Transcripts For CSPAN2 Michael Piwowar Remarks On Business And The Economy 20170717

[applause] thank you are coming. Its my pleasure to introduce to you, commissioner michael bueller. He was appointed to the Security Commission by president obama and is sworn in an august 2013. He was delegated by President Trump to be in german in that capacity from january 23rd of this year to may 4th. His term expires in june 2018. Previously, dr. Pirowar worked at the sec in the office of Economic Analysis with the division of economic and risk analysis as an academic scholar from iowa state university. He was a professor of finance at iowa state university, earned a ba in Foreign Service in International Politics that can take an from georgetown and phd from penn state. Today we are not going to have a set presentation, but instead a formal question and answer format. Im going to ask mr. Pirowar a number of questions and then we will open it up to the audience so you all can participate in the discussion. Commissioner pirowar come with the new chairman of the securities and Exchange Commission. What do you like to work way and what do you think will be the priorities of the securities and Exchange Commission . Thank you your judge for the great event. I look forward to questions from the audience and anyone whos ever seen in sec commissioners beat knows whats coming next. These do not miss their effective visit and the commission are my fellow commissioners. Think back to before the election from the way the commission is headed. We were a commission headed by a chariot cared about enforcement first in the doddfrank death march 2nd. Meeting new chairman chosen by the president by the agenda to protect investors and efficient market intent to nominate the incoming chairman and chairman claytonspeech with the Capital Formation is a broad theme we will continue to work on it the sec. Interns that the sec, are you all taken steps to talk through any kind of legislative agenda . Sure. Some of the things we would like to do. Obvious the terminal set the agenda, but he an idea to commission are working to find the Capital Formation agenda. Theres a lot that we can do that does not require legislation. One example is something we parody done better new director of the division of Corporation Finance bill in maine on behalf of the Division Announced a week or so ago that we are going to extend the relief for companies that want an ipo on a confidential basis so companies can file in a nonpublic basis for people to know they started the filing process on an ipo. It was something for emerging Growth Companies. And regardless of size they want to listen United States as well, too. The onepiece people have been focused on him only extends confidential filing, but also followon offerings that occur within the first year of an ipo. That was Just Announced i believe a week and a half ago. We are to have company said it decided to take advantage of that. We have companies on a nonconventional basis and confidential filing for a follow offering. We already seen some of the things in that space. There are a number of issues we are looking at. I dont want a front on the chairman in terms of all of those issues, but what is important to know is the action last week shows that not only are there things that we can do, but the action last week didnt require a commission vote. As a number of things that can be done at the staff level. Im very excited whenever new Corporation Director to actually start moving on some of those items that dont even require a commission vote. We will see what we can do it this staff level and thirdly what requires legislation. Regulation is not the largest raising capital in this country for about 123 trillion annually. Are there things in your judgment that commitment to improve regulation . First of all and foremost, we need to tell the public that we are not going to move forward on some proposed amendments in 2013. The prohibition on general solicitation and 2013 prior to joining the commission at the same time, they proposed additional amendments that would have some enforcement for a better football to the registration process giving people some pause in terms of whether or not thats going to go final or not, whether some think it is final, though we are not going to move forward on the amendment didnt give people regulation, offerings without being put in a timeout. I think theres some things we can do to signal it. I personally have been in venues like this telling people if no interest in moving forward on the regulation did of course cannot present investors and private offerings, but there is also investors that is according to the terror analysis, rarely used. One of the reasons for that is the sec has never provided very much guidance as to what constitutes sophistication for the purposes of regulation. Its been increasing talk about providing with respect to what constitutes private accreditations or you have a test or a graduate degree in finance or what have you. Do you think there would be some openness does not at the commission . Or do you think it is best pursued by congress . I dont know in termsof i cant speak on behalf of my fellow commissioners, but ive questioned even the premise of having an accredited versus nonaccredited investor. The rationale for this Commission Prior commission until we change it 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 higher expected return. What we are doing is always protecting end quotes. You dont have to look to Silicon Valley to see all the unicorns out there that are tracked large amounts of private capital. I was just out in San Francisco and the amount of private capital people are willing to throw at these companies is amazing. At least Silicon Valley doesnt seem like their access to capital. My perspective from the momandpop investors are cherry ninnies returns to these companies and the companies are taking much longer to go public and in some cases the average investor is being prohibited from securities. Some people may counter that and say they expect a return but they are too risky to that the average investor investing. You mention as a former finance professor, will be teaching portfolio, the benefits of securities with provide diversification for investors in their existing portfolio and that has been sending trained to press the attorney at the sec to think about. Hopefully a lawyer driven agency and for historical reasons, weve been thinking about risks in terms of individual security offering. Think about the Disclosure Requirements, whether perspectives in a 10 k. Or some other filing. Ive been trying to get people to think more broadly to say look, its not just the risk of security and isolation, but risk with a portfolio that a customer would he has and if this is the mood to have come even though at a higher Risk Security and isolation, it can get portfolio diversification return. Id like to question the premise of these artificial distinctions. You raise a think a very good point in that companies are not going public are going public much later in their life cycle. A lot of the big games are basically limited to accredited investors at the top 7 roughly of the american people. 