Transcripts For CSPAN3 SEC Chair Testifies At Oversight Hearing 20220927

The hearing before the Senate Banking committee is just over two hours. Witnesses are in person. Mr. Gensler, nice to see you. Members have the option to appear in person or virtually. Welcome back, chair gensler, to this committee. Workers and their families do not measure the economy by the stock market. Neither should we. It is why in the senate and in the new Biden Administration we work to create an economy that delivers results for people who get their incomes from a paycheck, not an investment portfolio, raising wages and good paying jobs and lowering costs means fighting the corporate price gouging that so often hurts consumers and the unfair labor practices that so often hurt workers. That means investing in the future of american manufacturers and it means making sure our financial watchdogs keep our economy and our markets stable. At the fcc, that includes going after companies to try to cheat the market. Chair gensler is doing that very well. It means strengthening corporate disclosures to stay ahead of risks like Climate Change. They stretch their tentacles into more and more areas of our economy. It has been an eventful year this summer. The Senate Confirmed president bidens two nominees to the fcc. I know both new commissioners got right to work on the many issues. Dedicated staff have been busy. Republicans in this committee have a bellyache to, and i assume will today, about your ambitious agenda. If wall street and its allies are complaining, it tells me more doing your job. We put americas savings first. The focus on transparency and fairness to, concept critical to making sure our markets work for everyone, not just insiders, not just corporate exacts. The fcc must continue making enforcement a priority. But actors are always coming up with new schemes to separate people from their hard earned money or cheetah the rules to gain a little bit more for themselves. Under your watch, fccs increased prosecution for Insider Trading, which of course, as you know, under the trump administration, and fall into the lowest level in a generation. In april, this committee considered a menendez bill which would outlaw Insider Trading and statute the. House has passed a similar bill. We saw the successful result of bipartisan work of Committee Members to improve transparency and fight fraud. In 2020, senator kennedy, who was sitting to my left, more or less, and senator van holland push for the passage of the foreign count ability built trading of Foreign Companies with chinabased auditors that refused to comply with our oversight. That law jumpstarted negotiations. The Public Company accounting Oversight Board signed an agreement with chinese authorities which would finally allow auditors to in march, the president sign an executive order establishing a whole Government Strategy for Digital Assets while agencies across our government respond to the growth of crypto and best protect american money. We know the fcc continues to enforce the laws, going after crypto tokens that violate security laws, shutting down crypto ponzi scheme,s charging Insider Trading crimes and crypto. Over the last year, we have learned at how cryptoassets are used in scams and frauds and play a role in illicit finance. We heard from a secretary who testified in the president s working overall stablecoin. This morning, the ad committee downstairs in a senators with an eye on this committee on the democratic side sit on both of these committees. They are considering a crypto bill sponsored by sovereign boozman which focus on digital commodities. I appreciate their work. It is critical, though, that we are careful and deliberate in a drawing jurisdictional lines in this kind of regulation. We have to prevent gaps in close loopholes that can be exploited or abused. Its not easy. Its why action by the Agriculture Committee and the chair gensler is very familiar with whether action is welcome. We also know it is not enough. When congress wrote doddfrank, we fixed the video in the over countered derivatives market. We need to remember thinking of the damage that was done when it comes to fire to it comes to crypto. The regulators need to Work Together to make sure investors and consumers and market stability come first. Fccs work on Climate Risk Disclosure is an important example of how to improve the markets understanding of risk and provide transparency incomparability, clarity, and uniformity. If only a subset of companies provides disclosure and they do so however they want, that doesnt serve anyone. Investors outside the u. S. Already benefit from standardized Climate Risk Disclosure. Its time the u. S. Marketed as well. The fcc recent rule proposal to require more disclosure about corporate stock buybacks will also bring muchneeded transparency to the market. Thank you for that. We know that stock buybacks are a big problem. They distort the market and funnel profits to executives at the expense of longterm investments and workers and in innovation. The process allows for these buybacks as only made them more manipulative. Companies have been able to announce buybacks to juice their stock price. They only provide details months later on how and whether they would even complete their plans. Under fccs new proposal, the market went under executives are buying or selling it at the same time. Taken together with unprecedented steps in the Inflation Reduction Act to finally tax these buybacks, i appreciate senator tester and others on this Committee Supporting that. These are the first real steps we have seen in years to rein in the wall street scheme, another example of a new president of the United States who fights for workers and sides with workers. Chair gensler, i look forward to hearing more about other ways