Was held by the heritage foundation. Welcome to those of you joining us, on our website or in house. We ask for a courtesy check to ee that our various mobile devices have been turned off. For those of you online can ask questions at any time by emailing speaker heritage. Org. Mr. Burton, before joining heritage, served as general counsel of the Small Business association, hes been chief Financial Officer and general counsel for the alliance for retirement prosperity and was a partner at the arfwuss group, a Public Policy and Government Relations firm. Please welcome me in welcoming david burton. David. David thank you for coming. It is my pleasure to introduce to you commissioner michael buehler. He was appointed to the securities and Exchange Commission by president obama and was sworn in in august of 2013. He was dez egg nated by President Trump to be acting chairman of the commission and served in that capacity if january 23 of this year to may 4, when his term and his term expires in june of 2018. Previously, he was chief economist for the Senate Banking committee. And he was an economist with the own soifl economic advisors. He worked at the s. E. C. In the office of Economic Analysis which is now dara, or the division of economics and risk analysis, as an academic scholar on leave from iowa state university. He was professor of finance at iowa state university, he earned a b. A. In Foreign Service and International Politics from penn state, an m. B. A. From georgetown and a ph. D. In finance from penn state. Today were not going to have a set presentation but instead we are going to have a less formal question and answer format. Im going to ask mr. Im going to ask him a number of questions to get the conversation rolling and then well open it up to audience questions and answers so that you all can participate in the discussion. Commissioner, we have a new chairman of the securities and Exchange Commission. Whats he like to work with . What do you think will be the prior thousands of reconstituted securities and Exchange Commission . First of all, thank you, david, and thank you heritage for hosting this great event. I look forward to questions from folks in the audience. Anyone who has seen an f. T. C. Commissioner speak knows whats coming next. The views i express are my own hey do not necessarily reflect those of anyone else on the commission. That said, its awesome working with the commission. Back before the election, we were a commission who cared about enforcement first and the doddfrank death march second. We have a new chairman who was chosen by the president to remember that we have a threefold mission, to maintain investors and a fair market but also promote Capital Formation. When you saw the press releases when he was announced a as the nominee, in chairman claytons speech last week you see the Capital Formation part of the mission is a broad theme well continue to work on at the s. E. C. David mplet in terms of the section are you all thinking david in terms of the section are you all think s. E. C. Are you thinking about the legislative agenda . Michael the chairman is the one who sets the agenda but he and i and the others working together are working together. Last lot we can do that does not require legislation. As one example of something weve already done, our new director, the division of corporation finance, bill hindman on behalf of the commission announced about a week or so ago that we are going to extend the relief for companies that want an i. P. O. On a confidential basis so companies can file on a nonpublic basis so people dont know theyve started the filing process on an i. P. O. It was something that the jobs act added for emerging Growth Companies, weve announced that were extending that for any company that wants the i. P. O. Regardless of size and including foreign private issuers that want to list in the United States as well too. And the one piece of that that people have been focused on, it not only extends the confidential filing for initial public offers but offers that occur in the first year of an i. P. O. That was Just Announced about a week and a half ago. We already have companies that have decided to take advantage of that so we have companies that are Filing Foreign i. P. O. On a confidential basis, and we also have a company thats filed for confidential filing for a follow on offering. Were already seeing some of the things in that space. There are a number of issues that were looking at. I dont want to front run the chairman in terms of all those issues but whats important to know is that the action last week showed that not only are there things that we can do as a commission that dont require legislation, but the action last week actually didnt even require a commission vote. Theres a numb of things that can be done at the staff level and some very so im very excited we have bill hindman as our new Division Director who can direct the staff to actually start moving on those items that dont require a commission vote. So were under active discussion to see what we can do at the staffle leavell what we can coat the Commission Level and then thirdly what requires legislation. David regulation d is now the largest single means of raising capital in this country, accounting for about 1. 