Transcripts For CSPAN3 SEC Chair Clayton Testifies Before Senate Banking Committee 20240711

Question, we will move to the next senator until resolved. I remind all senators that the five minute clock still aflies. You should have a box on your screen labeled clock that shows how much time is on your screen labeled clock that shows how much time is remaining. But we have had some troubles, and i have had senators who cant find that box or dont see it. And so, in fact, last hearing one of the senators ask me again to get a reminder, i will do that at this time for everybody. So at 30 seconds left on your clock, there will be a tone, a bell ring, to remind senators and the witnesses that their time has almost expired. At the end of the five minutes, a bill will ring. That way we can all know how the clock is working, even though we dont find it on our screens. Today we will receive testimony from the security and Exchange Commission chairman jay clayton, regarding the work and agenda of the sec. I thank you chair clayton for your appearance before the committee today, which is essential to our oversight of the sec. And welcome. You last appeared before this committee in december of last year. The covid19 pandemic hit the United States shortly after that hearing, and the sec has taken many important steps to help limit the economic shot to our markets of governments have attempted to confront this unprecedented event. The sec used tools such as the market wide Circuit Breakers for the First Time Since the adoption. When markets dropped 7 from the loss s p 500 index. There were a number of uses of limit bound circuit breaks, when overnight stock futures hit their 5 limit, which resulted in halting further downward trades. Despite the high levels of volatility, or volatility, it is my understanding that the current mechanisms in place serve their intended purposes of increasing market stability. Additionally, in order to comply with cdc guidelines, you oversaw an unprecedented temporary closure of physical trading floors. This Business Continuity measure supported orderly trading while ensuring the health and safety of Market Participants. The sec has continuously pursued Enforcement Actions including a number of actions against those seeking to take advantage of investors, during this vulnerable time. Remarkably, all of this has been done while the sec is working remotely. It is commendable that despite the covid19 disruptions you have continued to advance the items on your regulatory agenda, which are the result of many months, and sometimes years of diligent stuff work. They finalize the minutes to update and improve the definitions of the credited investor and qualified institutional buyer. Which will now take into consideration education and expertise. Ultimately increasing investor participation and private offerings. And expanding access to Capital Markets. The sec recently modernized exempt offering framework, which will be a lifeline to small and medium sized companies. Navigating the previously complex system. These clear and concise rules will allow Smaller Companies to focus on getting their businesses back on track while improving the consistency of Investor Protections. Commissioner in Market Participants and crafting modernized shareholder proposals, thresholds and proxy voting rules. These modernizations no longer permit a small number of individuals with limited states, to consume corporate boardrooms. And will allow companies to better focus their efforts on covid19 recovery. The readability and streamlining of the information collected by regulation disclosure. It had been more than 30 years since these disclosures have been reviewed, last year, they finalize the package of rule makings including regulation best interest, and to interpretations under the advisers acts. Compliance with these rules began on june 30th since june has been reviewing firms compliance efforts and identifying additional areas for compliance improvements through a staff roundtable and other stakeholder engagements. Another modernization effort underway at the sec is the creation of a strategic up for innovation and financial technology. This Important Initiative is critical in the inter agency coordination, and it dissemination of information to the public, regarding initial coin offerings and other cryptocurrency matters. Clearly, the sec has been busy, and i commend you for your balancing emergency covid19 responses while advancing critical rulemaking initiatives. Risks based inspections, Enforcement Actions and issuer and filings. I look forward to continuing the to work with the sec tinge or the u. S. Markets come back from the covid19 disruptions more strongly, more liquid, and more dynamic than ever before. In closing, i also want to thank chairman clayton for his service and wish him the best of luck in his future endeavors as he departs the commission in the coming weeks. The will and drive you have brought to this job allowed you to bring about many significant improvements that were long overdue. And i wish you the best of luck in your future endeavors, and again, thank you for your service. Senator brown. Thank you mister chairman, i believe this is your last hearing i think, and if it has some relationship we have had an are billeted to Work Together and your cooperation, even when we had major disagreements, but thank you for that. Chair clayton, thank you for your service to our country, and this election voters rejected this administration and its wall street first attitude. Across the country, it is clear that people want financial watchdogs who look out for them, not make life easier for american ceos. Its time to turn the page on this field administration, by at least 5 million votes we know, and to Work Together to build an economy that actually works for everyone. That means, an economy where all workers can save and invest their hard earned money for a down payment, send their kids to a community college, to retire with dignity, that is how you grow the middle class. And its time that everyone had the chance to join in. That means finally working in a real way to eliminate the racial wealth gap, it means, we have to enlist everyone in our government in this project, including the sec. This year, the dedicated Public Servants at the commission have done important work in the middle of a Public Health crisis. And an economic crisis, we thank you, and all of them for that, monitoring for fraud and misconduct related to the pandemic, continuing their work to protect investors. Maintaining orderly market, and promoting capital formation. These efforts helped working families saving and investing today and Building Confidence in our markets for the future, but i believe, we aim higher, or should aim higher, then simply making markets more stable. We can do better than just preventing crashes and outright fraud, we need to make markets actually work for working people. Over the years, i have raised concerns about how your leadership has left behind the people whose savings are at stake in our markets, denying them the ability to hold executives accountable, and withholding critical information about how companies are run, and how they affect the environment and their communities. In spite of reducing transparency, you have tried to undermine the protections we do have even in the face of strong opposition from large and small investors, from advocates from experts. From employees across the country scrapping and saving to put money into their retirement accounts, investing for a generation of workers, theyre all in the worst place since you have been in office, that doesnt even include those who want to save for their family and their retirement, but just cant because theyre cheap their paycheck isnt enough. The wealthy get wealthier, and the middle class shrinks. You push for what you call, regulation best interest, your term, a new standard that applies when brokers give advice to clients, but it doesnt put mom and pop customers first. A few weeks ago, you dismissed the sec initial reviews at the standard went into effect in june. Even though you said firms are making again, your words faith efforts, your staff reported shortcomings in compliance and failures to fully disclose disciplinary history to clients, in fact, it doesnt seem like you have any way to tell if this rule will help at all. I find it especially auspicious. The sec final rules on proxy advisers in shareholder proposals are really a clear example of the administration taking the side, every single time in this committee, we talk about this every single time, we know this, every single time people get in line to do this, the administration took to the side of corporate interest over american savings, and investing for the future. Over the years, shareholder engagement is forced important conversations to happen in boardrooms, we need to Push Companies to focused on improving diversity, implementing better governance, and addressing Climate Risks. And yet your agenda is attempted to stifle these important conversations, i am not the only one who is worried about your agenda. Last week, the north American Securities Administrators Association wrote, 30 of its members state watchdogs including from ohio, concerned about a recent board rule with a few safeguards in their words, would facilitate an license intermediaries in the private market. Thats a polite way of saying, they are very concerned about rampant fraud. Not only are they worried that we are putting their constituents, their risks, theyre upset, they didnt even get a heads up. But you are advancing one bad rule after another, all the was till the courts corporate interest, you didnt take the opportunity to make sure Public Companies disclose the risks that Climate Change pose to the business, you did the opposite. Watering down corporate financial disclosures, when you try to improve workforce disclosures, its still fell short. Failing to address basic concepts like employee turnover, or identified the numbers of full time workers, compared to parttime workers. But we are never going to be able to undo the corporate Business Model that treats workers as expendable