SEC Identifies Priorities in Draft Strategic Plan
Commentary by Steven Lofchie
The SEC proposed a "draft strategic plan" detailing its priorities for FY 2022 through FY 2026. The draft strategic plan - which covered the agency's mission, vision, values, strategic goals and planned initiatives - focused primarily on the three objectives outlined below.
Protect Working Class Families from Misconduct
- Prioritize enforcement and examination initiatives relevant to the protection of retail investors;
- Expand the use of market data to prevent, detect, and enforce against misconduct; and
- Modernize disclosure delivery requirements.
Develop a Robust Regulatory Framework to Keep Pace with Innovation
- Encourage continued coordination among financial regulators, including foreign regulators;
- Update existing rules to reflect novel technologies and business models;
- Examine core pillars of financial markets to identify systemic and infrastructure risks;
- Prioritize investor outreach and education to underserved communities; and
- Continue gathering information while maintaining a flexible approach to novel products, such as digital assets.
Support Diversity and Inclusion Objectives
- Focus on recruiting a workforce with diverse backgrounds;
- Promote diversity, equity and inclusion within the SEC's workforce;
- Encourage collaboration among SEC offices through rotation programs and remote work;
- Enhance the security of the SEC's systems and sensitive data; and
- Utilize new technologies to carry out the SEC's mission.
The SEC invited public comment on the plan and will be accepting comments until 30 days after the notice is published in the Federal Register.
Commentary
The "strategic plan" is ultimately a political document rather than a substantive regulatory plan. No one quarrels with the goal of protecting retail investors and the SEC's systems, or with the concept of investor outreach.
In Chair Gary Gensler's months as head of the SEC, the agency has put out an unprecedented number of new rule proposals. The generic goals in the strategic plan seem intended to be a justification for all those proposals. But, at a more specific level, it is likely to be necessary (assuming that various market participants follow through on their threatened legal challenges) for the SEC to:
- demonstrate that the proposals are within its statutory authority; and
- provide a cost-benefit analysis that will justify those proposals and their massive, widespread costs.
It is not obvious that the SEC will be able to make that demonstration or justify the costs of its proposals. That may be left for the courts to decide.
Additionally, as a regulator, it should also be incumbent upon the SEC to consider not only the costs of individual rules, but the aggregate costs of its overall rules. What are reasonable burdens to impose upon the industry and the economy, and within what time frame? The concept of "strategy" implies choices, identifying what changes are most important and what is feasible.
Finally, as the strategic plan states, one of the missions that the Exchange Act imposes on the SEC is to "facilitate capital formation." There does not seem to be anything in the strategic plan to accomplish that goal, unless one believes that adopting numerous regulations will "inspire public confidence" to such a degree that the economy will necessarily zoom upwards. It is not obvious that such is the case.