3 trillion annually. Are there things in your judgment that can be done to mprove regulation d . Michael first and foremost, we need to tell the public were not going to move garden proposed amendments the commission did in 2013. So when the commission lifted the prohibition on general solicitation in 2013, prior to me joining the commission at the same time, they proposed additional amendments that would have some enforcement hooks for things that are sort of like foot faults in the registration process. Thats given people some pause in terms of whether or not thats going to go final or not, whether some people actually think it is final. I think we need to do a Public Statement that says that these are that were not going to move forward on these amendments and give people some comfort that they can move forward on the regulation offerings without being put in ha time out because of david would be good if you could withdraw it. Michael that would require commission action. I think there are things we can do to signal. I have been in venues like this saying i have no interest in moving forward on that i think withdrawing it would be the sensible thing to do david under regulation d, investors can invest in private offerings but theres also a provision with respect to sophisticated investors that is rarely used. One of the reasons is that the s. E. C. Has never provided very much guidance as to what constitutes sophistication for purposes of regulation d. Theres been increasing talk about providing some test with respect to what constitutes sophistication, for example that youd pass a series seven exam or you have certain private accreditations or you pass the test or have a graduate degree in finance or what have you. Do you think there would be some openness to that at the commission . Or do you think its best considered by congress . Michael i dont know in terms of i cant speak on behalf of my fellow commissioners, i for one have questioned the premise of having an accredited versus nonaccredited investor definition. The rationale is that the commission, prior commissions and until we change it this commission as well too, believe that somehow we are protecting investors by prohibiting them from investing in certain highrisk securities. Ive been questioning that premise because as we know, highrisk also equals high expected return. So what were doing is actually, ill use, protecting in quotes, here, were protecting investors from potentially high expected return securities, youage have to look to Silicon Valley and see the unicorns out there that are attracting large amounts of private capital. I was out in San Francisco and the amount of private capital that folks are willing to throw at these companies is amazing. And so, at least in sill condition valley it doesnt seem like theres problems with access to capital. But from my perspective from the investor, mom and pop investors, main Street Investors arent sharing in these returns to these companies and companies are taking much longer to go public, in some cases are not going public. The average investor is being prohibited from investing in these. Some people may counter that and say, its high expected return but theyre, quoteunquote, too risky to let the average investor invest in. What we teach in portfolio analysis case is the benefits of diversify case. A lot of securities would provide diversify case in their existing portfolios. Thats something ive been trying to press the attorneys at the f. T. C. To think about. The f. T. C. Is mostly a lawyer driven agency and for historical region weve been thinking about the individual security offerings, its about the risk factors of a particular security, whether its in a prospectus or 10k or some other file. Ive been trying to get people to think more broadly and say, look, its not just the risk of that security in isolation. Its risk with a portfolio that a customer already has. Investor. And if this is uncorrelated with what they have even though its a higher Risk Security in isolation it can get portfolio diversify case and offer them high expected returns. I would like to question the premise of having these artificial distings distinctions. David you raise a good point in that companies are not going public or going public much later in their life cycle, so a lot of big gains that are attributable to the lenders are basically limited to accredited investors which is the top 7 roughly of the american people. And that raises the question of what can we do to make it more likely that a company will go public . We now have approximately half the number of Public Companies we had 20 years ago. The number of i. P. O. s, whether measured by actual number of offerings or dollar amounts are way down even compared to a couple of years ago but dramatically down compared to where they were 15 years ago. So what sort of things do you think we can do to make being a Public Company more attractive . Michael those statistyoiks rattle off, those are the type of statistics, when jay clayton met with thenpresident elect trump, those are the type of statistics he mentioned to him, those with the things that were so shock to the president that he wanted to have a new chairman at the f. T. C. To come in and try to think about regulatory fixes we can do to try to improve upon those numbers. So there are those who say, theres nothing the f. T. C. Can do because theres other macro things going on. Theres huge returns to scale, win take all, a lot of Tech Companies dont want to go arthritic public, they just want to get bought by google. You hear all those stories. But i still think theres things we can do and as evidence of that, look at the jobs act. So i mentioned the we expanded the confidential filings to include the unicorns and some of the other companies too. When the jobs act went through and it aloud for confidential filings for emerging Growth Companies, we had Something Like 80 bioTech Companies went public in the first year. So that shows that small changes to the Regulatory Framework can have huge effects and so were looking for what are potentially some of those next changes that we could do to help facilitate Capital Formation which again is part of our mission. In terms of what are things we can do, ive actually over the last three or four weeks been on what im calling a Capital Formation listening tour, been to new york, San Francisco, even participated at the white house in tech week, on investing in Technology Companies and an arizona panel talking