a social justice agency for their particular interest rather than having this be an agency which is a mandate and providing investors with material investigation.
there is something called cover securi security. the exchange rates which are the largest company, the exxons and walmarts of the world, but small companies and regulation a are not treated the same and have to comply with the 50 state security laws both in their initial primary offers and in the secondary market except for tier two primary offerings. do you think it makes sense to rationalize that and get to a way where small public companies are not regulated more than the walmarts of the world? >> it is an issue we are looking at. it was of interest and we are
working on it. we have a wonderful relationship with state regulators. they are the cop on the beat and some of the other ones as well too. the intent there is for us to enter into more collaborative relationship with them and think through issues and see if we can find out if the blue skies law need to be preemptive or there is a work around.
>> let's talk about title iii equity under the jobs act. in my judgment, it's been a disappointment. about $10 million was raised in the first six and a half month. that is of course a small fraction of what is raised using other mechanisms. to me it's not a great surprise because title iii really had just about every regulatory burden you could think of of the small companies. which of course limited to track events since it's limited to the smallest companies. what do you think -- do you share my view it's a disappointment or what do you think we can do to improve title iii crowd funding using the internet to raise money from a large number of investors making very small investments? >> i agree with you that not only at the disappointment but
also not a surprise. in fact, when it came time for us to finalize the rulemaking because i dissented and voted no. as you mentioned, there's a lot of prescriptive things in terms of the funding portal and how much could be raised, a lot of that is statutory. unfortunately, the jobs act was working its way through congress, the house passed a sensible crowd funding provision for the jobs act which left a lot of flexibility to set up a regulatory regime. in the jobs act when jobs act regard to the senate, harry reid decided to stick a dreamscape regulatory order, had to go to the floor and allow one amendment on the jobs act now as the crowd funding amendment. the merkley brown amendment was substituted in, which was highly prescriptive and doesn't get very much flexibility at all in terms of allowing for a framework and so that was proving challenging. the reason why he was dissented was not only because it was
prescriptive, but the majority of the commission decided to make it even more difficult. there is a question there in terms of ambiguity, the limits of investing in a net worth test inning contest and it was ambiguous in the provision as to whether somebody had to meet both of those tasks where they could meet either one of those tests. the question whether somebody was retired but at a high net worth and didn't meet the income test, but admit that net worth test could they investing in turn. let's try to get crowd funding off the ground so i would refer to either one of the test. unfortunately, the majority of the commission decided to move forward to meet both of them, basically prohibiting a large number of retirees and diversify the portfolio from investing into crowd funding. having said that, we could go
back and try to change some of the things where we have flexibility, but the first step would be for congress to revisit and the choice act has the crowd funding freedom that where bill and mary that congress can raise pushing forward. show less text 00:29:44 >> it is possible but small. >> the other thing is recognizing not only do we have a federal crowd funding framework, but also each state has its own framework as well, too. most but not all the states have set up a crowd funding framework that allows smaller companies within their state to engage in crowd funding under their state-based framework and not strip the federal crowd funding regulation if they at the time was offer a stellar security within the state. we went back at the sec, one of the things i've pushed forward was making the exemption basically a safe harbor to stay in the state-based crowd funding framework, making that easier by getting rid of the offer language in there.
you can offer your security to anyone, basically make it easier to use the internet. when it comes time to sell security company have to do their due diligence to make sure people live within the state. i hope this by opening up the ability of the states to open and facilitate state-based crowd funding will be getting some data. that's why it's good to have information sharing so we can find out who will have diversity in different states and different frameworks, which ones work and which ones don't and we can use that information and how we want to revisit the crowd funding framework. >> let's switch gears and talk about regulation made. it has become almost a dead letter to the jobs act. in 2011 there is exactly one regulation offering raised more than $5 million. regulation eight plus is that people taken to calling the post
jobs act regulation may. there is a lot of hope that it will enable people to in fact access the public market and enables small companies to raise money from ordinary americans. releasing some data is for 16 months, ed more offerings have been made seeking 1.5 billion raise 200 million. of course i'm about 1.5 is really going to get raised, so we don't really know. but, it is likely the regulation a possible ramp-up relatively quickly. i think probably things can be done to approve regulation and
a. one of the most obvious is when the commission adopted the rule, it took a very positive step of preempting blue sky registration requirements with respect to so-called tier two primary offerings, but not secondary offerings. but are there things that you think can be done to improve regulation and a and make it better for the investor, for issues and if that's something looking at? >> on the secondary offerings, that is something we're looking at to engage a state security regulators to get as much information as possible. it was interesting i got a text from one of my old college roommates who said we are going to try one at a tier one regulation offering. we will let you know how it goes.
