SEC Chair White Gives "State of the SEC" Address (with Lofchie Comment and Delta Strategy Group Summary)

SEC Chair Mary Jo White delivered a speech at SEC Speaks 2014, discussing the current state of the SEC as well as its 2014 agenda.

Chair White explained that much progress has been made on the nearly 100 new rulemaking mandates required by Dodd-Frank and the JOBS Act, including identity theft rules, money market fund rules and rules regarding bad actors, among others. However, White stated that funding for the SEC still "falls significantly short" of the level it needs to continue to fulfill its mission to investors, companies, and the markets.

Chair White went on to describe the SEC's "other critical initiatives" in 2014. These include a focus on the role and duties of investment advisers and broker-dealers (with increasing oversight of broker-dealers), engaging with other domestic and international regulators to address the interconnected financial system's systemic risks, and reviewing equity market structure. Chair White stated that one "near-term project" will be the development and implementation of a tick-size pilot, along carefully defined parameters, that would widen the quoting and trading increments and test whether a change like the pilot would improve liquidity and market quality.

Additionally, Chair White stated that the SEC Trading and Markets Division is continuing to develop sources of data to inform regulatory decisions, such as MIDAS, and the SEC is proceeding to implement the Consolidated Audit Trail Rule ("CAT"). Chair White explained that the SEC plans to address technological developments, to reduce the risk of disruptions, and will hold a cybersecurity roundtable on March 26. She also said that the Office of Risk Assessment and Surveillance is developing new technologies to cull additional red flags from internal and external information sources.

In terms of enforcement, Chair White described some of the SEC's recent successes, and said that the SEC plans to continue to require admissions as a condition of settlement in certain types of cases in order to "achieve a greater measure of public accountability." Additionally, Chair White described new enforcement initiatives, including the Microcap Task Force, and a renewed focus on gatekeepers.

Chair White also mentioned that the SEC will continue work on disclosure reform, stating that the Corporation Finance staff is planning on making specific recommendations for updating the rules that govern public company disclosure, and consider how the rules governing public offerings and company reporting may negatively impact liquidity in the markets, and how they can be improved and streamlined.

Lofchie Comment: SEC Chair White asserts that the Commission cannot, at its current level of budget and staffing, fulfill its many missions. The CFTC makes the same complaint as to their funding and responsibilities. These are serious concerns. However, as these regulators request more money to cover the expanding scope of their mission, there is an equally significant concern that seems to be disregarded: the financial industry is struggling to adapt to the cost and pace of regulatory change. Some consideration must be given to slowing down the rate of regulatory change, and coordinating and prioritizing across agencies. The consequences are serious. Smaller financial institutions may simply drop out of the market, or from certain portions of the market, exacerbating what the government already says is a "too big to fail" problem. Unless an institution is a giant, it is a daunting challenge to keep up with the changes. And this does not touch upon equally important questions as to whether all these changes represent good policy. But, as they say on the sports pages, "it is what it is."

Click here for a summary of Chair White's speech by Delta Strategy Group.

See:SEC Chair White's Speech.See also: Slide Presentation at SEC Speaks; Commissioner Stein's Speech at SEC Speaks; Commissioner Aguilar's Speech at SEC Speaks; Commissioner Gallagher's Speech at SEC Speaks.