if we cant even get companies to put out accurate information, on the workers who make their businesses successful. While the pandemic posed challenges to the commissions enforcement work, it also revealed how applying Additional Resources to the Whistleblower Program delivers results. And congratulations on that, by relocating staff to review whistleblower tips, you manage records results. I hope that my concerns about the uncertainty created by your recent change to the rules dont undermined the obvious successes of that program. More broadly, enforcement, over the sec is aggressively pursued covid related scams and fraud, the last year of enforcement shows more of the same of a few big cases created big top line number, but looking under the hood, you see too many cases without individual accountability. Last weeks amount announcement that the sec charge wells fargos former ceo, for deceiving investors this part of the fake account scandal, that was uncovered in 2016 is a rare and long overdue. Again, 2016, where your agencies actually held someone accountable for breaking the law and ripping people off at a big bank cooperation. Back when you are nominee, you are sure that in your words again individual accountability die when you dont get better behavior by taking years, years, were even talking about wells fargo scandal for almost half a decade, taking here is to hold top executives individually accountable for intentional and god knows it was an intentional deception. American voter sent a clear message in this election, 80 million of them, they are tired of an economy where big cooperation and wealthy ceos play by different set of rules. The people who work for a living, each rollback important safeguards, each disenfranchisement i shareholders, you claim to be reforming modernizing and updating the rules, people are tired of the political spin. When you say reform, it seems you mean making things a little easier for the biggest dies, when you say modernized, you seem to be making it that much harder to actually hold powerful ceos accountable. When you say update, you seem to meet further entrench wall street Business Model that exploited workers, and we know they do. 80 million americans rejected your agenda in this election, i hope we can reverse it. As you prepared to leave the commission, you have changed the rules so much, even you will need to really learn fundamental elements of security laws when you return to what i assume will be a lucrative private practice. I said it before, promoting workers harder earned savings should begin with a simple concept, putting their interests first. I am disappointed, mister chair, jack layton, you did not see it that way. Decisive majority of the country surely does. Thank you. Thank you senator brown, and now we will turn to you, chairman clayton you may make your opening statement. Thank you chairman craig, Ranking Member brown, and senators of the committee. I appreciate the opportunity to testify today about the work of the women and men of the securities and Exchange Commission. Over the past year, including our work to address the effects of the covid19 pandemic. To begin, i want to thank you for the support and assistance you provided the sec during my tenure. I have enjoyed the thoughtful candid engagement, and importantly, you have provided adequate and Additional Resources to help us expand and modernize our investor oriented efforts. I do wish circumstances would have allowed us to get together in person, and i hope to reach out to all of you bilaterally in the time that i have left. Working alongside the dedicated women and men of the commission has been the privilege of a lifetime. I am honored to call them colleagues and friends, and i could not be more proud of the work they have done, each and every day, on behalf of investors. Especially this year in the face of incredible professional and personal challenges. Their dedication, combined with our strong time tested and flexible Regulatory Framework, allowed thes sec to respond quickly to the health economic, and other unexpected challenges we faced this year. I am pleased to report that while the pandemic significantly impacted how we do our work, it did not negatively impact the work itself. With respect to covid19, the sec responded quickly, one, providing targeted regulatory relief to ensure the continued operation of our markets. Two, dedicating significant resources to covid related enforcement and examination efforts. Three, increasing investor focus oversight and engagement in key areas of stress. And for, working closely with our domestic and foreign regulatory counterparts to monitor and mitigate the impacts of covid19 here i must thank the treasury the Federal Reserve, and congress for their swift action to intervene in our markets and provide liquidity and support for our current economy through generally through the c. A. R. E. S. Act. In addition, our condition oriented work continued with vigor, rigor, and transparency. During my chairman ship, recognizing the value of our time tested Regulatory Framework, the agency has focused on modernizing the rules and regulations that implement that framework. Some of which, and not been meaningfully updated in many many decades. As just a few examples, this year the commission move forward on a number of initiatives to one, improve the proxy voting and shareholder proposal process. To, facilitate access to capital in our public and private markets and in particular with respect to our small and medium sized businesses. Three, modernize the Fund Disclosure and Regulatory Framework with an investor Oriented Approach and for improve and modernize our equity market structure. Despite our main environment we have also continued our strong enforcement an examination programs. Focusing on areas that are most impactful to mainstream investors. Including through our teachers and military Service Members initiatives, and dedicating resources to address covid related frauds and other matters. In addition, by leveraging technology we have continued our robust outreach education, an engagement initiatives to investors, entrepreneurs and in a rave Market Participants. Finally, as the importance of Diversity Inclusion an opportunity to the commission the financial industry in our society more generally was brought into stark relief by the events of 2020. Building on a Strong Foundation provided by among other things our office of minority and women inclusion, and our Diversity Inclusion Strategic Plan we have continued to advance initiatives to further our collective commitment to these principles, and to each other here at the commission. Thank you again, for the opportunity to testify about the work of the commission, the fantastic work of the women and men of the commission, and i look forward to your questions. Thank you chairman clayton. And again, thank you for this service that you have given, as the chairman of the sec. As i remarked my opening statement, i am impressed by the rules that you have been able to modernize and improve during your tenure as chairman. Your regulatory agenda has been and continues to be ambitious, you mention in your remarks, there is much work left to be done. In air wet areas you think the sec should focus, or congress to take a closer look . Senator, let me take off a few. First is, corporate hygiene, i think in the pandemic and the stress we have seen areas where corporate hygiene could be better. You need to remove any uncertainty that corporations are operating with transparency, and rigorous governance. A few of those can be option pricing, and what i call the eight k information gap. I think these are things that most my views in this area, are things that most could cooperations follow. With this information out, there had discussions with members of congress, i think thats an area that we can learn from. We also can learn a lot from our mandatory teleworking viral meant, and the efficiency, but the importance of electronic communications. We need to move our Regulatory Framework forward for all investors to an electronic framework. If people had not had if this had happened ten years ago, we wouldve had a problem. We would have a real problem communicating particularly with our Retail Investors. Not to take too much of your time, but i also think the proxy process needs improvement. Our 13 f proposal revealed that companies do not have efficient access to the shareholder base. We need more access to our shareholder base, our companies, that benefits both companies and shareholders. And finally, in the area of esg, we need to be rigorous, and our approach to this disclosure area. I welcome the report from onb, often these components, i have discussed is this in detail, i look forward to doing so in the future. Thank you, i appreciate that summary of where you think the sec should focus some of the issues that need to be focused on. But Congress Needs to be paying attention, i appreciate that. Along the same lines, the sec was quick and decisive and taking action in response to the covid pandemic. And the tools that were used such as the market wide Circuit Breakers, oversaw as oversight of the physical floors of the Nations Stock Exchange is being closed in order to comply with cdc guidance. Undertaking swift Enforcement Actions to protect investors from fraud, and illicit schemes and misconduct. And providing temporary relief in a number of other areas, the question i have, as you reflect on the actions of the sec has taken in response to the pandemic, how do they shape the way the sec should move forward, are there temporary relief actions that you believe, the commission should continue making permanent . The short answer is yes, calmer, many. The shift to mandatory teleworking vitamin across our critical market infrastructure, again, showed the importance of being able to conduct business electronically and remotely. We provided a host of relief, we are assessing whether that relief in any way degraded Investor Protection or market integrity. Where it has, and i think in many cases, it increased it. Where it hasnt we should make it permanent. Its that simple. That said, i want to