the fcc is working to hold that actress accountable and protect american to invest their hard earned money in the markets. Senator toomey. Thank you, mister chairman. Chairman counselor, welcome back to the committee. Good to see you again. The fcc, as we all know, as a Critical Role to play in protecting investors, maintaining fair, orderly and, efficient markets, and facilitating capital formation. Unfortunately, some of the fccs recent actions and inactions raised concern about how well it is carrying out this mission. Take for example the fccs handling of Crypto Lending platforms like celsius and voyager. Celsius and voyager were offering Interest Rates as high as 18 if customers would lend their Digital Assets to them. The firms would then lend that crypto to presumably other larger investors to make short term bets on the Crypto Market. Once the crypto selloff began, many borrowers could not pay their debts. These platforms froze customer accounts. The fcc took enforcement action against block five for similar activities last winter, yet somehow let cell seat and and voyager continue to this spring when both with investors staring at billions in losses. Where was the fcc . Where is the fcc ban and clarifying the rules of the road for Crypto Market participants . Our chairman insists in his written testimony that, i quote, the vast majority, and quote of crist oh tokens our securities. He has acknowledged that bitcoin is not. That is presumably because bitcoin is so thoroughly decentralized. That naturally raises the question, where on the decentralization continual does a token seems to be a security . Most of these togas dont have a financial claim on the issue. Doesnt that make these tokens very different from the vast majority of ordinary securities . The chairman is right most. Tokens should be considered a securities. As he himself stated in his written testimony, and i quote, it follows that many crypto intermediaries are transacting crypto transactions typically could be settled with intermediaries. As a result, crypto intermediaries often serve different they have different risks than traditional securities and intermediaries. All of that raises the question, what is the crypto specific roadmap for these crypto intermediaries to register . Stepping back, i think theres a larger problem here. As bloomberg columnist matt levy and put it, and i quote, chairman again slurs posture is that he should be i just dont see how that can work, and quote. I think mr. Levine has a good point. Given the novel nature of the tokens, we need to revisit the definition of security as part of a larger effort at taylor Regulatory Framework which is calibrated to the unique risks of the Crypto Market. As i have said, crypto tokens have varying degrees of decentralization. They usually dont have a financial claim on the issue. They typically can be settled in realtime without intermediaries. These were very major and important differences from traditional securities. They merit a clearly stated and tailored Regulatory Framework. While the fcc has failed to provide proposed rules in the ordinary Securities Market. The top of that list of the fccs Climate Disclosure rule. Public companies are already required to disclose material Climate Change information. The proposed rule, however, would go much further to require disclosure of exceedingly Extensive Global warming data. The state it would be enormously expensive to collect but almost none of it will be material to a businesss finances. For any reports along, the fcc estimates that aggregate external Compliance Costs for issues would range from 1. 9 billion per year to 5. 2 billion dollars per year. If the fccs proposed Climate Disclosure will be comes affective. The fcc itself again estimates that in the external compliance cost of the Company Going public would increased by more than five times at a time when excessive regulatory costs are already resulting in fewer Companies Going public. The cost of compliance would be more material to the investor than the information itself. Of course, the Climate Disclosure rule is not really about informed Investment Decisions its about equipping climate activists to run pressure campaigns against companies which would often be to the detriment of shareholders. The endgame is to other Traditional Energy industries. We have seen how well that is working out in europe. The fcc is wading into controversial Public Policy debates outside of its mission. They are doing it without the Legal Authority to do so. Politicized agein the process, s politicizing the agency, slowing economic growth, increasing inflection, and possibly undermining natural security. Banking Committee Republicans over into the fcc asking basic questions about how the fcc developed the climates cultural. The fcc has been stonewalling us. The fcc may not want to answer to congress. Ultimately, the fcc will have to answer to the courts which should make it nervous. The Supreme Court has repeatedly held, and i quote, congress does not alter the fundamental details of a regulatory scheme invade terms or insularity provisions. It does not, one might say, hide elephants in mouse holes, and quote. The summer, the Supreme Court applied the sensible principle in the West Virginia versus epa case. There, it ruled that the executive branch and its agencies cannot use novel interpretations of existing law to pretend they have a Legal Authority to support sweeping policy changes, including on Climate Change. That is what the fcc should consider it on notice by the court. The separation of power still exists and will be upheld. Thank you, mister chair. Thank you senator toomey. Today we will hear from a Securities Exchange Commission Chair gensler. This is his annual trip here. Sometimes, he doesnt more often. We thank him for that. Gary