Tag: Investor protection


A Threefold Cord—Working Together to Meet the Pervasive Challenge of Cyber-Crime

Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s recent address at SINET Innovation Summit 2015; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Cybersecurity is an issue of profound importance in today’s technology-driven world. What was once a problem only for IT professionals is now a fact of life for all of us. I say “us” because, as you may know, hackers breached a government database a few weeks ago and stole the personal information of roughly four million government employees, which may well include me.

There’s hardly a day that goes by that we don’t hear of some new cyberattack. These incidents are clear illustrations of how the internet has become an integral part of our professional and personal lives. And while the benefits have been enormous, so, too, have the risks.

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Remarks Before the SEC Historical Society

Mary Jo White is Chair of the U.S. Securities and Exchange Commission. The following post is based on Chair White’s remarks at the annual meeting of the SEC Historical Society, available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

I was delighted to be able to speak at your annual meeting. This yearly event of the SEC Historical Society is always the right occasion to underscore that those of us who currently have the privilege of serving at the SEC are part of a long and important tradition. The staff of this agency is beyond compare in its dedication, high-mindedness and expertise, making us all very proud to work here.

The SEC alumni are undoubtedly the biggest, most supportive and most enthusiastic group of any government agency or private entity. The SEC’s history is one of important public service and a tradition of protecting investors and bringing confidence to the financial markets. The SEC’s commitment to markets that are both safe and fair, as well as dynamic, has given millions of people the opportunity to share in the growth of the American economy, while facilitating capital formation to fuel the economy.

Those of us here today, who are or who have been part of the SEC tradition, can be rightly proud of our role in shaping a financial system that meets the needs both of visionary entrepreneurs, and those contributing as much as they can to their 401(k) or for their children’s college education.

As a reminder of your service at the SEC, I have been asked to very briefly share with you some of what we are working on—now and for the near future. I think you will recognize in that work the mission that brought you to the agency and which should continue to resonate long after you left your SEC post.

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Capital Unbound: Remarks at the Cato Summit on Financial Regulation

Michael S. Piwowar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Piwowar’s recent remarks at the Cato Summit on Financial Regulation. The complete publication, including footnotes, is available here. The views expressed in the post are those of Commissioner Piwowar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

I am happy to be with you in New York City. When I have the opportunity to travel for meetings or to conferences such as this, I have fundamentally different conversations than when I am in Washington, D.C. In Washington, conversations frequently are scripted. Participants, who may be accompanied by trade association representatives and lawyers, use their talking points and have been coached to “stay on message.” Those discussions are undoubtedly meaningful as we at the Securities and Exchange Commission (“Commission” or “SEC”) engage in rulemaking and otherwise set policy.

But outside of Washington D.C., people generally want to talk about something else. They want to share their dreams and concerns about running their businesses. They want to show how their products, services, and innovations contribute to the economy, create jobs, and improve standards of living. And more importantly, they want to demonstrate how inside-the-beltway regulations are often focused on concerns that do not represent the biggest risks of harm to investors, customers, and businesses outside the beltway. I hear how regulations distract attention from the real risks and challenges of operating a business in globally competitive markets.

Compliance with securities laws and regulations is only one component of running a company. A business must also comply with laws on consumer protection, taxes, safety, employment, zoning, and the environment, to name only a few. If you have multiple locations—such as in New York, New Jersey, and Connecticut—you must deal with regulators in each jurisdiction. Soon, it may seem like you exist not to provide a good or service, but just to stay in compliance with the law.

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Modernizing and Enhancing Investment Company and Investment Adviser Reporting

Mary Jo White is Chair of the U.S. Securities and Exchange Commission. The following post is based on Chair White’s remarks at a recent open meeting of the SEC, available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Good morning, everyone. This is an open meeting of the Securities and Exchange Commission on May 20, 2015 under the Government in the Sunshine Act.

The Commission today will consider two recommendations of the staff to modernize and augment the information reported by both registered investment companies, which include mutual funds and ETFs, and investment advisers. These proposals are part of a series of rulemakings to enhance the SEC’s monitoring and regulation of the asset management industry. We will discuss the two recommendations together and then will vote separately on each following the discussion.

The oversight of funds and advisers is one of the most important functions of the Commission. Over the past 75 years, our regulatory program for asset management has grown and adapted, guided by our mission, to address the challenges of this important, ever-evolving and growing area of our financial markets. Today, we once again are doing that.

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Effective Regulatory Oversight and Investor Protection Requires Better Information

Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s remarks at a recent open meeting of the SEC; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

It is said that, “knowledge is power.” Knowledge, however, requires information. And there is no doubt we live in an age of information. The advent of the Internet and the breathtaking technological advances we have witnessed over the last few decades have given us access to more information than at any time in history. The available data seems to be limitless—and all available at the touch of a fingertip.

Yet, when I joined the Commission, it quickly became apparent that the SEC did not have the breadth and quality of information necessary to do its job effectively. As our country experienced the worst financial crisis since the Great Depression, and, as things began to unravel, I sought data and information to analyze the impact of what was occurring—only to find that much of the information available to the Commission was missing, stale, or incomplete.