make a specific there are people who prefer paper, at the end of the day. And i think that for those Retail Investors we should continue to provide access to paper to the extent that they wanted. But investors are better off in a system, and the system is better off, and for all on a level electronic communication Playing Field. All right thank you, my last question is, too long to get out and get an answer to in this. So i will ask you this question, but then you can please respond in writing. It has to do with the labor force prevention act, which passed the house by a vote of 406. There is a Similar Senate bill, 34 70, one that contains a number of restrictions intended to punish those responsible for the horrific Human Rights Violations occurring in chinas autonomous region. My question to you is, again, which i would like you to answer in writing. Is, this legislation creates essentially a new disclosure regime at the sec to deal with this issue. Im concerned about whether that is the right approach, rather than using utilizing existing pressure channels in the department of treasury, commerce, state, defense, and others. Does the sec is it your view that the sec should establish a new disclosure regime . Rather than focusing on our existing regimes for punishing this behavior . Again, i would ask you to answer that question in writing. But its very critical i think Congress Needs to get a right, and i would like you advice on that. Happy to do so. Thank you. Senator brown. Thank you mister chairman, i echoed the senators request on that question, thats an important question. So thank you for the response that you will give. When borrowed stock from chairman klieman, he has to provide collateral under the customs Protection Role correct . Correct. Last month though, the sec issued a new action letter to senator that certain brokers are failing to provide collateral required. Violating we think, the sec customer protections rule, they said it was okay as long as they fix it within six months. Was that was that no action letter said . I think its more nuanced than that senator, but look for purposes of this discussion, that is a fair way to say it. We gave a sixmonth period for people to adopt practices that were clearly in line with customer protection rule. This was particularly motivated by ensuring that civic protection applied in this case. So, how widespread is this problem in your estimation . And, why do firms need six months to do this one in the past they hadnt . Its not clear that they need six months to do it, but is needed is a time for those types of transaction, and the like, to be unwound in a word i would say is an orderly way. So as not to adversely affect customers of the market itself. Our staff at the division of trading markets and consultation made an assessment, that this was not a particularly situation where people were particularly at risk. But, to use my word, we need to better hygiene across the stop borrowing ecosystem. Well understand what you said, i think it again plays into the believe that the sec and this government deeper swamp than it was four years ago. Makes people feel focus on main street feels like the oddest stocked against them. Well i can just quickly respond to that, and soon as i became aware of this, it was days when this action was taken. Okay. Thank you. Let me turn to stark, chairman, cleaning the sec broader case against the company for doing stocks by management had inside information about a merger. Insider trading by most definitions, you called it a failure of internal controls, even though the Legal Department signed off on the buybacks. Congress is calling you to revisit the stock buyback rules, many in congress have it doesnt make more sense to have clear standards to for companies to follow in hub of uses instead of extending resources on weak enforcement activities. Let me say this about stock buybacks. As i mentioned in my response to chairman mike crapo, i think additional hygiene in this area is appropriate senator. And theres to look buybacks provide a very efficient way from a companies standpoint to manage their Capital Allocation and Balance Sheet. I think it should be applied with the good corporate hygiene, including, policies and procedures to ensure that when they are put in place or restarted, the company does not have Public Information. Four executives, i am a proponent of a cooling off period, that is, when you put your ten b five one plan in face, say you do it in june, there are no purchases or sales, in most cases its sales with an executive ten b five one program, for a period of time, whether that period of time is three months, or six, months or would it is. That gives everybody comfort, that timing was not planned ahead, that four to the wasnt intent. And i think that is something we should all explore. Okay thank you, i have worked on legislation, its a little late in this session under your tenure that would create guardrails or prevent these kind of failures and abuses. I think your comments were appropriate, and we allow companies to still do buybacks, but they have to provide Real Transparency which they dont always. Reward workers, not just shareholders, thats what i think the real solution is. Just a coast briefly, with a bit of a statement, we saw earlier that during the pandemic crashing our families, hospitals, and the economy, how the markets seized up. The secs recent report of interconnectedness and then market offer some insights but no real policy recommendations. I know that you and vice chair and a deputy secretary of come on to the market reforms last places. Were not good enough. Its clear that your successor the next banking regulators, the next will need to reduce risk from interconnectedness, and excessive leverage. The economy may in the future depend on it. Thank you chair clayton, thank you mister chairman. Senator, your turn. Thank you mister chairman, and chairman clayton welcome back on what i gather is your final appearance before committee, let me just take a moment to say, i really appreciate the excellent work that you have done in the leadership you have provided at the sec. In my mind, you have clearly advanced the mission of the sec is responsible for. Protecting investors, and maintaining fair orderly and efficient markets, and facilitating capital formation. Particularly appreciate your efforts to expand Investment Opportunities for average investors. I appreciate the work you have done to create an environment, or is easier for companies for companies to go public. And i also want to take a moment to tip my hat to you and your colleagues, for the extraordinary, really extraordinary, accomplishment of how we got through the unprecedented period where, we shut down our economy, we sort of voluntarily closed our economy, we forbid people from going to work. And yet, during that period of time, during the worst of that period of time, after a brutal period where they completely froze, out but then in response to our legislation, our Capital Markets reopening, they thrived. We actually set alltime records in influences across the credit quality spectrum, we had no settlement problems, we had an amazingly efficient, in fact we returned to being the worlds deepest most liquid, most efficient Capital Market by far. And we did it with everyone working from home, the sec working from home, while theyre a lot of people that deserve a lot of credit for, i think you deserve your share as well mister chairman. So thanks for all that you have done for your service to the country, let me ask i got two Big Questions for you if i could. The first is about, Companies Going public. As we all know, there are fewer of them than there once was, right. Companies wait till the longer, the delay going public as long as they can it seems. It seems that ipos now are more often a liquidity event than they are a Capital Raising event. We have far fewer Investment Opportunities for investors, because we have politically traded companies, and we have fewer options for Capital Raising on the part of the companies that feel like that is not a viable option. So my question for you mister chairman, just a couple of free throws if you have them. Is there more that we can be doing in congress, to create an environment where it is more attractive to go public earlier . So that that is a viable option for growing businesses, and its a viable Investment Option for more investors. What else can we be doing to restore even more vibrancy to our Public Markets . Thank you for the really kind words about the work of the commission, i think if the American People saw what to the women and men here did in that month of stress they would be extremely impressed. Your question is one that is kind of front of mind for me at all times. We have taken the jobs act, which was a terrific piece of legislation, which did facilitate the move from being a private company to a public company, providing an on ramp. And we have expanded access to the jobs act to companies, and i believe that has made a difference over time, and the choice between staying private and becoming public. Im not going to take a victory lap yet, or you know were up on ipos, that may be market driven, maybe a result of our breasts efforts and maybe a result of a lot of different things. Im hoping that that choice is a better one, i think we have to recognize that one size does not fit all from a disclosure and regulatory perspective. I have no problem with many of what people would call burdens frictions, whatever you want, in our system for large Public Companies. Can they be adjusted here and, there and are we doing that . Sure. But for medium sized companies, im going to say this company, 100 million to a couple a billion, or more, the same rigor in life that applies to a company with a 500 billion dollar market cap just doesnt make sense. And we need to recognize that. Well, thanks, im going to run of time here mister chairman. Thats quite all right. I would suggest that the jobs act has been remarkably successful, the vast majority of companies that go public actually use the emerging growth avenue that we have created. I think we want to expand