SEC Commissioner Uyeda Criticizes "Prescriptive" SEC Agenda
Commentary by Steven Lofchie
In remarks before an Investment Company Institute asset management conference in Singapore, SEC Commissioner Mark T. Uyeda criticized the SEC's rulemaking agenda for investment advisers and investment funds as being overly prescriptive, costly and failing to effectively address concerns raised by market participants. He also expressed skepticism about the Financial Stability Board, which he criticized for recommending that securities markets be subject to bank-like, prudential regulation.
Mr. Uyeda warned that the application of prescriptive regulations to capital markets would hurt investors and lead to diminished economic growth and innovation. He said that the regulatory regime in the United States - a disclosure-based regime that helps investors make informed decisions on how to allocate capital, with additional protections for those who opt to have an asset manager make investment decisions on their behalf - is considered the "gold standard" of regulatory framework. He said that securities laws should not restrict the freedom of investors to make their own informed decisions under the guise of risk mitigation.
Mr. Uyeda said that current SEC disclosure requirements already require advisers to disclose how client funds are invested. He said that adding specific, targeted requirements, such as the proposed ESG disclosure rule, is unnecessary. Mr. Uyeda asserted that the SEC's existing authority would allow the agency to pursue enforcement actions related to disclosure violations, including greenwashing, without the need for additional rules. He also expressed skepticism as to other SEC proposals, including the imposition of a mandatory liquidity framework.
Commentary
One of the most interesting aspects of Commissioner Uyeda's talk, beyond his criticism of SEC Chair Gary Gensler's agenda, was his negative take on European regulation, which he views as overly risk adverse, and therefore depriving European investors of the potential rewards that come with more risk. Mr. Uyeda pointed out the small size of the EU equity markets as compared to the equity markets of Asia, as well as the limited number of IPOs launched in Europe as compared to the United States and Asia.
In short, his talk may be read as both a jab to the Europeans that they are being left behind, combined with a warning to the United States that following the European model of prioritizing safety and regulation over growth leads to stagnation.