i will have a personal case study. one of the things i was proud of what is standing by on board to extend the tier one up to $20 million. here too close to 50. i want to get both of them to 50 in terms of which when people prefer. do you want to go through the state or through the commission on not? we can get a real controlled experiment. originally i was exposed to 10 million, but were able to get back to 20 million. we are just starting to get some data from folks in there. the data will help guide us in terms of how people are using these offerings. in tier two are they all close to $50 million? is that the case and maybe we should read this and think about increasing the threshold again. he mentioned only 5 million, but there was hardly any offerings over a series of years. the cost of doing a 5 million offering are not that much different than the 50 million offering but the benefits are much higher. just by simply increasing, more
and more people choose it. on the smaller end, the dollar amount to the offerings commit tier one and tier two, we are seeing regulation crowd funding is prescriptive and people are finding that being an essentially useful one for crowd funding. we are starting to your anecdote that offerings are kind of fill in some of that space and sort of crowd funding with the lowercase rather than regulation to broaden its meaning on that. people are seeing articles being written in firms and consultants out there talking to people about sort of crowd funding through regulation may, so that may be another recognition. as you mentioned, our division of economic risk analysis has statistics on that and we're starting to analyze data and look at potential ways that we can either make it easier or increase the threshold. >> congress recently created the small business created the small business advocate at the sec. it's a little different, but it's modeled on that. when do you think you all are going to be able to stand that?
show less text 00:35:39 >> my hope is by the end of the year. so congress authorized it last year, but we had to go through some hoops on the appropriation side, so it requires inside the beltway recovery programming. we just recently got approval from the appropriators to do that, to try to stand at the office, so the next step would be for us to go through the hiring process for the new small business advocate and we will model back. my understanding is pretty much redid the investor advocate and we will have staff involved in the commissioners be involved in that process. my hope is we can start that process, a move that forward through the summer and fall and hasn't been announced by the end of the year. >> great. the center financial regulatory authority is the primary regulator. it has a budget that is roughly two thirds the size of the sec and is staffed with almost 80%
of the sec. yet, there is relatively little congressional oversight and the sec oversight has been at least in my observation relatively light. last october, the sec created a new office design to provide oversight center and of course i was paired with some reforms on the way the sec regulates broker-dealers. what have you learned about that? what is the sec wondered about how the office is operating? do you have any thoughts on how it can be improved or the sec's relationship to be improved? >> yes, you're right. a couple reasons why we decided to reallocate staff within the commission.
the first thing we did is we reallocate we did as the reallocate its staff we did is we reallocate his staff under exam team from overseeing broker-dealers to overseeing investment advisors. we have over 12,000 investment advisors out there we need to examine and it keeps going up year after year and so we needed to reallocate staff from the broker-dealers site to the investment advisors side. i doing that, we also had conversations with sandra and telling them that we are going to rely on their oversight of broker-dealers moreto help fill that space. of course we also oversee san right to your point. but we also did was we made some adjustments within the offices and our offense compliance examinations prior to this move, all of our oversight, the self-regulatory organizations include the exchanges come the pca were all within one office. but because we are going to be relying more and more on the
broker-dealers side, we decided to split that office into one that focuses just on oversight and the other that focuses on all the other self-regulatory organizations. we are looking through trying right now. looks like we got the balance pretty close to right. we will continue to evaluate the balance on us to make sure we got it right. having said that, finra has a new leader in the air coming in. he's doing a tremendous job. something called finra 360 outside of washington d.c. and listing the criticisms in terms of their transparency and
accountability. he's in the middle of the review right now. he's also announced initiative he is moving forward with trying to get the voice of particularly the smaller brokers were involved in finra, very much in tune with what is going on on capitol hill with potential legislation that would give them greater oversight and a tremendous job fair. we continue to see those play out in the future. we will continue to rely and put more resources to make sure they are doing what they're supposed to do. >> may be as fun as a year ago, at least eight months ago, the sec put out a very positive action letter on business brokers, but there hasn't been any finder is there some people call them replace the brokers. just so people in the audience understand, if two main street business people one says i'm trying to raise money and offer you a finder's fee, but that works out and they actually make an investment, the sec 15 years
ago or so it changed its position and adopted the policy that they should register as a broker dealer and the fact they choose the same as merrill lynch. obviously a great deal of regulatory uncertainty because the american bar association task force has as many as 40% of small businesses because it hasn't been made exclusively all equal. do you see any openness or do you personally think that issue should be revisited and try to clarify the rules and allow intermittent small finders to not have to register as a broker dealer? >> yes. this is an issue brought to her attention almost every year by her committee on smaller
emerging companies and the small business forum and folks on this. we now finally have a chairman that is committed to looking at capital formation issues and putting it squarely on the front burner in terms of our agenda going forward. this is an issue i would like to see. there are some folks in prior leadership that were focused and we believe everyone is born until they prove us otherwise. that's sort of what it is. but we need to have a space for finders to do their job and it's particularly important for capital formation and the smaller companies where they are not going to all of a sudden trip the requirements for being a broker dealer. >> we can force them to put their offering arrest. >> it creates a mass. we need to carve out for finders, limit them to certain set of back to the days within the activities then you are fine, whether it's a safe harbor or something like that and then we can allow for that. that is something absolutely we can get reform on.
