WHAT LIES BEYOND DISCLOSURE? KEY POINTS FROM SEC CHAIR’S ADDRESS

Recently at the annual “SEC Speaks” program, SEC Chair Mary Jo White addressed the agency’s agenda for 2016. The theme of Ms. White’s speech was the SEC’s increasing need to go “beyond disclosure.” While she recognized disclosure as the SEC’s “core authority,” Ms. White explained that the SEC is more often exploring “carefully targeted substantive requirements – like controls on technology or limitations on activities.” Other substantive requirements of the SEC include setting financial standards for broker-dealers, review of the rule filings by exchanges and other SROs, supervision of the clearing of securities, and oversight of the Public Accounting Oversight Board. Under the Dodd-Frank Act, the SEC also oversees security-based swaps, restricts proprietary trading, mandates risk retention for securitizers, and limits incentive-based compensation for financial institutions.

Ms. White said that these areas “have become more important” to the SEC’s mission, and outlined several examples from recent regulatory reform. First, Ms. White reviewed Regulation SCI (Systems Compliance and Integrity), which imposes requirements for systems controls and technology standards. Second, Ms. White described money market fund reforms becoming effective in October 2016, which will require prime funds to float their NAV (Net Asset Value) rather than use a fixed NAV. Third, Ms. White discussed Regulation A+ and the SEC’s new crowdfunding rules, which address disclosures for startups and small businesses raising capital, as well as impose limits on investment. Ms. White also highlighted several outstanding SEC proposals and initiatives, including imposing minimum liquidity requirements and derivatives limits in asset management, supervision for changes in the operation of alternative trading systems, and new standards for the governance and operation of clearing agencies. After reviewing these issues, Ms. White reasserted that “using other policy tools to strengthen our regulatory regime does not reflect a retreat from our core disclosure powers.” Rather, Ms. White stressed the need for “additional protections beyond those that can be achieved through disclosure alone.”

For more information about the SEC’s recent rulemaking, initiatives, and compliance contact us at Carrington Coleman. You can read the full text of Ms. White’s address here.