gensler, you are particularly welcome because we have a very good well above average turnout today. Enjoy that. Thank you for joining us. Chair brown, Ranking Member to lee, and members of the committee, im honored to appear here before you today. I want to start by thanking you, this committee and all of congress, for confirming our two new commissioners, [inaudible] terrific commissioners. Its welcome that we have a full complement. I want to say that i am speaking on myself. I dont speak on behalf of the new commissioners in this hearing. I would like to start by discussing two key years in policy making awhile back. 1933, 1934, i think that is when chair fletcher sat in the seat and chair brown if, i recall my history right. It was in the middle of the great depression. President roosevelt and congress addressed the crisis through a number of landmark reforms. Among them, congress and fdr came together to cry after the first two federal Securities Laws. In 1933, president roosevelt also suspended the use of the Gold Standard. In other words, in those two critical years, one could say that we were placed one Gold Standard with i would like to say another, the security laws. I do believe the court principles have contributed to americas economic success and geopolitical there is a basic bargain then investors get to decide what risk they want to take but there is a Securities Law where there was full fair and truthful facilitate capital formation. We cannot take the leadership for granted, though. Even gold medalists, especially gold medalists, constantly train to stay ahead of the competition. I do think that senator kennedy and van haaland helped us a little bit with this issue with china. We must remain vigilant to opportunities to drive greater efficiencies, integrity, resiliency across our area. First, markets work best when they are efficient. What does that mean . That means that there is competition. There is transparency in the middle of the market when we lower the cost in the middle. Issuers have lower cost to raise money and investors get better returns. We have done a lot but have not updated our equity system in 17 years. Imagine if you have a more than 17 years old phone in your pocket. You would think, oh my god, maybe i should update that phone. Technology moves fast. Our system works best when there is integrity in the market. We have proposals to bring better integrity into the market around a special purpose acquisition companies, the insiders, trading plans, and so forth. Another area is crypto, as member to meet raised. Of the nearly 10,000 tokens in the the vast majority are securities. Offers and sales of the security tokens are covered by the Securities Laws. Given that, ask the Ranking Member quoted me, saying, it follows that many crypto intermediaries are transacting insecurities and have to register with the fcc in some capacity. I would note that when chair fletcher was in that seat, there was not a Central Electronic clearing. You could Exchange Security person to person in a paper format. Staff is working with Market Participants 100 trillion dollar Capital Market. That is the sort of motherlode. That is our Capital Market. Crypto is one 100th size. Markets work best when they are resilient, both in normal times of stress. We have seen those in 2008 and 2020 this includes selling the that straw work we are anchored by the laws that in all our work, we are anchored by the Laws Congress passed, the courts interpretation of those laws, Economic Analysis, and public input. As the commission, we benefit greatly from public input, including from congress and this Committee Member that i stand ready to meet with one on one, nearly anytime you want. We benefit from that feed that. Our Capital Markets are the Gold Standard, lets do everything we can to keep them that way. I look forward to questions. Thank you, chair gensler. I think that what you said, and ive heard you say this before in smaller groups publicly, bigger groups that we cant allow the war that is fundamentally our job here. Fundamentally, that is our job in the banking and urban affairs committee. You have made improving transparency a priority in addition to the climate risks, disclosures, enhanced stock buyback that i mentioned earlier. The commission is addressing cybersecurity risks, improving visibility, if you will, and to concentrate ownership of stocks. Discuss why it is critical that we improve these types of disclosures, these types of disclosure for investments large and small. I would say that there are two core things. It goes back to our founding. One was this basic market that investors get to decide as long as they get the full and fair disclosure, material disclosure. They get to decide. You cant defraud them and mislead them. That lowers the cost of capital, actually. There is trust in the market. The second thing that transparency does is it helps promote competition in the markets. That is the nature of things. It promotes our economy as well. That competition amongst intermediaries, amongst people trying to raise money from the public, so i would say those are the two things, not to mention market integrity. Thank you. I have noticed today i commented to senator toomey. We have seen an unusually high turnout of republicans for this hearing today. I think the turnout of republicans, many of whom against all evidence, many of whom are climate deniers, will i would assume ask you questions about that. Let me go with that. On Climate Risk Disclosure, discuss why your agency is proposing what you are proposing if not, quote, making climate policy, but how improving disclosure helps all investors. It is because right now hundreds of companies and investors representing not trillions but tens of trillions of dollars of assets under management are in this