WASHINGTON, D.C.— Stephen Hall, Legal Director and Securities Specialist, released the following statement in connection with the release of a report entitled “The Securities And Exchange Commission: Regulation And Enforcement In 2022.”

“The SEC is critical to maintaining the integrity, stability, and vitality of our securities markets, and those markets are critical to a thriving economy. The SEC’s responsibility is to write and enforce strong rules to make sure that the securities markets are fair, transparent, and stable.  If the SEC falls down on the job, investors suffer fraud and abuse and the markets are more vulnerable to dangerous instability.  And if investors lose confidence in the integrity and stability of the securities markets, then they pull back, ultimately threatening the vitality of capital formation and the prosperity of all Americans.

“Given the SEC’s important role, we’ve taken a look back at the agency’s work over the past year on two fronts, regulation and enforcement. Our report shows that the agency deserves high marks for many of its priorities and achievements, although it also reveals areas where the SEC must do more to fulfill its statutory duty and serve the American public.  The agency is making significant progress in protecting investors from new threats, from digital engagement apps to cryptocurrencies; it has issued an ambitious set of proposals to make trading practices more fair for retail investors; it has finalized important executive compensation rules that will help prevent reckless and destabilizing corporate behavior; and it has cracked down on the opaque and often predatory capital-raising vehicles known as SPACs.

“In addition, the SEC deserves credit for responding to investor demands for more disclosures about the environmental, social, and governance practices and risks facing corporate America, most notably in the form of a proposed climate risk disclosure rule.  And it is shining more light on the shadowy world of private funds for the benefit of regulators as well as investors.  All of these accomplishments are even more impressive given the relentless opposition from the securities industry, the constant legal challenges the SEC must defend in the courts, and the grossly undersized budget the SEC receives from Congress.

“It’s equally clear that the SEC has more work to do.  Investors are still too exposed to harmful conflicts of interest that incentivize their financial advisers to give advice not in their best interest.  Investors also remain subject to mandatory arbitration clauses that rob them of their right to seek relief in court when they’ve been victimized by financial firms.  The Dodd-Frank Act gave Congress explicit authority to address this problem, but the SEC has failed to act.  It’s also clear the SEC can and must do more to address conflicts of interest among the credit rating agencies and to ensure that money market funds are less prone to runs and potentially catastrophic collapse in times of market stress.

“With respect to enforcement, the SEC is, to its credit, leading the charge against the wave of unregistered and fraudulent cryptocurrency offerings that have cost investors billions if not trillions of dollars.  However, to effectively punish and deter all violations of the securities laws, the SEC must work harder to hold more individuals personally accountable, not just companies; ensure that fines are more than a cost of doing business; and apply conduct remedies and collateral consequences more frequently.

“All in all, Americans should take comfort from the fact that this SEC is working hard to protect investors, maintain orderly markets, and promote honest capital formation.”

The Report is available here.

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org