show less text 00:42:39 unidentified speaker >> president trump without an executive order number teamed 7081, basically in connection with government reorganization. it strikes me that there are certain aspects that could probably use reorganization. i believe there's 23 direct reports to the chairman now. do you add that there will be some sort of significant reorganization under the organization in response to the executive order or for other reasons? at the first is identifying all those. the executive order is a great place to identify. something that 23 direct reports. meeting, we only had a couple rooms big enough to fit everyone in there. the difficult part of doing a
whole scale reorganization is the number of those direct reports or statutory and so that would actually require legislation to give the chairman and the authority to make those changes. they've been sort of putting piecemeal. there is statutes to go through and create the investor had a kid or some other position. something like that is a direct report. that one is fine, but you do this a number of times, pretty soon you end up with a number of direct reports in the air. we can do things around the edges, within division, within offices. you can move people around to be more efficient that way. in terms of the wholesale sort of change in these direct reports in thinking more creatively, that would actually require legislative changes. >> i will ask you one more question and then open it up to
the audience. just a quick around the question. in almost every other field i work in, there's a lot more information available to the public and the policymakers then there is in the security regulation area. the statistics of income and an annual administration agency. the commerce department puts out the national income council and a tremendous amount of other information. there's a tremendous amount of data in the health care area. basics about everything you want to know about the labor market here. the only information we really have on the private capital market crowd funding is periodic, but not regular, but occasional reports. there is also relatively little
information. there is some on the enforcement side of the sec, but almost nothing in terms of what kind of provisions are causing the enforcement for the infractions engaged in. do you think the commissions should start publishing on a periodic annual basis information but how much is regulation a crowd funding rule five and six and so on and so forth and you can evaluate it including the commissioners themselves, but also better information about what kind of things have enforcement problems in the real world. >> that's a good idea i had thought about putting that out on a more regular rice bases to make a conscious effort to have the risk analysis puts statistics. all of our enforcement actions are available online. show less text 00:46:22 unidentified speaker >> but they are not categorized.
it was a private rule five or six offering adequate disclosure. you have no real means of assessing what aspects of the law are not causing problems are causing problems. >> act for the rest of the academics collected data and console to provide this data. >> we didn't have any information until they go through all the foreign deeds. it is very irregular and we don't really have a good series. >> that is something all take back. i didn't really think about that. a number of our filings to be done with the structured data format and that allows us to quarterly go through all the public companies and put together a database for researchers on a quarterly -- you can download all this data to do large-scale academic research on all public companies to do cross section and we started doing that and now we have every quarter going forward. in the private spaces which are suggesting.
>> are merely an enforcement space. the ipos come in the best data is by the university of florida professor. >> well, let me ask for audience questions. we will start with brian. >> thank you. if you could just for the benefit of the listeners say your name and institutional affiliation before you asked the question. [inaudible] >> -- george mason university. thank you to our panelists. question to the commissioner. what if anything is the sec doing to address the disruption and innovation coming from type logical innovation a couple of potential areas would be the use of the ledger for clearing that
on that recording these of quote, unquote initial point offerings to arguably try to circumvent the security laws? what if anything are you doing? you anticipate something formal likened the sec. where did they say that? >> last year for the first time we had a roundtable and i went to asia but there is taiwan, japan, hong kong, korea. i thought all right, technology and finance. there's something special going on here. when i realized that point because there's something special than just adding technology to financial services across the jurisdiction and the regulatory roof framework. turning off the ground in the u.s. is that there's so many different regulators they talk to whether it's the marketplace
finding they talk to state regulators, federal regulators and securitize and talk to investors in on top of the sec from a distributed ledger technology cuts across whether used for keeping track of shareholder registries, keeping track of trading when it cuts across all kinds of different industries. in addition to the roundtable, where the task force at the sec are we as people from across the division, across offices out in the regions, obviously a regional office out there is very helpful. they are going on in the industry. i received this is transformational. there's a lot of a lot of hype in specific things, that there's a number of things where they can actually transform the capital raising process.