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Optimizing Our Equity Market Structure

Mary Jo White is Chair of the U.S. Securities and Exchange Commission. This post is based on Chair White’s recent address at the Inaugural Meeting of the Equity Market Structure Advisory Committee; the full text, including footnotes, is available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

I am pleased to welcome everyone to the inaugural meeting of the Equity Market Structure Advisory Committee. Maintaining and enhancing the high quality of the U.S. equity markets is one of the SEC’s most important responsibilities. This Committee’s work is an important part of that and will be of great assistance to the Commission as we continue our efforts to ensure that the equity markets optimally meet the needs of investors and public companies.

The U.S. equity markets have, of course, experienced a sweeping transformation over the last 20 years. Primarily manual market structures have been replaced by high-speed electronic markets in which computer algorithms dominate trading. As I have detailed before, empirical evidence shows that investors are doing better in today’s marketplace than they did in the old manual markets.

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Making Our Equity Markets Work Better for Investors

Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s recent public statement; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

It is well known that the Commission needs to undertake a holistic review of our current equity market structure. In fact, the Commission has formed an advisory committee to assist that review. In furtherance of that process, the following is intended to focus on certain issues that any serious review should consider—such as the various issues that have arisen from our markets’ increasingly fragmented structure, including market quality, and various market participants’ responses to the intensified competition for order flow.

In areas where there appears to be a compelling need for action—and where the benefits of a particular course of action are clear—there is a call for action. In areas where there may be a need for action, but where the best course is not readily apparent, recommendations will be made as to areas that require further study, including empirical research. Finally, in areas where there is no convincing evidence that change is warranted, or where it may appear that suggested reforms might even worsen matters, caution will be urged

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Regulators Working Together to Serve Investors

Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s recent remarks at the North American Securities Administrators Association Annual NASAA/SEC 19(d) Conference; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

It is my honor to deliver the opening remarks for today’s [April 14, 2015] North American Securities Administrators Association (“NASAA”) and Securities and Exchange Commission (“SEC”) 19(d) Conference. For those who are keeping count, this is my seventh year as the SEC’s liaison to NASAA. It has been a privilege to serve you in this role, which I have done since my early days as a Commissioner. Before I begin my remarks, however, let me issue the standard disclaimer that the views I express today are my own, and do not necessarily reflect the views of the SEC, my fellow Commissioners, or members of the staff.

NASAA and the SEC have a long history of working together to provide a robust regulatory environment for businesses to grow and to protect the investors who fuel that growth. Today is a clear example of that partnership, where representatives from the SEC and state regulators come together to share ideas for increasing cooperation and collaboration. This partnership is crucial to achieving our common goal of protecting investors, maintaining market integrity, and facilitating capital formation.

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Reasonable Investor(s)

The following post comes to us from Tom C. W. Lin at Temple University Beasley School of Law.

Much of financial regulation for investor protection is built on a convenient fiction. In regulation, all investors are identically reasonable investors. In reality, they are distinctly diverse investors. This fundamental discord has resulted in a modern financial marketplace of mismatched regulations and misplaced expectations—a precarious marketplace that has frustrated investors, regulators, and policymakers.

In a new article, Reasonable Investor(s), published in the Boston University Law Review, I examine this fundamental discord in financial regulation, and seek to make a general positive claim and a specific normative claim. First, the general positive claim contends that a fundamental dissonance between investor heterogeneity in reality and investor homogeneity in regulation has created significant discontent in financial markets for both regulators and investors. Second, the specific normative claim argues that policymakers should formally recognize a new typology of algorithmic investors as an early step towards better acknowledging contemporary investor diversity, so as to forge more effective rules and regulations in a fundamentally changed marketplace. Together, both claims aim to highlight the harms caused by not better recognizing contemporary investor diversity and explain how we can begin to address those harms. Ultimately, the article aspires to create a new and better framework for thinking about investors and investor protection.

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Supreme Court’s Omnicare Decision Muddies Section 11 Opinion Liability Standards

The following post comes to us from Jon N. Eisenberg, partner in the Government Enforcement practice at K&L Gates LLP, and is based on a K&L Gates publication by Mr. Eisenberg. The complete publication, including footnotes, is available here.

The Supreme Court has a long history of rejecting expansive interpretations of implied private rights of action under Section 10(b) of the Securities Exchange Act. Most notably, since 1975, it rejected the argument that mere holders, rather than only purchasers and sellers, may bring private damage actions under Section 10(b), rejected the argument that Section 10(b) liability may be imposed based on negligence rather than scienter, rejected the argument that Section 10(b) may be applied to “unfair” as opposed to fraudulent conduct, rejected the argument that purchase price inflation is enough to show damages under Section 10(b), rejected the argument that Section 10(b) reaches aiders and abettors rather than only primary violators, and rejected efforts to muddy the distinction between primary and secondary liability under Section 10(b).

The Court, however, has barely even mentioned Section 11 of the Securities Act in its opinions, much less interpreted it. Section 11, unlike Section 10(b), 1) provides an express private right of action, 2) is limited to misrepresentations and omissions in a registration statement, and 3) requires no proof of culpability although defendants other than an issuer have due diligence affirmative defenses. The Supreme Court’s March 24, 2015 decision in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, No. 13-435, is the Court’s first meaningful foray into Section 11. Unfortunately, the decision, which addresses opinion liability under Section 11, provides an amorphous standard that is likely to lead to unpredictable results. It should provide little comfort to plaintiffs or defendants and should make defendants more cautious about including unnecessary opinions in registration statements and, where appropriate, should lead them to carefully qualify opinions that they do include.

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