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 numbers we had 20 years ago at the number of ipos present measured by actual number of offerings or dollar amount or way down compared to a couple of years ago, to where they were 15 years ago. So what sort of things do you think we can do to make being a Public Company mark tracked live . Those statistics are the type of statistics when jay clayton met with thenpresident elect donald trump and now President Trump. Those are the type of statistics mentioned in the type that were so shocking to the president that he wanted to have a new chairman to come in and try to think about regulatory fixed income to improve upon those numbers. So there are those that say theres really nothing the sec can do because there do because there is not grow things going on. Huge returns of scale, winner take all. A lot of Tech Companies dont undergo public. They just want google and those types of things that you hear all the stories. I still think there things we can do and is evidence to back him a look at the jobs act. They mention we expanded the confidential filing to include some of the other companies when the jobs act when drew and it allowed for confidential filings, we had Something Like bb bioTech Companies went public within the first year. That shows that small changes to the Regulatory Framework can have huge effects and so we are looking for what are potentially some of those next changes that we can do to help facilitate Capital Formation, which again is part of our mission. In terms of things that we can do, ive actually for the last through critics have been playing Capital Formation listening to her in new york, Silicon Valley, San Francisco during tech week on investing in Technology Companies in the arizona panel talking about how we can increase geographic diversity of Venture Capital financing to start small and emerging Growth Companies that would go public because most of the venture cap is occurring in boston. So i think, what we need to do is continue to listen to people. Focus and heritage, and the various interest groups. You tell us what we can do but sit around in the building in washington d. C. And dream up what we think are important things to do. What is most important for us is to get out there and hear from people as to what you are finding that the impediment to Capital Formation. On that note, i mentioned the amendment a couple times, director of corporate finance, hes been telling people he wants to accomplish three things. He wants to make the division more transparent and more collaborative. He wants to challenge the staff to get the review filing process more efficient, quicker review problems, was to be more transparent in terms of getting out and talking to people. Silicon valley San Francisco the same time i was talking to people out there about expanding the confidential filing that he wants to be more collaborative. If you think about the last eight years the relationship returning the regulated in the regulators has been very much confrontational near the Capital Formation is wanted in particular we could benefit from more and more collaboration. We will take more meetings with people. Listen to more ideas from many people that want to give us ideas that we can do when things were doing. Truth be told, the staff has been wanting to be more and more collaborative with the change in the tone at the top from a new chairman coming in to say this is the way we are going to work at the commission. Well, there has been a number of, i guess, possible corporate identified. One is the Disclosure Requirements under regulation s. K. The fcc recently released a study that was required by congress. Some of those requirements are also doddfrank, particularly the politically motivated disclosures, for example with respect to conflict minerals, extractions come as ceo ratios and so on. Resume favorites. I figured that. The event do you think there is room for meaningful improvement in the disclosure regime of the governing Public Companies at this point . Yes, those are once when i was at ensuring they try to target to make those rules less burdened some should congress not choose to repeal. The first best from my perspective would be congress would help depoliticize the sec by getting rid of those motivated with materiality. And investors to make informed decision. The first best would be for congress to repeal, which would be fantastic. There are things we can try and make it less burdensome as possible. Then pay ratio open a comment. On those two feedback from the public in terms of we kept hearing folks that they were particularly burdened some are things we could do. We have extensive authority in the numbers bases potentially providing some sort of skill disclosure or just outright notions for smaller reporting and some of the ones where the burden of fixed cost of compliance is proportionately high. The sec estimated the cost to be a Public Company today. If you are a Small Company it, that is an insurmountable burden, with the sword of the normal ratio is like 10 million of shareholders. One of the things that was striking out as a 1 billion plus valuation. The private Company Entire Legal Department is to people. This company had 12 shots because they had a bunch of millennial spear the ratio of shots to legal with six to one. Thats probably a good ratio. They require them to disclose the ratio. But it was striking to me. Imagine a company of that size, a Public Company but have an army of people, Investor Relations and the like. Another saying that is constantly a reference is a problem in the other jobs act or the internal controls reporting and in fact you see a tremendous number of companies that went private in 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 . The macquarie then revisiting for which they have to comply with lee. It is clear they did have benefits for companies, but the cost side with a lot more than anybody anticipated and the costs are very high fixed cost you no matter what the size of the company is, theres things they all have to do. Those costs will disproportionately on the Smaller Companies. It would behoove us to find out where that sort of cost benefit ratio is. For some large companies, the benefit outweigh the cost and its okay for them. My preference would be if we had private ordering to figure that out. Sarbanesoxley for a long time now. If we can