that avenue, so that more companies can take advantage of it. I also think we want to be more careful about the extent to which activists groups are trying to use Corporate Governance as a way to advance a social and political agenda, that really ought to be advanced through a the accountable elected branches of government. Thank you for your service, i look forward to continuing the discussion. Senator bob menendez, with us. I think he may have had to go off line for a minute. , all right lets move on to senator mark r. Warner. Thank you mister chairman. I appreciate this hearing. And mr. Chairman, before i turn to questions, i also want to take a moment and thank you for his service, chairman clayton, has been someone i have had a great working relationship with. Can you hear me all right . Am i coming along . Okay, and while we have not always agreed by any means, i appreciate the partnership that we have worked on, issues like improving the sec enforcement tools, which i want to get to at the end of my comments. But i really wanted to zero in on something that i first talked to as you came into this job, and thats the question which i think is a fundamental and will be one of your legacy items about Human Capital reporting. I think, we all know that we have seen a prepandemic, a fundamental transformation in Overall Investment strategies. We have seen that companies are investing much less in tangible goods, and much more and intangible goods, and oftentimes those intangible goods are Human Capital. We have talked about a need for potentially, to impact reporting accounting transition, maybe further down the path a new, on some of those issues. But i really appreciate the fact that you have taken this issue on with a seriousness and rigor and really laid down laid down he did that by the revised rug ask a. Regulations, and that finally for the first time, and i would argue for the first time in more to go, requires some level of Human Capital metrics. For companies to report when you talk about the ceos talks about their assets being the workforce, yet there is no place that that is reflected on their Balance Sheet there is no place that is reflected in their filings, i think by these revised rules youre starting down this path towards a more work Center Management structure. And i hope i think taking this on as a principle space approach, that we will both see both an increase in the quantity of this reporting, as well as the quality, and its terribly important that we ultimately get enough data in place where there is allowed to be a baseline that would allow some comparison between industries on this important topic. We had this start at some place, and you have started that discussion, i say you have noted in your written testimony that you believe in the principles based on the quantitative disclosure by firms, indeed, you had deemed the information to be material. Can you talk about how you see that turning in practice, and then how we make sure that this is just not a nice to have but that more and more firms will actually believe this Human Capital proponent falls into the materiality category, and that they will make it with a kind of seriousness, that i know you do. And i hope we will see the whole Business Community move towards. Yes, thank you. I believe that the disclosure requirement that we put in place will facilitate both qualitative disclosure, how do we look at our workforce, like you said. In a number of industries it can be the entire company. It can be 30 , 40 of the value on the Balance Sheet. Depending on the industry, i would expect turnover. Turnover in particular areas. To be a metric that people might show. In some industries thats not very relevant. In others, it is. Sector specific within skill sets. Engineers. How many engineers are people actually bringing onboard . How difficult is it to hire them. Theres a qualitative in the quantitative disclosure. We should understand what management believes drives the value of the business from a Human Capital perspective. Thats the core requirement. I think thats the way i look at things at the s. E. C. Whats our turnover. And from a topic thats current today, from a Diversity Inclusion standpoint, we are tracking those metrics at the s. E. C. And i have them in front of mind if i were a public company, i would expect to disclose them. I appreciate that. Again you had to be the guy that set the framework to get this out of the discussion stages to start having companies putting this reporting in place. You have heard my colleagues on this committee, i think we need to go further. I always point out the problem in terms of tax and accounting. A company buys a robot, you get a tax credit. Its an asset on your Balance Sheet. The accountants have recognized that. The same Company Invests in choosing human beings to be more efficient than the robot, they are not given the same tax treatment. That investment is not viewed in a category on the Balance Sheet as an asset class. I know you are coming down to your last meeting or so. I dont want to get further out on your skis but i want to push you on this a little bit. My hope would be that you would you are at least open to ongoing engagements. I think the commission has a role of overseeing fasb. We open the discussions or start discussions about accounting treatment of investment in Human Capital. I think we ought to look at tax treatment of investment in Human Capital. And do you think we are you have taken the first step by having at least the de minimus reporting. I think the next step ought to be tax and accounting review. Use my last minute or two for youto comment on that. You are about two minutes over, senator warner. Where is your clock . I thought you were going to put a clock up here. I was trying to be brief. I will let chair clayton since we had discussion repeatedly you take that one for the record. I would love to if you let me help draft your answer so i can share it with chairman crapo and some of the others. Let me just again say, jay, thank you for your service. You have done a great job and looking forward to continuing this. The tone i told everybody we were going to play doesnt appear to be working. I was waiting for the exit music, mike. Somebody in my ear going thats a great question, warner. I guess i have to try something, please folks remember the clock. Well try to solve this. Thanks, mark. Senator scott. Thank you, mr. Chairman, for my 12 minutes i have now. Thank you so much. Ill use every minute plus fifteen on top of that. Thank you so much. Chair clayton, thank you for your service to our country without any question. Having had the opportunity to work with you, i know that you are focus has been on mr. And mrs. 401k. The average investor in our country through their retirement funds, may not appreciate the way that you have really focused on simply filing some of the language and making it easier for the investor to engage. Mr. And mrs. 401k or the main street investor may not be able to pinpoint exactly which amendment to the 34 act or tweak to the 40 act that allowed them to safely and affordably access the products needed to meet their investment goals. Im glad you and your team at the s. E. C. Have been so diligently focused on protecting these investors. Thats a really big key. You think about the fact only half of u. S. Households own stock at all. And the average portfolio is about 40,000. That is a really important engagement when the average investor can understand and appreciate in a simplified manner what they are investing in and the rules of the road, so to speak. You take that number and you cut it down by 31 for minority investors. Hispanics, africanamericans that number dropped precipitously. Fortunately, technology and innovation have recently improved the availability of simple, lowcost investment platforms that can be accessed by investors with a smart phone and as little as 20 to see their dream come true. A broad chunk of young and diverse americans are more engaged in the stock market, including many millions who are doing so for the very first time. Can you, chairman clayton, please discuss the benefits of the increased participation, and if the commissions regulations are keeping up with the pace of innovation . Thank you, senator scott. I believe and i know the people here believe and the pandemic demonstrated this, that being connected to our financial system, having a bank account, having an investment account, is essential to participation in our society. We saw this in the cares act relief. You could get relief faster to people who were connected. We want to increase those connections, preserving Investor Protection. As you mentioned, driving down costs. Look, we are hellbent to get at fraud and prevent fraud. We have a thousand people in the Enforcement Division, a thousand people inspections thats their job. If we can reduce cost for the average american by 25, 30, 50 basis points over the course of their retirement, the benefits to society are astronomical. And technology should be enabling us to do that. So, get connected. Get educated. And get the frictions down. Chair clayton, ill end with this note trying to respect my 1 30 we have left. Access as you just discussed is so critical. It has never been more accessible than it is today. I was talking with my nephew who is a resident, and his friends are now engaging in investments using multiple platforms in a way that was unimaginable, and frankly cost prohibitive, 10 years ago, 15 years ago. So we are moving to a place where the average family, average person will have access to the stock market. And the most important point with that increased access is having integrity in the system. So thank you for spending quality time insulating those smaller investors by making sure that there is lots of integrity. In my opinion integrity in this case would be transparency and digestible. Making sure that the language is such that the average person i heard the bell. Senator warner just ignored the ball. Continue to work really hard and making sure that the average investor has confidence in the system and i appreciate your Office Taking the average persons