conversation already. Investors get to decide we are not a merit regulator. Some people think we might be. We are not. We are a disclosure based regulator. Investors today are wanting to know about climate risks. It matters to the future path of the performance, financial and other performance. What are customers going to do . What is the supply chain going to do . What might happen around the globe because our u. S. Issuers are operating in many jurisdictions around the globe . It does go back into when i buy or sell a stock or vote a proxy, climate risk matters to those investors. We have a role to help bring consistency to those disclosures that are already happening. You are clearly saying you are not a merit regulator. You are a disclosure regulator. Thats really important here. I hope my colleagues i remember that you said that. I hope they think that through if they ask their questions. Let me ask for crypto in the last minute and a half. The Crypto Market has touched my colleagues developed legislation, as you know, that would get the cftc jurisdiction over part of the Crypto Market. Remind us why it is important. I want to ask two questions together so you can take glassman and a half. Remind us why it is important for financial regulators to coordinate oversight and make sure that gaps or loopholes do not exist and would you agree to continue to work with our committee, the cftc, and making regulars to make sure we get this right . I do commit to that. When i say that it is important to protect and ensure that the hundred trillion dollar Security Market works, it is because that is the heart of how we brace risk in our Financial Markets and how investors safe. This committee and the House Financial Services committee oversees that. There was one regulator on the beat. The definition of security should be, i think, the exclusive remit of these two committees. Im looking across the aisle, if we end up with multiple federal agencies defining when does the Treasury Security when does Something Else in the equity market or else were a security . We have worked with other financial regulators. Just yesterday, we announced something in the treasury markets that we worked with in the federal reserve. With the cftc, i was honored to chair that agency. I love the agency, the cftc. I love the fcc. Its like my three daughters. I do want to say that we worked closely with the cftc with regard to recent rules that we put out. There were many parties that were dual registrants. We have a dealer registrants that are registered with the cftc and us. So as well on the Fund Advisory side. If congress moved forward to get the cftc Greater Authority over bitcoin, we would of course Work Together. We have already worked together dually on a number of Enforcement Actions in the crypto space. Thank you. One brief statement. Your testimony mentioned the Enforcement Division in strength by 5 over the last five years, yet despite that, the fcc has pursued new cases in crypto focused on fraud and misconduct with Financial Professionals and securing emissions of guilt. That doesnt happen often enough. I thank you for doing that. Ranking member toomey . Chairman gensler, in your statement, you acknowledged, as you have in the past, that there are some tokens that are not securities. I know your view that whether or not a digital last it is a security is a fact in certain circumstances of analysis. I know your view that the fcc has very broad authority. You have also made it clear in the past that bitcoin is not a security. Some ftc staff have previously said that there the fcc characterizes ethereum astley centralist. Here is my question without getting into the weeds on this. I acknowledge you believe that most tokens have a large degree of central control. Generally speaking, is it fair to say that a significant factor for you and whether or not a Digital Asset is a security is whether it is centrally controlled already centralist . Well, i look to the Supreme Court that is often writing about this. They have written about this close to a dozen times in 50 years. It is whether the investing public is anticipating profits. That includes anticipating profits from appreciation as well as from, as you mentioned, writes based upon a common enterprise. The efforts of that common enterprise. I guess another way to put my question, which you havent answered, is, is it possible to have a common enterprise with something that is decentralized . How could you have a common enterprise . I mean, it doesnt isnt centralization esoteric to constitute a common enterprise . You could have some things that are quite open but still have, if the public is anticipating a profit based upon that common enterprise. Im being careful with my words here. I want to be as accurate as best i can. Are you relying on a group of individuals . These are not laundromat tokens. I youre not answering my question. Let me try it this way. What is it about bitcoin that causes you to conclude it is not a security . Well, one is there is no group of individuals in the middle. Its decentralized. Theres no group of individuals in the middle. Right. You are not in essence, the investing public is not betting on someone in the middle or six people in the middle. You are choosing not to use the term decentralize, but thats what youre describing. It is the decentralized nature of bitcoin, i think, is really what you are getting it. Heres my point. Im going to run out of time here. There are a lot of projects, as you know i mean, decentralization and centralization occur on a continuum, really, i think. You have acknowledged that there are tokens, floral, that are not securities. I think it is because of the centralization that you come to this conclusion. My point is that it is not reasonable to fail to provide clarity, to provide