at least exempt Smaller Companies up to a certain threshold and not prohibit them, if certain say we are willing to incur the cost because we take benefit in terms of the information out there for terms of investors are so comfortable and let them do that. I think it would behoove us to actually increase the threshold to the point that we conservatives see where companies benefits justify the cost. Former economic commissioner once read an article called blinded by the light. The premise of the article being the disclosure documents have become so massive that the relevant information is getting lost in hundreds of pages of dense legalese. Or disclosure documents to obfuscate rather than inform. The link of the case is dramatically increased. Ive seen some estimates that say that by a factor of two. So, do you think it is a fair criticism of reforming regulation s. K. Is going to hurt investors or do you think it can both simultaneously reduce the burden and improve the accessibility of the Central Mission . The latter. I couldnt agree with the former commissioner on that. If you look at the size of the 10 k. And our perspectives and try to find useful information in there, it takes forever to find information. Somebody recently gave me the perspective of walmart when walmart went public in the 1960s. The entire perspective is 20 pages long. One said this page left intentionally blank. Theres a lot of useful information in a strip toward, but a lot of redundant information. We have several making some progress that would help clean up some of that and allow the more Material Information to rise to the top for people to find that information and to become politicized from a number of folks on the far left with less information, less redundant information is going to be giving less real information to shareholders. Weve seen what the pay ratio the disclosure that is being grown in merit that is not providing good information to shareholders and something we need to constantly be vigilant about and i think we can actually move forward with real reforms and get rid of some of this stuff. Accounting principles change over time. Industries change over time. It is up to us to keep up with all of those changes. Some of the risk factors become boilerplate. One company has to risk your and so now you have a list of 21 risk factors with everybody in the same industry rather than very good meaningful information. It is interesting to me, historically the notion that materiality came from a famous Supreme Court case cb northway, that where there was a decision by the Supreme Court written by ben Justice Thurgood marshall and i talked about materiality has to have a limit there, otherwise you think everything is material are potentially useful within information for amanda for blinded by the light. Its amazing to me how far we have come in that. That was a decision written by Justice Thurgood marshall saying we need to hold the line that materiality and we keep getting more and more special interest when the social Justice Agency for their particular interests rather than having this be an agency to provide investors with material investigation. The blue sky laws is the name that is commonly used for state security laws. Under current federal law, there is a concept called cobra securities, which the securities are covered securities dont make a approval from 50 different state regulators. Exchange traded securities, which are generally the largest companies. So our rules of five or six regulation d. , outcome in securities. Small Public Companies and regulation they are not treated as covered securities and therefore have to comply but the 50 different state security laws, both in their initial primary offerings and also the secondary markets, except for a tier two primary authors. Do you think it makes sense to rationalize that and get to a world where small Public Companies are not regulated more than the axons and walmarts of the world . It is something we are looking at. It was an issue or Advisory Committee on small and emerging companies. It is something we are working with the state securities regulators, nasa, regulation for state security regulators. We have a wonderful relationship with our regulators and oftentimes the cop on the beat in terms of rooting out fraud and particularly small offering an small Investment Advisors. When i was acting chairman, we entered into information sharing agreement with state securities regulators so that we could share more information back and forth about small securities offerings and some of the other ones as well, too. The intent is for us to enter into collaborative relationship with them to see through the issues and find a path forward on some of the secondary market trading issues, whether or not the blue sky laws need to be preemptive, whether we can do a workaround for those things and that is something we are in active discussions now. Lets talk about title iii equity under the jobs act. In my judgment, its been a disappointment. About 10 million was raised in the first six and a half month. That is of course a small fraction of what is raised using other mechanisms. To me its not a great surprise because title iii really had just about every Regulatory Burden you could think of of the Small Companies. Which of course limited to track events since its limited to the smallest companies. What do you think do you share my view its a disappointment or what do you think we can do to improve title iii crowd funding using the internet to raise money from a large number of investors making very small investments . I agree with you that not only at the disappointment but also not a surprise. In fact, when it came time for us to finalize the rulemaking because i dissented and voted no. As you mentioned, theres a lot of prescriptive things in terms of the Funding Portal and how much could be raised, a lot of that is statutory. Unfortunately, the jobs act was working its way through congress, the house passed a sensible crowd funding provision for the jobs act which left a lot of flexibility to set up a regulatory regime. In the jobs act when jobs act regard to the senate, harry reid decided to stick a dreamscape regulatory order, had to go to the floor and allow one amendment on the jobs act now as the crowd funding amendment. The Merkley Brown amendment was substituted in, which was highly prescriptive and doesnt get very much flexibility at all in terms of allowing for a framework and so that was proving challenging. The reason why he was dissented was not only because it was prescriptive, but the majority of the commission decided to make it even more difficult. There is a question there in terms of ambiguity, the limits of investing in a net worth test inning contest and it was ambiguous in the provision as to whether somebody