perspective on something that is very complicated. Sometimes hard to understand. With that, i yield back my last three seconds. Thank you, senator scott. Senator menendez. Chair clayton, thank you for your service and best of luck as you move forward. Last time you were here we discussed how foreign actors could evade the Beneficial Ownership disclosure requirement under section 13d and the negative effects that could have on publicly traded companies, particularly in the media and technology sectors. Given the ongoing pandemic, the ensuing economic crisis, we need to continue to be vigilant against any maligned foreign actor that could be looking for an opportunity to purchase a significant stake of a Distressed Company without filing the requisite disclosures. Has the s. E. C. Made any improvements to your 13d oversight as we discussed this last year . Have you identified any statutory impediments that prevent the agency sufficiently monitoring or enforcing potential 13d violations . Senator, i agree with you and i think our friends at the treasury would agree with you that understanding the Beneficial Ownership and whether there is any evasion of 13d is very important. We did take a recent measure that i want to highlight for you. We just put out what i would call guidance, but you can also call it good hygiene. Foreign omnibus accounts, accounts that mix ownership of different parties outside the u. S. , and then trade through a single pipe into the u. S. , i believe that they have been used to mask ownership. And we need to ensure that the u. S. Brokerdealers, particularly in this guidance, comes out in the area of thinly traded and lowpriced securities, are doing the appropriate diligence on those foreign omnibus accounts. What i can do is assure you we are focused on this area and we are we are not just studying it, we are doing things about it. I appreciate that and im particularly concerned about media and Technology Companies that are responsible for delivering unbiased and objective reporting of Current Events to the american public. And in these times they play a special role in disseminating critical Public Health information so we can get the pandemic under control. I hope that your success and the rest of the members will continue to prioritize this. I have seen elements of foreign entities purchase things and having significant controlling interests. In and of itself thats not a terrible thing, but understanding the nature of having the disclosure so we know who is affecting these Public Information channels is incredibly important. Let me turn to another topic. Studies have consistently found greater diversity on executive teams have led to greater profitability and Better Outcomes for shareholders. Mckinseys most recent report found companies with more gender diversity on their executive teams were 25 more likely to have an above average profitability than companies with nondiverse teams. That same report found that companies with the most ethnically diverse executive teams are 33 more likely to outperform their peers on profitability. Do you find that is more profitability . I looked at that report. Let me just say what we do here at the s. E. C. We do believe and have acted on diversity and inclusion not only as the right thing but as value enhancing. I have seen firsthand as we increased inclusion here that its led to better performance. I appreciate that. Id like us to go beyond that. I think that in a marketplace, forgetting about doing the right thing, that simply in a marketplace where you have a trillion plus dollars of domestic spending of the hispanic community, for example, younger by a decade than the rest of the american population, more brand loyal than any other group, and spends more of their disposable income, as a business proposition i would like to be on them like white on rice. Understanding, however, the nature of the community, having senior people on corporate boards and Senior Executive management or the bottom line. My final question, section 956 of dodd frank requires the o. C. C. , Federal Reserve, and fhsa and s. E. C. To join the proposed executive conversation rule to prohibit unsafe and unsound compensation plans. During your time as the s. E. C. Chair, have all six regulators sat down together to discuss this rule making . Commissioner clayton yes, we have. If you consider Conference Calls sitting down together. What do these discussions ultimately lead to . Have you moved forward with the proposed rule . Ill say it this way. We are advanced term sheet stages. Bandwidth has been constrained in some areas by particularly that kind of coordination bandwidth is constrained by the events of the day. I would just say it seems sometimes the bandwidth on things we dont really want to deal with seems the most constrained. Thank you. Good luck in your future. Senator cotton. Thank you, senator crapo, thank you, chairman, for your appearance. Which i assume will be your final appearance. Im sure you hope so. I want to thank you thank you for the service to our country at the s. E. C. And thank you for being a good partner to my office when we agree. Especially when we dont agree. And the open lines of communications we have had and representing the people of arkansas. I want to speak today on a topic we discussed in the past at these hearings and directly oneonone. That is the concept of regulation by enforcement. This is something that became infamous under president obama, its the act of using Court Rulings or administrative decisions, make changes in rules as opposed to the notice making process under the administrative procedures act. It often means that they are based on things that regulators may or may not like. Things that remain opaque and sometimes even unknown to regulated players in the market. Do you agree that enforcement action should only be taken when an actor in the market violates rules, rules that have either been written by congress in law or passed into regulations by an agency like yours . Senator, i do. I want to qualify that by saying some rules rely on facts and circumstances application. But to the extent you are asking me should we expand authority or Regulation Without going through notice and comment, no, we shouldnt. We should do that. I think its a fundamental principle of the rule of law which in some way predates the concept of selfgovernment that its hard to have an ordered Society Without clear and established rules known in advance that all citizens can obey and uphold. Irrespective of whether or not you agree with the laws or not. So vital that we have established written rules in advance. One example we discussed, i want to discuss here today, is the s. E. C. Share class selection disclosure initiative. Under that Initiative Several firms were fined partly because they didnt list three items in the disclosure. One, a Firm Received 12d1 fees. Two, the same fines were available. And three that will fund shares that paid the fees and were available would adversely affect the clients return. These may be best practices for financial disclosures, but thats exactly not what we are talking about here. We are talking about having clarity in advance of any enforcement decision. Can the s. E. C. Write a Public Document where all three of those elements were listed in advance of any of these Enforcement Actions, mr. Chairman . I dont have a document like that to hand. I understand the issue very well. This was an Investment Advisors engaged in their clients. They have a duty to those clients not to put the Investment Advisorsinterest ahead of the clients. They also have a duty of candor. This let me give you the stark case, you tell somebody im going to put you in the best option for you, from a cost perspective, you have two choices, one has a higher cost, one lower, the others are exactly the same, there is no doubt that thats a violation of that obligation. What we tried to do was trying to efficiently deal with what we saw a bad practice with the law. Theres other circumstances of situation, and i understand that some people felt that they wear within the bounds of the law when we did that or not. Im hopeful that theres been clarity brought to this, more clarity brought to this. Bite im also comfortable that the Enforcement Division pursued this believing and having that belief based on rigorous analysis they were on the right side of the law. I very much take your point that we should not, you know, use ambiguities or uncertainties in the law to our advantage. Let me [indiscernible] action in this case, something that commissioner pierce said. The division it was never tried before a judge. Precedent that they violated [indiscernible] and they shortcircuited the rulemaking process rather than through rulemaking. I take it you disagree with commissioner pierce on that point . I agree with part of what she said. Using our administrative courts for matters like this, we need to do so cautiously, if at all. I wish that precedent were in the article 3 court. Were hearing bells ringing. Maybe thats an angel is getting its wings when a senator goes over its time. Im having a tone rung at 30 seconds at the end of five minutes. Some senators dont seem to be able to find the clock on their screen. With that, senator warren. Thank you, mr. Chairman. The s. E. C. Is ensuring investors have the basic information they need to make good Investment Decisions and thats why the s. E. C. Requires publicly traded companies to disclose things like outstanding lawsuits or pay for top executives. If a Company Looks like a bad bet, then an investor can decide to put their money somewhere else. Now, in order for the s. E. C. To make sure that Companies Stay honest, Disclosure Rules have to keep up with changes in our economy. And one of the biggest changes bearing down on our economy is Climate Change, extreme weather events, rising sea levels, increasingly scarce resources. These all pose huge risks that Big Companies must navigate. Policies moving us toward clean energy will have a big impact on companies who are still dependent on dirty energy. So while the crisis has gotten worse, the s. E. C. , under your leadership, has done nothing. And