the definition of exactly where on this continuum you have a sufficient common enterprise that it qualifies is accordion where you dont. You said bitcoin doesnt. Some of your colleagues have said ethereum doesnt. A reasonable developer who wants to comply with this doesnt know where the line is drawn. I think we might have a difference. There are many factors. It is not one spectrum of centralization versus the centralization. I try to stick to they are the Supreme Court. There will be debates about other laws. I try to stick to what they say, a common enterprise. I think about individuals in the middle. That developer is in the middle. The investing public is betting on them and counting on them even if the token might be on 1000 computers. Its not about the token being on 1000 computers. Its a coup developers in the middle. If there is nobody controlling it in the middle, that is what we call decentralized and that does happen. As you know, of course, the how we test requires all four of the tests to be met for something to be defined as a security. Let me move on to another related issue. As i said in my opening statement, i dont think that the fcc has provided a crypto specific roadmap to the registration of crypto intermediaries. One example of the problem that arises is the fccs customer protection rule was written in 1972. It doesnt address how a broker dealer should hold a customers blockchain private keys, for instance. I know the fcc claims to have provided relief, but the relief has a very onerous contingencies. It is timelimited. In my understanding, few, if any, broker dealers have been able to comply. I know you have said many times that you want to have the industry, the intermediaries common and have a conversation with the fcc about this. Wouldnt it be better if the fcc came out and laid out how you would apply the rules and regulations to these novel devices . We are in conversations with a number of these intermediaries across the exchange, the landing, the broker dealer, the cost of the space. As i said a year ago, in the lending space, people should make no mistake. I think it sounds like, senator, you and i might agree that the lending platforms are under the Securities Laws. In the Exchange Space and the broker dealer space, i accept that people have not come in and used what was put in place under chair clean, that broker dealer custody that you mentioned. I have said to staff, lets use everything in our regulatory toolkit, whether it is exempt of orders and others, to help facilitate and get this industry people will not have trust in this space unless it comes into investor production. Im out of time, mister chairman. I would just say, my concern is that the approach you are taking with these oneoff discussions, if it did even result in an opportunity to comply, it would be this idiosyncratic exempt of order negotiated with a single company. That is not a good way to pass rules. It ought to be through the apa in a very public process. If the chair would forgive me, i think we have been very clear through 70 or 80 actions starting with that double order, the monkey order, and many others they were full votes of the commission, not just staff. I just look at other times in history when the fcc and the Securities Market took ten or 11 years where they did these, as you would say, executive orders or relief to individual issuers and did a role at the end of that ten or 11 years based upon all of that experience. Its worthwhile to talk to the industry, top of the participants, and get them registered. Thank you, mister chair. Thank you, mister chairman. I want to thank you, chairman counselor, for being here. Recently, i let a group of my colleagues writing to you about your process for a significant number of proposals that the fcc has been working on over the last few years. I think you would agree that it is important that there are sufficient opportunities for Stakeholder Input and feedback. One of those proposals that i have been hearing about is enhanced one and standardization of Climate Related Disclosures for investors. You probably know that i am a farmer. This is my wife and is 45th harvest, as a matter of fact. As a working farmer, i can tell you that i can understand the importance of considering the impacts of Climate Change. This year was our second worst harvest due to the drought. Last, year due to extreme weather conditions, it was our worst harvest. Climate change is real. It appears like it isnt going away. We have some issues to deal with. I also know, though, that access to capital and markets to sell our product and to produce our product is really important. I can tell you i understand the burden of reporting information. I get surveys nearly every day about what i am doing as a farmer. This week, there were a number of farm groups that i visited with virtually and in person. A number of banks were concerned about this rule. So, from a production area culture standpoint, i dont have a lot of options as a farmer. I tell folks that i threw a couple hundred gallons of diesel fuel in the tractors. Its not like i have an electric tractor in the garage that i can use. Im pretty well locked into fuel. Under this rule, what responsibility would folks and production agriculture, specifically montana farmers, have for disclosing their emissions . Thank you for that question. Presuming that those farmers are not Public Company, they dont come under the rule. We have heard from a various farm bureaus and the American Farm bureau federation. Other members probably know is if the. Public companies would have an obligation under the proposal with regard to Greenhouse Gas emissions, their own emissions. We say in the rule that they estimate their supply chain emissions if it is material. It has a materiality. It is just that the