about how to increase geographic diversity of Venture Capital financing to start small, emerging Growth Companies that would want to go public. Most of the venture cap financing is occurring in Silicon Valley, new york, and boston. I think what we need to do is continue to listen to people, listening to folks at heritage, listening to various Interest Groups out there and think about, you tell us what we can do. We can constituent around in the building here in washington, d. C. And try to dream up what we think are important thicks to do but whats most important for us is to get out there and hear from people and say what are you finding as the impediments to Capital Formation . On that note, i mentioned bill hindman a couple of times already, our new director, hes been telling people he wants to accomplish three things. He wants to make the division more efficient, more transparent and more collaborative osm then efficiency front he wants to challenge the staff to get the review filing process more efficient, quicker review filing. Wants to be more transparent in terms of getting out and talking to people. He was out in San Francisco at the same time i was talking to people out there about expanding the confidential filings and he wants to be more collaborative. If you think about the last eight years, the relationship between the regulate and the regulators have been very much confrontational. The Capital Formation space thats one that in particular we could benefit from more and more collaboration. Were going to take more meetings with people, were going to listen to more ideas from as many people that want to give us ideas that we can do in terms of things that were doing and truth be told actually the staff has been wanting to be more and more collaborative. What it needed was a change in the tone at the top from a new chairman coming in and saying this is the way were going to work at the commission. David theres been a number of, i guess, possible culprits identified, one is, ill go into a few other, one is the Disclosure Requirements under regulation s. K. , the f. T. C. Released a study required by congress and some of those requirements are also a function of dodd 46 frank doddfrank, particularly the politically motivated disclosures with respect to conflict, minerals extraction, c. E. O. Pay raises and so on. Mi do you think theres room for meaningful improvement in the disclosure regime dwonching governing Public Companies at this point . Michael yes. Those are my favorites because when i was acting chairman, i tried to target them to start the process, for us to make those rules less burden som, should congress not choose to repeal those. I think the first from my perspective would be if congress would help depoliticize the s. E. C. By getting rid of those special interestmote vadvathed disclosures interestmotivated dwiss closures that have interestmotivated disclosures. The first best would be for congress to repeal those, which would be fantastic. There are things we can do to try to make it less burden som as possible. Thats why on conflict minerals and for pay ratio, i opened Comment Period on those to feedback from the public in terms of we kept hearing from folks that they were particularly burden som or the things we could do to help make them less burden some. We have exempive authority in a number of spaces. Potentially providing some sort of scale disclosure or just outright exemptions for smaller reporting companies. Some of the ones where the burden of fixed cost of compliance fall disproportionately high. David the s. E. C. Estimated that its 1. 5 million a year in Compliance Costs to be a Public Company. Which means if youre a small company, thats an insurmountable burden. With a normal ratio, its like erasing 15 million of shareholders equity right there. Michael one of the things that was striking to me when i was out in Silicon Valley, i met with one of these private companies, unicorn has a 1 billionplus valuation. Theyre a private company. Their entire legal death two people. Imagine that for a Public CompanyLegal Department is two people. Imagine that for a Public Company. They have 12 chefs. The ratio of chefs to legal is six to one. Thats probably a good ratio. David theyre required to disclose that ratio. [laughter] michael it was striking to me. Imagine a company that size as a Public Company, twhee have an army of people in the Legal Department, in Investor Relations and the like. David another thing thats constantly referenced as a problem and of course emerging Growth Companies under the jobs act are exempted, is the internal controls reporting under sarbanesoxley. In point of fact you see a tremendous number of companies that went private right after sarbanesoxley and the decline in Public Companies really dramatically accelerated at that point. Do you see room for improvement there . Perhaps making the emerging Growth Company exemption permanent instead of a fiveyear layoff . Michael oor even revisiting the threshold for which they have to comply. With sarbanesoxley. Its clear that sarbanesoxley did have benefits for investors and for Public Companies. But the cost side was a lot more than anybody anticipated. The costs have are very high fixed costs. Theres a lot of things they all have to do. Those costs fall disproportionately on the Smaller Companies. I think it would behoove us to find out where that costbenefit ratio is right. For large company, the benefits outweigh the costs in terms of complying so its ok for them. My preference would be if we had private ordering and let companies sort of figure that out. But sarbanesoxleys been the law of the land for a long time now. If we can at least exempt Smaller Companies up to a certain threshold, and not prohibit them from complying, if theres Certain Companies that say, were willing to incur those costs because we think the benefits in terms of the