i was over in kenya last year and saw the transformational change that came across. kenya now has a higher rate of financial inclusion. we are still talking about the bank and we want to get people in banks and then get access to the various financial services, whereas kenya weren't bound by that. let's get people involved and then start talking about offering financial services in the 30-dollar increments in kenya and earn higher rates of return and putting their money on the bank. we are seeing the rest of the world, a number of incidents that moving forward that are transformational with investors
and consumers. one of the things i will continue to focus on is to make sure the regulatory framework is not stifling of innovation. part of our mandate is capital formation and so not only are we protecting investors, but we also have to make sure we are not stifling innovation. if that's the reason we started having discussions more seriously. it's highly fragmented, very difficult and i think the sec to take the lead role in this. we do have the capital formation mission. we have regional offices throughout the united states for next generation of entrepreneurs and can help investors whether it is advisors, the digital technology and with the nasdaq in estonia, what is going on in australia and watching what is going on the state of delaware has committed to doing a number of things on the block chain and learning from all of those
things. working with the disruption going on, but also cooperation and competition sort of working together to move this stuff forward. that is an exciting area double benefit consumers and potentially help the raising process. show less text >> yes, ma'am. [inaudible] >> a routine basis to not publicize the votes when cases are sent to the federal debt airport. one exception, which was reuters and "the wall street journal" is now online. the general counsel's office is privileged information. do you believe that should be privileged? should that be on a regular basis? >> yeah, there's very difficult legal projections on that, but he was able to get done through foia. we in fact the commission just
wanted a word recently for being one of the most efficient agencies in responding to foia. it can be done on an ad hoc basis. we are going to put it out there. i have nothing to hide. >> the company's systems focused on early cancer detection. over the years have taken advantage of raising capital is so far. we are going to try later this summer and as a lead-in to reggae plus. the good news is most of the topics that are on my mind has been touched upon by either you or david. i would like to buy the next one nation point on a couple points. first i would like to commend you for your initiative is getting out and getting on the road in listing two
entrepreneurs. in addition to being the see how of a biotech company, i chair a coalition of small companies than we've done a little bit of work at the sec. i met david in that capacity. a couple years ago i attended a small business conference at the sec and they were maybe two to 300 people. i did not get a single small business person there. it was all lawyers, academics, think tank people. i commend the initiative, but you're not going to hear from small business people. i'm close to washington. i can get down here recently.
talking to entrepreneurs, particularly in the so-called other 47 states, 75% of venture capital is going to companies based in three states. so getting out to the other 47, including maryland and talking to ceos and their shareholders and finding what's really their mind is an important thing. i hope the other commissioners will do so. two things that were touched on but i think are very important for my company and most of the other ceos i know that raise capital, one is to broker a deal and the fine roles are a tremendous impediment not only to finding capital, but the cost of raising capital. it is exorbitant. but we have to pay to groups like that to present the medal tally because they're not allowed to get into commissions, they necessarily have to pay the cost of that is killing companies. that is i think the number one priority is liberalizing those roles and cycling the accredited investor rules need to be revoked at as it was touched upon. thank you. >> yeah, thank you.
>> yes, sir. [inaudible] i need to want to get ahead of the chairman on his agenda, but since you reopen the docket on pay ratio and now have a lot of comments in the docket, is it your belief at this point that the implementation deadline will be delayed particularly with some color on how you think that's going to go in the second question at the tail end we talked about some of the rules that she felt could've been finished, but there is not a quarantine with the title vii rules. what is the state of title vii at this point? is the commission never going to adopt the rules that were apparently ready at the end of her time? show less >> the title vii for those of you that are familiar with it, it deals with the derivatives and over derivatives split between the sec and the cftc has finalized the number of roles. but they are going back and
revisiting some of those, look and asserted the implementation and acting chairman to start revisiting some of those. the fcc we have not gone as far in a number of rows and we have the opportunity to move forward. at the same time, we need to make sure we work with the cftc to make sure that our rules are harmonized within the jurisdiction for security-based swap in the number of participants, whether on the dealer cider customer side are in both markets. it is an opportunity for us to work with the cftc to work on a more collaborative basis in terms of them revisiting our walls and that's moving forward. i think you are going to see more collaboration, more cooperation between the two agencies on those rules are laid forward. [inaudible] show less text
>> staff is looking through the comments right now and see what we can move forward on. >> is wondering if you could share some topline center listening to her, either what they are saying consistently with capital formation for some of the most surprising things you heard that might not have occurred to somebody inside the beltway. >> taking care to mention the silicon valley, the reason why a lot of these large uniforms are seeing private as they could literally make a phone call and get hundreds of millions of dollars in capital. his enough private capital available and not on the one hand it's nice here, but on the other hand again this makes me even more strong and i believe that we need to get the average investor the ability to get involved in a number of those offerings. i hope sort of i'm not a. i think the biggest sort of feedback in terms of positive feedback we got from people as
they were very appreciative of just the change in tone at the commission and out of white house as well, to. in terms of recognizing that we have had the best capital market in the world for a long time, but the rest of the world is catching up and we need to make sure we get the balance right in terms of the costs and benefits. .. they have to have lawyers looking at these things, and the costs that go into providing information for stuff with little or no value to investors, just reiterated a lot of those things. the finders issue keeps coming up.