thats resulted in multiple problems. So i just want to go over the list i thought we might do this together. Uniform standards for climate risk reporting. Chairman clayton, has the s. E. C. Established a mandatory uniformed standard for reporting on climate risk so that investors can make can compare companies headtohead . If you mean a standard metric, like a carbon standard metric across our 6,000 whatever the number is . No, i mean a mandatory uniform standard, have you got a mandatory uniform standard . To the extent climaterelated risks are material to the companys performance and prospects, they have to be disclosed. We have outstanding guidance to guide companies. I understand you have that guidance. I read that guidance. It does not establish a standardized framework. Im asking about mandatory uniform standard and i think your answer here, one word, yes or no . Depends on what you we do have a material you dont know what a mandatory uniform standard is . You have no uniform standards for reporting. What about mandating that Companies Report something . Chairman clayton, has the s. E. C. Mandated that all publicly traded Companies Report something about climate risk so that investors can compare those companies headtohead . To the extent its material to an investor. Thats not what i asked. I asked the question about requiring all publicly traded companies to report something. They may decide to report that they have no risk at all. But do you require that . We do not require that. Ok. Right now we have these huge gaps in the s. E. C. s Disclosure Rules that basically allow a company, either to conceal or to downplay climate risk from investors. How do the investors feel about that . How do the Pension Funds and University Endowments that are trying to make longterm investments or socially responsible investments feel about the s. E. C. s failure to require full and consistent reporting of climate risk . Well, this summer, 40 major investors who collectively manage over 1 trillion in assets joined with nonprofits, businesses, and former regulators in sending you a letter arguing that the Climate Crisis is material and a systemic threat to our economy and asking the s. E. C. To mandate corporate climate risk disclosure. And then, just last week, the Federal Reserve National Stability report stated that, quote, increased transparency through measurement and disclosure could improve the pricing of climate risk. In other words, more information on climate risk is good. So chairman clayton, how do you explain to these investors, these businesses, these nonprofits and even your fellow regulators that they are somehow better off with less information about Climate Change . Well, thats not what i would say to them. Id say youre better off with good information. I can tell you i was up early this morning for a lengthy discussion with my iosco friends, mark carney and others, thats been ongoing as to how to actually address im supportive of the Federal Reserves report address this issue in a meaningful way. Let me just ask. Youre getting letters from investors asking for climate risk information. Obviously, theyre not getting it or else they wouldnt be asking. Have you been getting letters from climate from people representing over 1 trillion in investments, have they sent public letters asking you to shield them from getting climate risk information . No. They asked me to get them good information. Good those who say they dont want to no. What people is want is useful information. Thats why they ask you i have a bill with representative casten that would force you to do your job and require publicly traded companies to disclose information about climate risk. The s. E. C. Doesnt have to wait for congress to pass a law. You already have the authority to require companies to provide this information and youve refused to ask. Chairman clayton, climate risk Climate Crisis is an existential risk. We need existential risk. We need a chairman that will put this at the top of the agency. Thank you, mr. Chairman. Thank you. Thank you, mr. Chairman. First chairman clayton, let me begin by saying, congratulations, on the upcoming end of your tenure as chairman and thank you for all the hard work you did while serving at the s. E. C. Youve accomplished a great deal as chairman but one positive development that id like to highlight is the s. E. C. s expansion of people and entities that qualify as accredited investors under the regulation d. In particular, i was pleased the s. E. C. Expanded regulation d to include native american tribes. These reforms will make it easier for tribes to participate in Investment Opportunities. Also put native american tribes on more equal footing with Market Participants. In considering the changes to reg d, particularly as it relates to native american tribes, are there additional ways the s. E. C. And congress can help level the regulatory Playing Field for tribes . The short answer is yes. This is an issue i wasnt aware of when i arrived here. I had a nice meeting with representatives of a number of tribes and realized they werent being treated fairly under our accredited investor definition and some of the other definitions that provide access and opportunity for Institutional Investors. In short, they should be treated like any other Institutional Investor like a pension fund or the like. And i believe were going to be doing that Going Forward. Right. Look, i appreciate that. I know the tribes in south dakota have an interest, specifically, regarding that. I appreciate the work youve done. Im also sure youve been closely following the conversations in state legislatures and City Councils about imposing a financial transaction tax on trading. Is it opens concern me for several reasons. Mainly because these concerns is could hurt main Street Investors and Institutional Investors like the south dakota retirement fund. South dakota is a low tax. Id like to say to any of the businesses that may fall victim to a financial transaction tax elsewhere in the United States, whether youre an exchange in manhattan, a data center, commodities trader in chicago, youre welcome in south dakota. Chairman clayton, how do you see our Securities Market evolving if one or more state and local jurisdictions impose a financial transaction tax . You know, a couple things just to highlight, to think about. One is that transaction taxes, whether theyre in Financial Services or other places, the incidents, largely falls on the end user. In our case, the investor. Some of the frictions are absorbed by intermediaries. At the end of the day experience shows that. They should approach that with mind that the tax falls on the person who uses the investor at the end of the day. The other thing is, if we have if we do have a piecemeal approach to transaction tax, youre going to have Critical Infrastructure moving in response. Tax policy causes adjustments. If we have our Critical Infrastructure moving from one jurisdiction to another for more favorable tax treatment, from my perspective, that creates operational issues that we need to think about. Thank you. With regard to proxy Advisory Firms, theres been discussions about their impact, whether or not there should be more disclosures. Just in broad terms in the time i have left, whats your thoughts regarding any regulatory activity that should involve proxy Advisory Firms . Where are we at right now, in your opinion . Are there other issues . Are there concerns that youd like to express to this Committee Regarding the firms, the impact they have and whether or not additional regulatory activity should consider regarding them . Let me try this at a perspective Going Forward. Sorry im not going to be here in the process. The proxy process is designed to approximate the quintessential Shareholder Meeting. If you have somebody at that Shareholder Meeting is soliciting votes one way or another, you want to know their interests. Just what weve done in our rulemaking is apply that concept to the proxy Advisory Firms and say to the extent you have material and, again, material, material conflicts that could that a reasonable person could believe would affect your advice, you should tell them. I think with that paradigm, you know, virtual Shareholder Meeting is one. Lets have engagement so shareholders can hear boats hear both sides and make an informed decision. Thats how i look at it. Thank you for your service. Thank you, mr. Chairman. Thank you. Our engagements have always been good and respectful and sometimes we even find areas of Common Ground. I want to follow up a little bit on our ongoing conversation about climate risk. Last year we discussed the s. E. C. s enforcement of its 2010 guidance on climate risk disclosure. You and senator warren had a brief exchange about 15 minutes ago. Where is the division of Corporation Finance on the enforcement efforts . Can you give me an update . Heres where we are, senator. I want to make it clear that this is an area where for certain where for certain sectors and certain companies, you know, we all believe disclosure is required, different sectors, different ways. What weve been doing like i said, i just got off a long Conference Call this morning with iosco top group task force. How do we drive the standards that are meaningful . And i think were all gravitating toward the view these need to be sectorspecific. Its hard. Its forwardlooking information. Sorry im taking so much time. I need to say this. Its hard to make forwardlooking disclosure over time. We need something to disclose against and whether thats Carbon Neutral by 2050, you know, how will i get my company Carbon Neutral by 2050 . You need something to disclose against. We are working on that. For example, the property and casualty industry and in Certain Industries you can start to see metrics where people will gravitate toward as regulation changes. But this is a vexing issue. We are on it. These risks for material, the s. E. C. Does not need additional Statutory Authority to require these disclosures but, and this stuff is hard and we need uniform platforms and Disclosure Requirements so its not everybody intending their own disclosure technique