information thats out there or in terms of investors are more comfortable and it lowers the cost of capital, fine, let them do that. I think it would behoove us to actually increase that threshold to the point where we can sort of see where Companies Find the benefits to justify the costs. David former commissioner once wrote a law review article called blinalded by the light. The premise of the article being that the disclosure documents have become so massive that the relevant information is getting lost in hundreds of pages of ense legalees. Or disclosure documents now obfuscate rather than inform. The length of 10ks is dramatically increased. Ive seen some estimates that say that by a factor of two. Do you think its a fair criticism of reforming regulation s. K. Thats going to hurt investors or do you think it can be done in way that both simultaneously reduces the burden and improves the accessibility of this information for investors . Michael the latter. I couldnt agree more with former commissioner on that. If you look at the size of a 10k now and try to find useful information in there, it takes forever to find that information. Somebody recently gave me the per speck tus of walmart when they went public in the 1960s. It was 28 pages long. One of those was a page where it says, this page left intentionally blank. Right . So you can flip the page over. Theres a lot of useful information in these reports. But to your point, theres a lot of redundant information. We have some rulemakings in progress that would help sort of clean up some of that. And allow the more Material Information to sort of rise to the top for people to find that information. Unfortunately its become politicized from a number of folks on the far left, that somehow less information, less redundant information is going to be giving less real information to shareholders. With the pay ratio and conflict, theres useless disclosure thats being thrown in there thats not providing good information to shareholders. Its something we need to constantly be vigilant about. I think we can actually do more foove on some real things, real reforms where we can get rith rid of some of this stuff. Accounting principles change over time. Industries change over time. And so its up to us to keep up with all those changes. Some of these risk factors become boiler plate, where one company add as risk factor and then another company thinks, i need to add that same risk factor. Now you have a list of 21 risk factors that are the same, with everybody in the same industry, rather than giving you very good, meaningful information. Its interesting to me, historically, where did this notion of materiality come from . It came from a famous Supreme Court case where there was a 90 decision by the Supreme Court written by then Justice Thurgood marshall, where they talked about materiality has to you have to have a limit there, otherwise youre going to if you think everything is material or potentially useful to anybody, theres going to be what they said an avalanche of information or the metaphor, blind by the light. Its amazing to me how far weve come in that where that was a 90 decision written by Justice Thurgood marshall saying we need to hold the line on materiality and how we need more and more special interests, wanting to turn the sneek a social Justice Agency for their particular interests rather than having us be an agency, which is our statutory mandate, to provide investors with Material Information. David under start with blue sky laws is the name that is commonly used for state securities laws. Under current federal law, theres a concept called covered securities. The securities that are covered securities dont have to make 50 different state filings, get arolph from 50 different state regulators. Exchange traded securities which are generally the largest companies, the exxons and walmarts of the world, are treated as covered securities. So is regulation d. Crowdfunding securities. But small Public Companies and regulation a are not treated as covered securities and therefore have to comply with 50 different state securities laws, both in their initial primary offerings and also in the secondary markets. Except for two primary offerings. Do you think it makes sense to rationalize that and try to get to a world where small Public Companies are not regulated more than the exxons and walmarts of the world or private offerings . Michael s its something were looking at. Its an issue that was identified by our Advisory Committee on small and emerging companies. It is something that were working with the state securities regulators, nasa, the National Organization for state securities regulate rts, we have a wonderful relationship with our state securities regulators. Oftentimes theyre the cop on the beat in terms of rooting out fraud on particularly small offerings and also for small Investment Advisors. When i was acting chairman, we entered into an information sharing agreement with the state securities regulators so that we could share more information back and forth about small securities offerings and the rega space, regd space and some of the others too. The intent is for us to enter into more collaborative information with them, to think through a number of these issues and see if we can find a path forward on some of these secondary market trading issues. Whether or not the blue skies laws need to be preempted. Whether we can do a workaround for those types of things. The something were in active discussions with right now. David lets change subjectses a little bit and talk about title 3 subjects a little bit and talk about title three crowdfunding. In my judgment, its been a disappointment. About 10 million was raised in he first 6 1 2 months, according to a small fraction of whats raised using other mechanisms. To me its not a great surprise had e title three really just about every