had to meet both of those tasks where they could meet either one of those tests. The question whether somebody was retired but at a High Net Worth and didnt meet the income test, but admit that net worth test could they investing in turn. Lets try to get crowd funding off the ground so i would refer to either one of the test. Unfortunately, the majority of the commission decided to move forward to meet both of them, basically prohibiting a large number of retirees and diversify the portfolio from investing into crowd funding. Having said that, we could go back and try to change some of the things where we have flexibility, but the first step would be for congress to revisit and the choice act has the crowd funding freedom that where bill and mary that congress can raise pushing forward. Is partisan. The other thing is recognizing not only do we have a federal crowd funding framework, but also each state has its own framework as well, too. Most but not all the states have set up a crowd funding framework that allows Smaller Companies within their state to engage in crowd funding under their statebased framework and not strip the federal crowd funding regulation if they at the time was offer a stellar security within the state. We went back at the sec, one of the things ive pushed forward was making the exemption basically a safe harbor to stay in the statebased crowd funding framework, making that easier by getting rid of the offer language in there. You can offer your security to anyone, basically make it easier to use the internet. When it comes time to sell Security Company have to do their Due Diligence to make sure people live within the state. I hope this by opening up the ability of the states to open and facilitate statebased crowd funding will be getting some data. Thats why its good to have information sharing so we can find out who will have diversity in different states and different frameworks, which ones work and which ones dont and we can use that information and how we want to revisit the crowd funding framework. Lets switch gears and talk about regulation made. It has become almost a dead letter to the jobs act. In 2011 there is exactly one regulation offering raised more than 5 million. Regulation eight plus is that people taken to calling the post jobs act regulation may. There is a lot of hope that it will enable people to in fact access the Public Market and enables Small Companies to raise money from ordinary americans. Releasing some data is for 16 months, ed more offerings have been made seeking 1. 5 billion raise 200 million. Of course im about 1. 5 is really going to get raised, so we dont really know. But, it is likely the regulation a possible rampup relatively quickly. I think probably things can be done to approve regulation and a. One of the most obvious is when the Commission Adopted the rule, it took a very positive step of preempting blue sky Registration Requirements with respect to socalled tier two primary offerings, but not secondary offerings. But are there things that you think can be done to improve regulation and a and make it better for the investor, for issues and if thats something the commission is going to be looking at . On the secondary offerings, that is something were looking at to engage a state security regulators to get as much information as possible. It was interesting i got a text from one of my old College Roommates who said we are going to try one at a tier one regulation offering. We will let you know how it goes. I will have a personal case study. One of the things i was proud of what is standing by on board to extend the tier one up to 20 million. Here too close to 50. I want to get both of them to 50 in terms of which when people prefer. Do you want to go through the state or through the commission on not . We can get a real controlled experiment. Originally i was exposed to 10 million, but were able to get back to 20 million. We are just starting to get some data from folks in there. The data will help guide us in terms of how people are using these offerings. In tier two are they all close to 50 million . Is that the case and maybe we should read this and think about increasing the threshold again. He mentioned only 5 million, but there was hardly any offerings over a series of years. The cost of doing a 5 Million Offering are not that much different than the 50 Million Offering but the benefits are much higher. Just by simply increasing, more and more People Choose it. On the smaller end, the dollar amount to the offerings commit tier one and tier two, we are seeing regulation crowd funding is prescriptive and people are finding that being an essentially useful one for crowd funding. We are starting to your anecdote that offerings are kind of fill in some of that space and sort of crowd funding with the lowercase rather than regulation to broaden its meaning on that. People are seeing articles being written in firms and consultants out there talking to people about sort of crowd funding through regulation may, so that may be another recognition. As you mentioned, our division of economic risk analysis has statistics on that and were starting to analyze data and look at potential ways that we can either make it easier or increase the threshold. Congress recently created the Small Business created the Small Business advocate at the sec. Its a little different, but its modeled on that. When do you think you all are going to be able to stand that . 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 inside the beltway recovery programming. We just recently got approval from the appropriators to do that, to try to stand at the office, so the next step would be for us to go through the hiring process for the new Small Business advocate and we will model back. My understanding is pretty much redid the investor advocate and we will have staff involved in the commissioners be involved in that process. My hope is we can start that process, a move that forward through the summer and fall and hasnt been announced by the end of the year. Great. The Center Financial Regulatory Authority is the primary regulator. It has a budget that is roughly two thirds the size of the sec and is staffed with almost 80 of the sec. Yet, there is relatively little congressional oversight and the sec oversight has been at least in my observation relatively light. Last october, the sec created a new Office Design to provide Oversight Center and of course i was paired with some reforms on the way the sec regulates brokerdealers. What have you learned about that . What is the sec wondered about how the office is operating . Do you have any thoughts on how it can be improved or the secs relationship to be improved . Yes, youre right. A couple reasons why we decided to reallocate staff within the commission. The first thing we did