either by sector or even by individual companies. So we have a fair amount of Common Ground here. As you know, the u. K. Announced last week it would require companies to disclose the financial impacts of climate on their businesses by 2025. This is where we may have disagreement because its not just against potential regulation. Its against whats currently happening. Its both. What we see now and what we see in the future. This is not just about regulatory risk, political risk. This is about financial risk to property, to farms, to aviation, to tourism, whatever it may be. The question i have for you is, how deeply are you engaging with your International Counterparts on their plans . I think its fair to say other countries and other regulators are a little further along there. I dont want to get wrapped around the axle on that particular question. How deeply are you engaged with your International Counterparts and whats the next step with the s. E. C. . Deeply as in we monthly if not weekly at a very substantive level because we need to be humble about this. Let me give you a financial comparison. Backlog. Company discloses backlog. Thats a forecast as to how much they will be able to sell in the next two years. Backlog numbers usually prove to be meaningful but somewhat inaccurate. We need to try and get disclosure. People recognizes thats forward looking. Gives you an assessment of the risks but people wont be held to precision. They wont be held to metrics. And thats a very important way to approach this. This is not how did you do last quarter or what were the effects. Its what are you thinking about Going Forward . I believe we will get better disclosure and move this forward if we have a safe harbor that you cant fraud, you cant lie, you cant do those things. People need to know if they miss their forecast, theyre not in a goodfaith way. We need that forecast information. We cant deter it with, you know, you know what im saying. Senator schatz i do get what youre saying. The one thing ill close with this. We moved along pretty nicely on this question. It got us to the point we can agree this stuff is highly technical. Theres work that needs to be done through the network, financial system, bank of england all of this stuff is not easy. But where we were three to five years ago, because this stuff is difficult, its therefore permissible to put the risk at zero. The risk may be difficult to quantify, even if terms of ranges, but Everybody Knows that the risk is not zero and so we got to put pen to paper and do the hard work and i appreciate your partnership on this. Thank you. Senator tillis. Thank you, mr. Chairman. Chair clayton, thank you for being here. I want to first thank you for what i think has been excellent work in your tenure and my staff have high regard for the people that theyve had an opportunity to work with over there. Before i ask you a few specific questions, when you were first moving into this role, i was really trying to emphasize regulators were going to go out, take a look at the organization, and right size some of the either Regulatory Guidance requirements that your particular agencys responsible for. Can you tell me a little bit what youve just done internally, what youve taken on yourself and things you are most happy with under your tenure . Its nice of you to ask that question. We have looked across the landscape of our rules and seen which ones have not been touched in years and tried to modernize them and bring rationality to them. In some ways weve increased regulation. Broker dealers when they deal with customers significantly. In some cases we cut red tape. The patchwork system that is our exempt offering framework that was built up over 30 years, you know, we we made the seams between the patches a lot less rough. You dont need an army of lawyers to figure out how to get clearly qualified investors into an investment. Well, i for one think youve done a great job. There are some specific things you and i had more than one conversation over. The one in particular was the rule back in excuse me back in july over proxy advisors. Can you explain why you think that was worthwhile and important to people who may be watching this . Well, i think any time you have a participant in our marketplace who is soliciting votes or providing it investment advice, understanding their conflicts is important. Material conflicts. I think thats very important. And to the extent youre participating in a Shareholder Meeting, you want that engagement at a Shareholder Meeting to be as meaningful as possible. In many ways we codified best practices, brought transparency and i hope it will lead to better decisionmaking by investors. I want to touch a little bit more on the shareholder process. I appreciate the work you did there. Youve also worked on updating the rules regarding shareholder proposal process. Can you mind expanding excuse me on the steps the s. E. C. Has taken under your leadership on this issue . Sure. That process parts of that process material parts of that process has not been updated since the 1950s. So almost 70 years ago. That was the days of the mails and the like. And so what we did was on the proposal process, we looked at what a demonstration of a meaningful stake in the company is such you can take up the time and attention of the other shareholders such that i mean this is an amazing system. You can be one shareholder having 2,000 or more and if you held it under our new rules, you held it for three years, you can take the time and attention of all other shareholders on your proposal. You know, that is thats part of our system. What is the amount you need to do to demonstrate the level of commitment that allows you to demand that time and attention of the other 20, 000, 30, 000, 40, 000, 50,000 shareholder for them to go through the proxy . 2, 000, thats a good minimum threshold. You held it less, you need a little bit more of a financial commitment. Youre proposing changes for the long term, you should demonstrate youre in there with your other shareholders. And then on the resubmission thresholds, they were outdated. It was that if you you could get less than 10 of shareholder more than 90 voting against it, you still have the opportunity to resubmit. If you got more than 10 after a few times, you could submit it for lack of a better term into perpetuity. We tiered those, but we didnt say youre out forever. We said you need a timeout. I think we did a very good job. And just a final question. I have some other ones i may try and submit for the record. Whats next . What else should we expect in your remaining weeks on the job . Well, continue focus on covid and the integrity of our markets. We have a few more rule makings on our [indiscernible] but its just business as usual. Well, again, chair clayton, i appreciate the great work youve done. I especially appreciate how accessible you have been. Im sure i join the majority of my colleagues thinking its been a great run. And i appreciate your service. Thank you. Senator van hollen. Thank you, mr. Chairman. I too want to start by thanking you, chairman clayton, for your public service, for the open lines of communications that weve had, whether we agree on an issue or disagree on the issue. I want to talk about a couple areas where i think we agree but i have been, you know, frustrated that we havent made more progress recently and maybe tee up some action items for all of us, including the s. E. C. Going forward. And these are all designed to do what i think we all want which is to provide accountability or insiders and Corporate Executives and transparency for investors. So on the issue of accountability and making sure that insiders are not exploiting unfairly information they have. You mentioned already the s. E. C. Rule 10b5 which allows executives an affirmative defense to Insider Trading if they essentially provide a schedule for their stock sales. But weve seen a number of incidents recently which at the very least i think undermine Public Perception that people are not using insider information. Most recently was the pfizer time stock, the c. E. O. Of pfizer, as you know the stock sale occurred on the very same day that they announced their breakthrough on a covid19 vaccine. That stock sale had been scheduled in august when the c. E. O. Changed their plan, their scheduled sales plan. And i heard you mention earlier, you know, putting guardrails up against this maybe three months, or six months. I really think we need to act. We also saw a similar situation with moderna, where after announcing their progress towards a covid19 vaccine, their stock sale their stock price increased and then certain moderna executives changed their 10b51 plans and as a result made an additional 4. 