Regulatory Burden could you think of imposed on both the funding portals and these Small Companies. Which of course limits its attractiveness. Since its limited to the smallest companies, 1 million a year, what do you think do you share my view, its been a disappointment . What do you think we can do to improve title three crowdfunding . Using the internet to raise money from a large number of investors, making very small investments . Michael i agree with you that not only has it been a disappointment, but its also not a surprise. When it came time for us to finalize the rulemakings, i dissented and voted no. As you mentioned, theres a lot of prescriptive things there in terms of the funding portals and limitationses on how much could be raised. A lot of that is statutory. Unfortunately. When the jobs act was working its way through congress, the house passed a sensible crowdfunding provision for the jobs act, which basically left a lot of flexibility for the s. E. C. To set up the Regulatory Regime and adjust as necessary. When the jobs act went over to the senate, harry reid decided to skip it going through regular order, through the committee, just have it going to the floor and allowed only one amendment on the jobs act. That was the crowdfunding amendment. And an amendment was substituted i in which is highly sub scripttive and doesnt give us very much flexibility at all in terms of allowing for a framework that works. So that was proving challenging. The reason why i dissented was not only because it was prescriptive, but then the majority of the commission at the time decided to make it even more difficult. So there was a question there in terms of ambiguity, in terms of the limits of investing. There was a net worth test and income test. It was am big in the provision as to ambiguous in the provision as to whether somebody could meet one of those tests or both of those tests. The question was if somebody was retired by but had a High Net Worth and didnt meet the income other test. The the majority of the commission decided to move forward with a test where you had to meet both of them. Basically prohibiting a large number of retirees and other folks who want to diversify their portfolio from investing into crowdfunding. Having said that, we can go back and try to change some of the things where we have flexibility. But i think the first bet would be for congress to revisit it. I believe the choice act has the crowdfunding freedom act or bill thats in there that congressman mchenry is pushing forward. David the positive but small. Michael the other thing is recognizing that not only do we have a federal crowdfunding framework, but also each state has its own statebased crowdfunding framework as well too. Most but not all of the states have set up a crowdfunding framework that allows Smaller Companies within their states to engage in crowdfunding under their statebased framework and not trip the federal crowdfunding regulations. If they at the time it was offer or sell their securities within the state. We went back at the s. E. C. , one of the things i pushed for was making the exemption basically a safe harbor for them, to stay in the statebased crowdfunding framework. Making that easier by getting rid of the offer language in there. Now you can offer your securities to anyone. Basically making it easier to use the internet. But when it comes time to sell the securities, they have to then do their Due Diligence to make sure the people actually live within the state. My hope is by opening up the ability of the states to open and facilitate statebased crowdfunding, well be getting some data and information. Thats why its good for us to have that information sharing agreement with the states. So we can find out, were going of ave a diversity in terms different stateses have different types of frameworks. Which ones work and which ones dont . So that we can then use that information in terms of how do we want to revisit the federal crowdfunding framework. David lets change gears and talk about regulation a. Regulation a had become almost a dead letter, part of the jobs act. I think in 2011 there was exactly one regulation a offering. Of course cant raise more than 5 million. Regulation aplus is what people take into have taken to calling the postjobs act regulation a. Theres a lot of hope that it will enable people to, in effect, access the Public Markets or enable Small Companies to raise money from ordinary americans. Dara has released some data that shows in the first 16 months, 81 offerings have been made seeking 1. 5 billion and raise 200 million. Of course some of that, 1. 5 billion is really going to get raised so we dont really know. Its likely that regulation aplus will ramp up relatively quickly. Theres, i think, probably things that can be done to improve regulation a. One of the most obvious is when the Commission Adopted the rule, it took the very positive step of preempting blue sky registration and qualification requirements with respect to socalled tier two primary offerings. But not secondary offerings. But are there thing that you think can be done to improve regulation a . And make it better for both the investing public and for issuers . Is that something you think the commission is going to be looking at . Michael on the secondary offerings, thats something were looking at. Engaged with the state securities regulators and trying to get as much information as possible. It was interesting, i got a text from one of my old College Roommates who said, were going to try a tier one regulation a offering. Weve been doing regd offerings. Ill let you know how it goes. Ill have a personal case study from someone switching. One of the things im very proud of in the aplus is getting my fellow commissioners onboard to extend the tier one to 20ds million. The tier two goes to 50 million. I wanted to get both of them to 50 million. Lets