is we reallocate we did as the reallocate its staff we did is we reallocate his staff under exam team from overseeing brokerdealers to overseeing Investment Advisors. We have over 12,000 Investment Advisors out there we need to examine and it keeps going up year after year and so we needed to reallocate staff from the brokerdealers site to the Investment Advisors side. I doing that, we also had conversations with sandra and telling them that we are going to rely on their oversight of brokerdealers moreto help fill that space. Of course we also oversee san right to your point. But we also did was we made some adjustments within the offices and our offense compliance examinations prior to this move, all of our oversight, the selfregulatory organizations include the exchanges come the pca were all within one office. But because we are going to be relying more and more on the brokerdealers side, we decided to split that office into one that focuses just on oversight and the other that focuses on all the other selfregulatory organizations. We are looking through trying right now. Looks like we got the balance pretty close to right. We will continue to evaluate the balance on us to make sure we got it right. Having said that, finra has a new leader in the air coming in. Hes doing a tremendous job. Something called finra 360 outside of washington d. C. And listing the criticisms in terms of their transparency and accountability. Hes in the middle of the review right now. Hes also announced initiative he is moving forward with trying to get the voice of particularly the smaller brokers were involved in finra, very much in tune with what is going on on capitol hill with potential legislation that would give them greater oversight and a tremendous job fair. We continue to see those play out in the future. We will continue to rely and put more resources to make sure they are doing what theyre supposed to do. May be as fun as a year ago, at least eight months ago, the sec put out a very positive action letter on business brokers, but there hasnt been any finder is there some people call them replace the brokers. Just so people in the audience understand, if two main street Business People one says im trying to raise money and offer you a finders fee, but that works out and they actually make an investment, the sec 15 years ago or so it changed its position and adopted the policy that they should register as a broker dealer and the fact they choose the same as merrill lynch. Obviously a great deal of regulatory uncertainty because the American Bar Association task force has as many as 40 of Small Businesses because it hasnt been made exclusively all equal. Do you see any openness or do you personally think that issue should be revisited and try to clarify the rules and allow intermittent small finders to not have to register as appropriate . Yes. This is an issue brought to her attention almost every year by her committee on smaller emerging companies and the Small Business forum and folks on this. We now finally have a chairman that is committed to looking at Capital Formation issues and putting it squarely on the front burner in terms of our agenda Going Forward. This is an issue i would like to see. There are some folks in prior leadership that were focused and we believe everyone is born until they prove us otherwise. Thats sort of what it is. But we need to have a space for finders to do their job and its particularly important for Capital Formation and the Smaller Companies where they are Smaller Companies where they are not going to all of a sudden trip the requirements for being a broker dealer. We can force them to put their offering arrest. It creates a mass. We need to carve out for finders, limit them to certain set of back to the days within the activities then you are fine, whether its a safe harbor or Something Like that and then we can allow for that. That is something absolutely we can get reform on. President trump without an executive order number teamed 7081, basically in connection with government reorganization. It strikes me that there are certain aspects that could probably use reorganization. I believe theres 23 direct reports to the chairman now. Do you add that there will be some sort of significant reorganization under the organization in response to the executive order or for other reasons . At the first is identifying all those. The executive order is a great place to identify. Something that 23 direct reports. Whenever i had a senior staff meeting, we only had a couple rooms big enough to fit everyone in there. The difficult part of doing a whole scale reorganization is the number of those direct reports or statutory and so that would actually require legislation to give the chairman and the authority to make those changes. Theyve been sort of putting piecemeal. There is statutes to go through and create the investor had a kid or some other position. Something like that is a direct report. That one is fine, but you do this a number of times, pretty soon you end up with a number of direct reports in the air. We can do things around the edges, within division, within offices. You can move people around to be more efficient that way. In terms of the wholesale sort of change in these direct reports in thinking more creatively, that would actually require legislative changes. I will ask you one more question and then open it up to the audience. Just a quick around the question. In almost every other field i work in, theres a lot more Information Available to the public and the policymakers then there is in the security regulation area. The statistics of income and an annual administration agency. The Commerce Department puts out the National Income council and a tremendous amount of other information. Theres a tremendous amount of data in the health care area. Basics about everything you want to know about the labor market here. The only information we really have on the private Capital Market crowd funding is periodic, but not regular, but occasional reports. There is also relatively little information. There is some on the enforcement side of the sec, but almost nothing in terms of what kind of provisions are causing the enforcement for the infractions engaged in. Do you think the commissions should Start Publishing on a periodic annual basis information but how much is regulation a crowd funding rule five and six and so on and so forth and you can evaluate it including the commissioners themselves, but also better information about what kind of things have enforcement problems in the real world. Thats a good idea i had thought about putting that out on a more regular rice bases to make a conscious effort to have the risk analysis puts statistics. All of our Enforcement Actions are available online. But they are not categorized. It was a private