8 million in profit. Again, this is currently legal but i do believe it undermines Public Confidence in the system. And i want to know if you agree and whether you would encourage us to work to put up tighter guardrails against potential abuse and certainly a Public Perception that undermines confidence. So i want to be very clear. Im not commenting on any particular case. But as a general matter, i agree. And i do think that how we craft it, you know, there are people that have different views. Let me just say it this way. For Senior Executive officers using the 10b51 selling stock i believe in a cooling down time until the first transaction is appropriate and whether thats four months so you cover a full quarter or its six months. I can make arguments for either. I do think we should do it. I appreciate that. Well, senator fischer and i have a bipartisan bill we introduced and encouraged the s. E. C. To look at this and do a rulemaking. It passed on a bipartisan basis in the house. I will ask chairman crapo to look at it and maybe pass it before the end of this year. Let me ask you a question regarding transparency and country by country reporting. Because you stated, at a hearing in the house on june 25th, that, quote, i want to be clear, in your referencing country by country reporting, its becoming increasing part of how sophisticated investors are looking at companies, unquote. And, weve seen that 100 percent of investors managing to trillion dollars an assets who weigh in with the Financial Accounting standards board. First, but board includes country by country reporting, and the gap, a gap. Is this an area where you also would agree that more transparency would help investors . Yes, let me say this, im not sure i can give you an absolute specific answers headed to the last one. To the extent that management in the board room, people are looking at drivers on a countrybycountry basis. I would hope in the ndna section of disclosure that companies would be disclosing that to their investors. Its much more its part of a companyspecific issue but, yes. Another area where theres legislation to provide that kind of transparency, which it seems to me its hard to argue and to provide investors with that useful information. Mr. Chairman, i will follow up with a question for the record regarding something that senator brown raised regarding stock buybacks and Insider Trading. Ive talked with chairman clayton about this issue before one of his former colleagues, commissioner jackson was involved in this. And since his findings, lenoir paladino at the Roosevelt Institute issued a paper finding it very clear correlation between stock buyback activity and insiders selling their own shares. I think this is another area we got to look at Going Forward. Maybe even after you leave public service, mr. Clayton, we can work with you on that and get your advice. Thank you. I love markets. I love investors. Happy to help. Thank you. Thank you, mr. Chairman. Thank you. Senator kennedy is next. Thank you, mr. Chairman. I am in a Judiciary Committee hearing. Of course, were in the middle of a vote. So i just wanted to use this opportunity rather than to ask questions to make a short statement. Specifically to chairman clayton. I want to thank you for your service, mr. Chairman. [indiscernible] you will be leaving your post at the end of december. I want to just give you my point of view. Youve been one of the best s. E. C. Chairmen our country has ever had. Youve been fair. You clearly care about investors. You also care about the investments. You have exercised power intelligently and materially. Youve always been responsive. You have been frank with all of us. If you think our ideas have merit, you say so. If you think our ideas dont have merit, you say so. In a very tactful way. And were going to miss you, mr. Chairman. I just want to say that it is a genuine honor and a genuine privilege to serve with you, jay. Thank you and best wishes to you as you go back to the private sector and soar through what im sure many opportunities there. Thank you, senator kennedy. Working with you and your staff has been tremendous. In particular, i want to thank i want to thank the people that are willing to engage with us to get something back. Youre too nice to say it here but we didnt do a good enough job for the standfor people but it wont happen again. Thank you, jay. Thank you. Senator cortez masto. Its not an easy task under the current environment. We havent always agreed on policy. I, too, appreciate your service to our country. Let me ask a question. I know youre leaving at the end of this year. Were going to have a change in the administration with new president elect biden. What is it that you are preparing for right now with that transition . Are you undertaking any type of work with the Transition Team or coordinating with them in any way whatsoever and if you are, can you talk specifics . In terms of transition to a new chair and the like, let me just say this. Ill be i will be available. My predecessor was available to me. In terms of the ongoing work of the commission, were very transparent. We have four other commissioners. We have an agenda thats transparent. And when the time comes, in terms of legal restrictions and ability to engage with folks, well do so. Thank you. Thank you for that response. Clearly it sounds like no transition is happening until you get through the legal restrictions set by this current administration. Let me ask you about 13f, the proposed rule that has been very controversial. Is the s. E. C. Planning to finalize this rulemaking prior to you leaving . By the end of the year . The short answer to that is no. But if i can elaborate. This proposal has taught us something. It goes to 13f which was there for a market integrity point of view. Lets find out how much Institutional Investors have in particular stocks and how it changes from quarter to quarter and whether theres a market integrity. Its an outdated way to do that. We looked to modernize the threshold but what we found was people were using 13f for two things it wasnt intended for. One was so companies could find their shareholders. Its an incredibly inefficient way for that to happen. So we need to fix our proxy system. Our obo, nobo. Fancy terms for got to go through intermediaries systems to make Companies Access shareholders. And the other thing is to track Peoples Trading strategies. You have x, y, z fund manager. Someone looks at their 13f reports and track their trading strategies. Two things. Im not sure we want regulation that is there to facilitate trading strategy tracking. Thats proprietary. Maybe we do. Maybe we dont. Certainly wasnt the intent. But if we do, 13f is a pretty inefficient way to do it. Its there. I can get into technical things. Investors need to understand if they look to 13f as a robust trading strategy, in many cases its not. Let me jump to an issues that is a concern of mine. I understand senator scott asked. I have a rules Committee Meeting as well. Its about sophisticated investors. It goes to the issue of too many young people being able to trade online in this kind of in this kind of environment where it is trading on platforms, no fee. Really kind of gamifies the stock market into a playful environment. We have seen horrific coverage of a young man, College Student training on Online Platform while home due to the pandemic and he had a negative cash balance of 730,000. And fearing financial ruin, i understand from the reporting, that he was so distraught he committed suicide. This is horrific. This is an area where we need to understand what is happening with these platforms and really young adults who are not sophisticated enough to be on these platforms and thinking theres some sort of a gameful environment going on. So my question to you, what has the s. E. C. Done to avoid such financial devastation for investors and what are you doing to respond to some of these platforms that are no fee online that kind of incentivizes that gamified kind of environment . Yeah. Let me say this. We have long allowed direct assets for investors to have sales directed accounts. Thats been its been that way for a long time. But to the extent what i would say is technology has facilitated that and then people home with the pandemic and you have people what i would say is trading, not investing. Risks go up. And in particular [indiscernible] or other complex products. One specific thing weve done recently is we have put out guidance, Commission Guidance and are looking at other ways to do that to tell people not only brokerdealers, investorsadvisors, people trading those instruments have the understanding with those instruments. You shouldnt be playing around in leverage investments and options where you can lose your shirt unless you can clearly understand them. Clearly there needing to be education and responsibility for young adults. I think more needs to be done, definitely. Thank you, again. I know my time is up. I appreciate your service. I still see senator crapo on the floor awaiting the second vote to start. The next people in line are senator moran is is he here, by chance . Or senator jones . Or senator smith . I will ask is anybody here who wants to ask a question . I dont know quite what to do. Let me greg, if you would respond somehow to me whether i should wrap the hearing up or senator crapo would like to return. I assume there are maybe a couple of members. Lets do this, chair clayton. Anybody that didnt get to ask because of the votes will send you questions in writing, as we always do. Thank you for always being responsible with that. Youve been a good public official and Public Servant with that. Lets then probably we should wrap the hearing up. And i will just i will close it up. I just wanted to i had one short statement i wanted to make. That of course, i cant find now. I guess i wont be able to find. Give me about 30 seconds. Let me just close with a statement and then we will wrap this hearing up, chair clayton. Sorry its just you and me. Sometimes these things happen. Your agenda, in my view, has limited transparency and hurt Investor Protection. The increase in the shareholder proposal thresholds will result in less shareholder engagement and management, accountability. New requirements of proxy investors will raise cost for Institutional Investors. And make proxy voting harder. Regulation best interest that we talked about earlier in my earlier comments and statement doesnt put wall street customer doesnt put main street customers first. The proposal enables unregistered finders to act without oversight, hurts invester protection. Your proposal to shut down transparency reports from are 90 of Institutional Investors will lead others in the dark. And ignoring calls for climate risk in response to a couple of questions. Ignoring for Climate Risks ignore what investors have been asking for. I know you and others will argue less is more and all these rollbacks and improvements but to me more is less is, well, just less. So thank you, mr. Chair. Thanks for coming in front of our Committee Many times. Good luck as you pursue your interests in the private sector. This committee is adjourned. Voter and th were back with latosha brown, who is the cofounder of the black Voters Movement organization. She is here today to talk about the black voter and in the 2020 election. Good morning. Good morning, thank you for having me. So first of all tell us what the black Voters Matter Fund is. So its a organization of started to take place in in 2016, because we wanted to shake the dynamics around