hold a horse race in terms of which one people prefer. Do you want to go through states or the commission . We can get a real controlled experiment. But originally it was proposed to tier one to only go to 10 million but we were able to get that up to 20 million. Were starting to get some data in from folks in there. That datas going to help guide us in terms of how people are using these offerings. In the tier two, are they all close to 50ds million . This if thats the case, then maybe we should revisit and maybe think about increasing the threshold again. As you mentioned, when it was only 5ds million, there was hardly any offerings over a series of years. Its the cost of doing a 5 Million Offering are not that much different than doing a 50 Million Offering in terms of the fixed cost. The benefits are much higher for that. Just by simply increasing the threshold, were seeing more and more People Choose this. On the smaller end, on the smaller part, the dollar amounts and offerings, tier one and tier two, what were seeing, regulation crowdfunding is particularly prescriptive and people arent finding that as being potentially useful for crowdfunding. Were starting to hear anecdotes from people that rega offerings are filling some of that space. Sort of crowdfunding with the lower k. C. Rather than the regular. Its its broadened its meaning on that. People are receiving articles being written and firms and consultants out there talking to people about sort of crowdfunding through regulation a. So that may be another mechanism for us. Our division of economic risk analysis has been starting to collect some of the statistics on that and were starting to analyze that and look at potential ways to that we can either make it easier or increased threshold. David congress recently created an office of the Small Business advocate at the s. E. C. I think its a little different than the investor advocate. But its modeled on it. When do you think you all are going to be able to stand that office up . Michael my hope is by the end of the year. So congress authorized it last year. But we had to go through some hoops on the appropriation side. So it requires the sort of inside the beltway, whats called reprogramming dollar amounts. We just recently got approval from the appropriators to do that, to try to stand up the office and so the next step would be for us to go through the hiring process for the new Small Business advocate and were going to model that, my understanding of pretty much what we did for investor advocate and well have staff involved in the commissioners be involved in that process. My hope is that we can start that process, move that forward through the summer and fall and have something announced hopefully by the end of the year. David great. The Financial Industry Regulatory Authority is the primary regulator of broker dealers. It has a budget thats roughly 2 3 of the size of the s. E. C. And i think its staff is almost its staff is almost 80 of the s. E. C. Yet theres relatively little ongressional oversight of fi nira. Last october the s. E. C. Created a new office designed to provide oversight of fira. That was paired with some reforms, the way the s. E. C. Regulates broker dealers. How do you what you have learned about that . What is the s. E. C. Learned what has the s. E. C. Learned about how that office is operating . Do you have any thoughts on how it could be improved or the s. E. C. s relationship with them could be improved . Michael yeah, so youre right. There was sort of a couple reasons why we decided to reallocate staff within the commission. So the first thing we did was we reallocated staff on our exam team from overseeing broker dealers to overseeing Investment Advisors. So we have over 12,000 Investment Advisors out there. That we need to examine. The number of Investment Advisors keeps going up year after year. We needed to reallocate staff from the broker dealer side to the Investment Advisor side. By doing that, we also had conversations with finra and telling them that were going to rely on their oversight of broker dealers more to help fill that space. Of course we also oversee finra, to your point. And so what we also did was we made some adjustments within the offices in our Office Compliance , inspections and examinations, prior to this move. All of our oversight of the selfregulatory organizations, which includes finra, the exchanges, pcaob and the msrb, were all within one office. Because were going to be relying on finra more and more on the broker dealer side, we decided to split that office into two. One that focuses just on oversight of finra and the other one that focuses on the oversight of all the other selfregulatory organizations. In terms of both of those moves, were looking through, trying right now we just did those last year. Looks like we got the balance pretty close to right. Were going to continue to evaluate the balance on those, to make sure we got that right. Having said that, obviously finra has a new leader in there, robert cook coming in. Hes done a tremendous job on something called finar 3606789 he went on a listening tour, outside of washington, d. C. , and met people where they are and listened to criticisms in terms of the transparency and accountability. He is the niddle of that broad review right now. Hes already announced initiatives hes moving forward with. Trying to get the voice of particularly the smaller brokers more involved in finra. Very much in tune with whats going on capitol hill in terms of potential legislation that would give them greater oversight and doing a tremendous job there. Were going to continue to see those play out in the future. Were going to continue to rely on finra more. But continue to put more resources to make sure that theyre doing what theyre supposed to be doing. David maybe as long as a year ago, at least eight months ago, the s. E. C. Put out a