rule five or six offering adequate disclosure. You have no real means of assessing what aspects of the law are not causing problems are causing problems. Act for the rest of the academics collected data and console to provide this data. We didnt have any information until they go through all the foreign deeds. It is very irregular and we dont really have a good series. That is something all take back. I didnt really think about that. A number of our filings to be done with the structured data format and that allows us to quarterly go through all the Public Companies and put together a database for researchers on a quarterly you can download all this data to do largescale Academic Research on all Public Companies to do Cross Section and we started doing that and now we have every quarter Going Forward. In the private spaces which are suggesting. Are merely an enforcement space. The ipos come in the best data is by the university of florida professor. Well, let me ask for audience questions. We will start with brian. Thank you. If you could just for the benefit of the listeners say your name and institutional affiliation before you asked the question. [inaudible] george mason university. Thank you to our panelists. Question to the commissioner. What if anything is the sec doing to address the disruption and innovation coming from type logical innovation a couple of potential areas would be the use of the ledger for clearing that on that recording these of quote, unquote initial point offerings to arguably try to circumvent the security laws . What if anything are you doing . You anticipate something formal likened the sec. Where did they say that . Last year for the first time we had a roundtable and i went to asia but there is taiwan, japan, hong kong, korea. I thought all right, technology and finance. Theres Something Special going on here. When i realized that point because theres Something Special than just adding technology to Financial Services across the jurisdiction and the regulatory roof framework. Turning off the ground in the u. S. Is that theres so many different regulators they talk to whether its the marketplace finding they talk to state regulators, federal regulators and securitize and talk to investors in on top of the sec from a distributed Ledger Technology cuts across whether used for keeping track of shareholder registries, keeping track of trading when it cuts across all kinds of different industries. In addition to the roundtable, where the task force at the sec are we as people from across the division, across offices out in the regions, obviously a Regional Office out there is very helpful. They are going on in the industry. I received this is transformational. Theres a lot of a lot of hype in specific things, that theres a number of things where they can actually transform the Capital Raising process. I was over in kenya last year and saw the transformational change that came across. Kenya now has a higher rate of financial inclusion. We are still talking about the bank and we want to get people in banks and then get access to the various Financial Services, whereas kenya werent bound by that. Lets get people involved and then Start Talking about offering Financial Services in the 30dollar increments in kenya and earn higher rates of return and putting their money on the bank. We are seeing the rest of the world, a number of incidents that moving forward that are transformational with investors and consumers. One of the things i will continue to focus on is to make sure the Regulatory Framework is not stifling of innovation. Part of our mandate is Capital Formation and so not only are we protecting investors, but we also have to make sure we are not stifling innovation. If thats the reason we started having discussions more seriously. Its highly fragmented, very difficult and i think the sec to take the lead role in this. We do have the Capital Formation mission. We have Regional Offices throughout the United States for next generation of entrepreneurs and can help investors whether it is advisors, the Digital Technology and with the nasdaq in estonia, what is going on in australia and watching what is going on the state of delaware has committed to doing a number of things on the block chain and learning from all of those things. Working with the disruption going on, but also cooperation and competition sort of working together to move this stuff forward. That is an exciting area double benefit consumers and potentially help the raising process. Yes, maam. [inaudible] a routine basis to not publicize the votes when cases are sent to the federal debt airport. One exception, which was reuters and the wall street journal is now online. The general counsels office is privileged information. Do you believe that should be privileged . Should that be on a regular basis . Yeah, theres very difficult legal projections on that, but he was able to get done through foia. We in fact the Commission Just wanted a word recently for being one of the most efficient agencies in responding to foia. It can be done on an ad hoc basis. We are going to put it out there. I have nothing to hide. The companys systems focused on early cancer detection. Over the years have taken advantage of raising capital is so far. We are going to try later this summer and as a leadin to reggae plus. The good news is most of the topics that are on my mind has been touched upon by either you or david. I would like to buy the next one nation point on a couple points. First i would like to commend you for your initiative is getting out and getting on the road in listing two entrepreneurs. In addition to being the see how of a biotech company, i chair a coalition of Small Companies than weve done a little bit of work at the sec. I met david in that capacity. A couple years ago i attended a Small Business conference at the sec and they were maybe two to 300 people. I did not get a single Small Business person there. It was all lawyers, academics, think tank people. I commend the initiative, but youre not going to hear from Small Business people. Im close to washington. I can get down here recently. Talking to entrepreneurs, particularly in the socalled other 47 states, 75 of Venture Capital is going to Companies Based in three states. So getting out to the other 47, including maryland and talking to ceos and their shareholders and finding whats really their mind is an important thing. I hope the other commissioners will do so. Two things that were touched on but i think are very important for my company and most of the other ceos i know that raise capital, one is to broker a deal and the fine roles are a tremendous impediment not only to finding capital, but the cost of raising capital. It is exorbitant. But we have to pay to groups like that to present the medal tally because theyre