SEC Commissioner Hester M. Peirce expressed support for SEC Chair Jay Clayton's initiative to review outdated regulations.

In a speech before the American Chamber of Commerce in Tokyo, Ms. Peirce stated that Mr. Clayton has approached the rulebook with "an objective and practical eye" without "nostalg[ia]" for outdated rules. In so doing, she compared the efforts to the decluttering philosophy popularized by "tidying expert" Marie Kondo.

Specifically, Ms. Peirce supports efforts to reform:

  • the regulation of public companies to encourage (i) companies to "go public earlier and to remain public" and (ii) retail investors' participation;
  • regulation of communications between financial firms and their clients;
  • market structure to ensure that rules regarding equity and fixed income markets are serving issuers and investors; and
  • the proxy voting process.

Ms. Peirce noted that there was one area in particular that does not require updating: regulation regarding environmental, social and governance ("ESG") issues. According to Ms. Peirce, the SEC's responsibility is to ensure that investors have the information regarding the long-term value of the company. ESG issues, she stated, do not serve this goal and conflate financial materiality with social significance.

Commentary

As complicated as the rules are at the federal level, the problem is now compounded by the states going their own way on a wide variety of issues from AML to suitability to privacy to the treatment of senior accounts. While one may argue for or against any individual piece of state regulation, in the aggregate the increased Brexitization of regulation is going to be a significant drain on the economy.

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