very positive no action letter on business brokers. But there hasnt been any action with respect to finders or some people call them private placement brokers. Just so people in the audience understand, if two main street business people, one says, im trying to raise money and ill offer you a finders fee, but if you make an introduction to an investor, that works out and they make an investment, the s. E. C. 16 years ago or so changed its position and adopted the policy that they should have to register as a broker dealer. In effect be treated the same as merle limpling. Obviously thats created a merrill lynch. Obviously thats created a great deal of uncertainty. The American Bar Association task force estimates that as many as 40 of Small Businesses raising money actually use finders anyway. Because it hasnt been made explicitly illegal. Do ou see any openness or you personally think that that issue should be revisited and try to clarify the rules and allow internet and small finders to not have to register as a broker dealer . Michael yes. This is an issue thats been brought to our attention i think almost every year by an Advisory Committee on small and emerging companies. By the Small Business government Small Business forum and by a number of other folks on this. As i mentioned, we now finally have a chairman who is committed to looking at Capital Formation issues and putting it squarely on the front burner in term of our agenda going forward. This is an issue that i would like to see. There are some folks that we had in prior leadership at the s. E. C. There were folk that said, well, we believe everyone is born a broker dealer until they prove to us otherwise. And the burden is on them. We need to have a space for finders to be able to do their job. And its particularly important for Capital Formation for the Smaller Companies. Where theyre not going to all of a sudden trip all of the requirements from being a broker dealer, which we can go through the whole list. David and force them to rescind the transactions and put their offering at risk. It creates a mess. Michael it creates a mess. What we need to do is find a space where we can carve out finders. Limit them to a certain set of activities, as long as theyre within those certain set of activities, then youre fine. Whether its a safe harbor or Something Like that. Then we can allow for that. Thats something absolutely i believe we need to move forward on. David President Trump put out an executive order, number 13781, basically in connection with government reorganization. It strikes me that there are certain aspects of the s. E. C. That could probably use reorganization. Theres 23 direct reports to the chairman now. Do you anticipate that there will be some sort of significant reorganize under the new chairman . Either in response to this executive order, or for other reasons . Michael yeah. The first is identifying all those. I think thats important. The executive order is a great place for us to identify. As you mentioned, theres like 23 direct reports to the chairman. When i was acting chairman i knew. Whenever i had a senior staff meeting, we had a couple rooms that were big enough to fit everyone in there. The difficult part of doing a whole scale reorganization is that a number of those direct reports are statutory. And so that would require legislation to give the chairman the authority to make those changes. And they sort have of have been put in piecemeal. Theres a statute that goes through that says we create the investor advocate or some other position. Something like that. Then its a direct report and the like going, all right, that ones all right, fine. But do you this a number of times, pretty soon you end up with a number of direct reports in there. We can do thing sort of around the edges, within sort of divisions, within offices. You can move people around to try to be more efficient that way. But in terms of the wholesale sort of changing these direct reports and thinking more creatively about how we want to organize the commission, that would require legislative changes. David im going to ask you one more question, then open it up to the audience. Thanks Good Government question. In almost every other field i work in, theres a lot more Information Available to the public and to policymakers than there is in the securities regulation area. The i. R. S. Puts out statistics of income and an annual data book on the administration of the agency. The Commerce Department puts out the National Income counts and a tremendous amount of other information. Tremendous amount of data in the health care area. The bureau of labor statistics put out just about everything youd want to know about the labor market here. Yet all the information we really have on the private capital markets, rega, crowdfunding and so on, is periodic, but not regular, but occasional reports from dera. Theres also relatively little information, theres some, on the enforcement side of the s. E. C. But almost nothing in terms of what kind of provisions are causing the enforcement or the infractions and enforcement engages in. Do you think that the commission should Start Publishing on a periodic, annual basis, information such as how much was used for regulation a crowdfunding, so on and so forth, so you have a time series and can evaluate it . Including the commissioners themselves. But also better information about what kind of things are causing enforcement problems in the real world . Michael thats a good idea. I hadnt thought about putting that out on a more regularized basis. We make a [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] [captions Copyright National cable satellite corp. 2017] we take you back live now to the floor of the house. Following order. R. 2210 by the yeas and nays. And h j ressp. The first vote will be a 15minute vote. The Unfinished Business is on vote to pass h. R. 22