not allowed to get into commissions, they necessarily have to pay the cost of that is killing companies. That is i think the number one priority is liberalizing those roles and cycling the accredited investor rules need to be revoked at as it was touched upon. Thank you. Yeah, thank you. Yes, sir. [inaudible] i need to want to get ahead of the chairman on his agenda, but since you reopen the docket on pay ratio and now have a lot of comments in the docket, is it your belief at this point that the implementation deadline will be delayed particularly with some color on how you think thats going to go in the second question at the tail end we talked about some of the rules that she felt couldve been finished, but there is not a quarantine with the title vii rules. What is the state of title vii at this point . Is the commission never going to adopt the rules that were apparently ready at the end of her time . The title vii for those of you that are familiar with it, it deals with the derivatives and over derivatives split between the sec and the cftc has finalized the number of roles. But they are going back and revisiting some of those, look and asserted the implementation and acting chairman to start revisiting some of those. The fcc we have not gone as far in a number of rows and we have the opportunity to move forward. At the same time, we need to make sure we work with the cftc to make sure that our rules are harmonized within the jurisdiction for securitybased swap in the number of participants, whether on the dealer cider customer side are in both markets. It is an opportunity for us to work with the cftc to work on a more collaborative basis in terms of them revisiting our walls and thats moving forward. I think you are going to see more collaboration, more cooperation between the two agencies on those rules are laid forward. [inaudible] staff is looking through the comments right now and see what we can move forward on. Is wondering if you could share some topline center listening to her, either what they are saying consistently with Capital Formation for some of the most surprising things you heard that might not have occurred to somebody inside the beltway. Taking care to mention the Silicon Valley, the reason why a lot of these large uniforms are seeing private as they could literally make a phone call and get hundreds of millions of dollars in capital. His enough private capital available and not on the one hand its nice here, but on the other hand again this makes me even more strong and i believe that we need to get the average investor the ability to get involved in a number of those offerings. I hope sort of im not a. I think the biggest sort of feedback in terms of positive feedback we got from people as they were very appreciative of just the change in tone at the commission and out of white house as well, to. In terms of recognizing that we have had the best Capital Market in the world for a long time, but the rest of the world is catching up and we need to make sure we get the balance right in terms of the costs and benefits. They have to have lawyers looking at these things, and the costs that go into providing information for stuff with little or no value to investors, just reiterated a lot of those things. The finders issue keeps coming up. The issue of regulation crowdfunding not being as workable and the reggae pluses away they can do crowdfunding. People were just appreciative of the fact that we get outside of washington d. C. The point that was made early is that washington d. C. Can be an echo chamber. You just keep hearing the same things over and over. We need to get outside washington d. C. To me its important. If you think about our mission , you can set protecting investors and promoting Capital Formation but its no less than helping facilitate the American Dream. If you think about it, the dream of entrepreneurs is to take their spirit and put it into action. Start a company, raise capital , bring a product or service to market. For others its taking their hard earned savings and investing it in the entrepreneurs. Of others. Taking those proceeds and improving the standard of living for themselves, their children and their education by investing or taking the money and giving it to the charity of their choice. For me, our mission is to preserve the American Dream by investing in each other. Its been a great discussion. I want to mention three things i hear from a lot of Small Businesses looking to the public that we havent talked about yet. It surprises me that they mention these. Shareholder proposals, proxy advisors and security actions. These are three big monsters they are worried about. There are things the sec can do. There been advisor ideas out there, security class actions, the amicus briefs and all sorts of things are used as evidence to interpret laws in private actions. You think the new gc, with Everything Else theyve got going on will give attention to these issues. Yes all three. Thank you for bringing them up. For shareholder lawsuits, companies can come to us to ask for relief to put in mandatory arbitration. There was a company under the prior ministration i thought about doing that when the ipo decided to pull back. I would encourage companies to come and talk to us about that. On Advisory Firms, i have come to the realization they need robust regulation. There is stifling competition and im worried. There is tremendous concentration and many conflicts of interest. We regulate those in a number of ways through disclosure for prohibition. Have come to the point where proxy Advisory Firms are either engaging the business so full of conflict and are so influential in the building complex we even think about managing conflicts with proxy Advisory Firms. The last one you mentioned was the 14th aa process. Theres an article they dont want to have to have companies include things in the proxies. I think you will see staff, with our nude Division Director and chairman, one more companies will come for no action relief on that as well. They keep talking about mozart, we need to increase the threshold. Last question. There was a number of people, this gentleman. To follow up on brians question, what is the sec view of these . There seems to be question whether compliant. We are looking at that. There are a number of different icl out there. For me its just getting up to speed with all the acronyms. Then theres distributed autonomous organizations and to brians point there is a question of whether or not this is innovative and okay to do or is it skirting the federal security laws. There will continue to be movement in the space so we are paying attention. Thank you very much commissioner. This concludes our event. [applause] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] when i came in as acting chairman, i didnt