the issue of regulation crowdfunding not being as workable and the reggae pluses away they can do crowdfunding. people were just appreciative of the fact that we get outside of washington d.c. the point that was made early is that washington d.c. can be an echo chamber. you just keep hearing the same things over and over. we need to get outside washington d.c.
if you think about our mission , you can set protecting investors and promoting capital formation but it's no less than helping facilitate the american dream. if you think about it, the dream of entrepreneurs is to take their spirit and put it into action. start a company, raise capital , bring a product or service to market. for others it's taking their hard earned savings and investing it in the entrepreneurs. of others. taking those proceeds and improving the standard of living for themselves, their children and their education by investing or taking the money and giving it to the charity of their choice. for me, our mission is to preserve the american dream by investing in each other. show less text 01:02:34 unidentified speaker >> it's been a great discussion. i want to mention three things i hear from a lot of small businesses looking to the public that we haven't talked about yet.
it surprises me that they mention these. shareholder proposals, proxy advisors and security actions. these are three big monsters they are worried about. there are things the sec can do. there been advisor ideas out there, security class actions, the amicus briefs and all sorts of things are used as evidence to interpret laws in private actions. you think the new gc, with everything else they've got going on will give attention to these issues. show less text 01:03:25 unidentified speaker >> yes all three. thank you for bringing them up. for shareholder lawsuits, companies can come to us to ask for relief to put in mandatory arbitration. there was a company under the
there was a company under the prior ministration i thought about doing that when the ipo decided to pull back. i would encourage companies to come and talk to us about that. on advisory firms, i have come to the realization they need robust regulation. there is stifling competition and i'm worried. there is tremendous concentration and many conflicts of interest. we regulate those in a number of ways through disclosure for prohibition. have come to the point where proxy advisory firms are either engaging the business so full of conflict and are so influential in the building complex we even think about managing conflicts with proxy advisory firms. the last one you mentioned was the 14th aa process. there's an article -- they don't want to have to have companies include things in the proxies. i think you will see staff, with our nude division director and chairman, one more companies
will come for no action relief on that as well. they keep talking about mozart, we need to increase the threshold. show less text 01:05:51 unidentified speaker >> last question. there was a number of people, this gentleman. >> to follow up on brian's question, what is the sec view of these? there seems to be question whether compliant. >> in terms of putting things up
for a vote, people talk about votes that don't get support from people and you only have to have a small dollar amount. we need to look at increasing the threshold where you can get a vote on some things. if you don't reach a certain threshold you can't keep bringing it up year after year. last question: (inaudible) >> a question about ico. what is the sec's view? there is question about whether they are compliant with the security law. >> we are looking at that. there are a number of different icl out there. for me it's just getting up to speed with all the acronyms. then there's distributed autonomous organizations and to brian's point there is a question of whether or not this
[inaudible conversations] when i came in as acting chairman, i didn't have to make any personnel changes so i kept a lot of people in the acting roles. they've seen a lot of the action and things were working on is hiring new division directors and general counsel and chief of staff, all of those types of things.
it's a matter of building up staff. if you look at what we did in the confidential filing statement, i think that will have huge impact. that just requires staff action on that. i'm not surprised are troubled by that. we will be able to do things that will help the market. there's certain numbers and open meetings about it. show less text 01:09:50 unidentified speaker >> you think capital formation can be and what you are talking [inaudible conversations]
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policy issues that impact you. coming up tuesday morning, a look at efforts to pass the 2018 budget beginning with pennsylvania congressman brendon boil a member of the house community followed by texas congressman jody arrington. and later, dream land, the true tale of america's opioid epidemic. be sure to watch c-span's washington journal live at 7:00 a.m. on c-span. join the discussion. >> president trump hosted an event at the white house focusing on manufacturing jobs and products made in the u.s. the president spoke afterwards and was joined by vice president