have to make any personnel changes so i kept a lot of people in the acting roles. Theyve seen a lot of the action and things were working on is hiring new Division Directors and general counsel and chief of staff, all of those types of things. Its a matter of building up staff. If you look at what we did in the confidential filing statement, i think that will have huge impact. That just requires staff action on that. Im not surprised are troubled by that. We will be able to do things that will help the market. Theres certain numbers and open meetings about it. You think Capital Formation can be and what you are talking about. Last week you mentioned removing forward. Right, that timing and weve got some fastback requirements we need to get done. Theres some disclosure things that were started under chair white that are moving forward. The exact timing of that is all on him. On 14 aa there had been some numbers that indicate the commission has granted action relief. I think that was a wall street journal. [laughter] i dont read it. Anyway. I shall i heard the speech in new york, there was a line in there about Companies Seeking relief or talking to the commission when they have feedback on requirements that they think are onerous or burdensome. Im not sure the agenda Going Forward, how much could be at the staff level just by granting individual tailored relief to issuers . Is that a possibility . What we are ready saw about on the confidential filing, expanding not. Whats interesting is if you think about it, that means the commission always has that authority, even for emerging growth authorities but its an act of congress to tell the f cc to actually do it. Then we were able to expand it for all companies and for offerings within the first year. I think thats a piece people are missing that i think will be really important. They talk a lot about how important that is to companies in providing that relief for the confidential filing process. It will be hugely important. As i mentioned weve already got companies that have started filing for not only going public but that offering as well. The arbitration piece, is that one of the things that the chairman is also encouraging people to come forward and ask about . Is that part of, does that tiein. Im trying to remember if that was in his speech or not. Im wondering if thats something you think you will do more of her maybe already are starting to see including that. Thats one of the things thats generally, bill talked about being more collaborative in terms of talking to people. We can come up with ideas that we think are important but mandatory arbitration is one where people come and seek, a lot of its just them saying come talk to us. Theres very little we can do proactively on mandatory arbitration. The company has to come forward and ask for relief. [inaudible] absolutely. Thats why its important for us to get out there and say come talk to us. Its a Different Administration in a different chairman in a different Division Director. Whats your review of delegates of authority Going Forward now that is not yours anymore. The review is finalized, it was presented to the chairman and we will have discussions whether there needs to be changes in delegations on a number of levels whether or not additional delegations can be made. We asked the staff to give you a list of all the delegations but also to ask them, are there instances where you dont currently have delegations you think it would be particularly useful. There are some things i sign off on that i think these could be delegated. For me it will always be a tradeoff between efficiency and accountability on these issues. Is the enforcement restriction going to remain in place . It has remained in place and it is currently right now. That question will be part of the broader discussion that we will have over all of these things. Whether certain things should be delegated or sub delegation should come back, its all part of a broad discussion. To have recommendations . So what we did is as the general counsel to talk to each of the Division Directors and we talked about senior Staff Meetings where you go out and do this and put it all up and the General Counsel Office put together in terms of these recommendations. Its kind of like a big chart of all the different delegations in terms of what they are and whether theres sub delegations or whether its more substantive so thats the tradeoff between efficiency versus account ability so we have that broader discussion. Ive handed that off to the Chairmans Office and they are reviewing it right now. We will start having a discussion with the commissioner in terms of can we find a path forward on a package of things. Its all about getting that balance right. Maybe one more question. [inaudible] you tell me. You have better information a few weeks ago. [inaudible] a white house official on a call. No guesses, anybody in this room have anyone. Thank you. Thank you all for coming. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] if you missed any of this conversation you will be able to see it from the beginning on our website cspan. Org. Type Heritage Foundation in the search bar. The hill is reporting that senator john mccains Health Issues will not impede the work of this committee. They are expected to proceed with two confirmation hearing despite senator mccain not attending. He underwent a medical procedure on friday. On twitter he thanked the mayo clinic for their care. He had surgery friday to remove what clot above his eye. He will be at his home all week to recover. James in half will chair those confirmation questions in senator mccains place. The u. S. Senate returns today at 3 00 p. M. The expected to work on the nominee for Deputy Defense secretary, patrick shanahan, top boeing executive responsible for the operations. The house will be back at 2 00 p. M. Eastern time. Later in the week, bills related to gas pipeline construction and environmental regulation. You can watch the house live on cspan and our coverage of the senate is here on cspan2. Sunday on q a. When we look at president obamas domestic legacy, i think there are two things very important that will have longlasting, good consequences for the United States that can be summarized in four words. His two nominees to the Supreme Court. The second of our twopart interview with david garo. Mr. Garo talks about his book rising star, the making of barack obama which covers president obamas life up to his winning the presidency. I think the point to emphasize is that over the course of his presidency, there were scores of people in illinois who had known him in years earlier, who would deeply disappointed with the trajectory of the Obama Presidency and disappointed in two ways. Number one, disappointed that barack forgot most of the people who were