estimate. We have heard some folks in the community, thank you. The Farm Community is concerned. We are taking a very close look at that amongst our 14,000 other comments. Let me give you a scenario. Markets are really important. I like to direct markets as much as i can, but not as much a i sell to public male companies. I sell wheat to a publicly owned company. They start doing their assessment on climate impact, which i certainly dont have a problem with, by the way. What am i as a farmer who sold them grain, for example, or cattle or pick a commodity. If the company says to me, look, if youre going to do business with me, i have to have all this information, what are my recourses . So, what we have put out, and again, weve got some very good comments and we are working through this. That public empire you sell to does not have any obligation to ask you specifically. They either need estimates or just discuss how they are managing that scope three. I would say that this is what the Public Comment process is about. We have heard from 14,000 other people and how we sort of address this to lower the cost. The senator is not whether it is the Farm Community or other communities if they are not Public Companies, they are not under this rule. My concern is that we sell to Public Companies. The vast majority of the product that is sold us to a Public Company. I just bring this to your attention. I dont want to repeat myself. If the Public Company says, hey, we need you, tester, to tell us how much fuel you use, how much fertilizer you use, how much or inputs were in all of that, it becomes an issue especially for the little guy who is out there running a tractor and fixing their tractor and doesnt have a lot of time to sit in the house behind a computer. I will say two things. One is that that is not the intent of what we did, particularly how we did it with the safe harbor and estimates. Two, that is the benefit of Public Comment. That is why this helps us. We will put this hearing in the Public Record, in our Public Record as well. Thank you, chairman. Thank you, mister chairman. I want to try to fulfill your expectation that some republicans are going to bellyache during this hearing. Thrilled you listened to my opening statement. I did. I also listened to senator toomey. I want to get back to something that senator toomey mentioned. We have sent a non oversight request several months ago, a followup on july 21st. Looking for a written response to our recite request. Chairman gensler, i know your office and the initial response provided a one page response that suggested that we meet with the staff. Im curious when we could expect a specific written response to the oversight request that republicans have sent you. Sir, we do stand ready to meet with your staff and walk through the process. The process that we have on any rule we put out to the public in that release. It was hundreds of pages. Our Economic Analysis and the rationale and reasons for that 500 pages long. That is correct. That is correct. We stand ready again to meet with i guess we can just get a commitment. There might be other members who are interested. They are absent. Getting a commitment from you to meet so that we can go through and get the answers to this specific question. We had an oversight request. We stand ready to have staff meets to go through and generally talk about the process. I want to be careful. Its really about to talk about and try to address the questions that you have any concerns. Again, this role is rooted in decades of law and it is about a conversation that is already going on between Public Companies and their investors and investors would benefit if we could bring some consistency to this fragmented disclosure that is happening now. We are we may follow up with staff, but were going to continue. First, congratulations on your confirmation, but were going to continue to press on answers to some of these specific questions. Thank you for that. The u. S. Treasury market is the single most important market in the world. It to the base upon which the Capital Market exists. It does a lot. It is important in monetary policy. It is important in protecting Retirement Savings for u. S. Workers. We could go down a long list. I think your recent fcc proposal could inadvertently curtail involvement and liquidity in the treasury market. Im kind of curious. Did the commission really intend to require customers to register as dealers . We put out a proposal earlier this year based on a 1986 law about dealer registration. My understanding is the proposal would classify any form as a dealer if it transacts more than a specified amount per month. Is that true . There were two prongs, but yes, it had over 25 billion dollars a month. How would a pension fund that frequently transact in the treasury market and exceeds the trading threshold set by the commission in order to protect the Retirement Savings of its members be considered a dealer under any common sense interpretation . It is about whether you hold yourself on the statutory definition, holding yourself out regularly and transacting in a marketplace. There was not, by the way we go through this economics in the proposal. It would not cover Pension Funds as we know it today. The nature of the trading would matter . Its the size and scale of the market. As large as they are, its also that. Pension funds are not trading at those types of levels. I have a series of other questions. It would take me longer to ask yet that i have time remaining. We will be submitting several questions for the record. Again, i want to go back to the oversight requests. We need to kind of figure out how we can get these specific answers to the question. Im happy to have my staff meet with you. We would also like to get a formal written response to the requests. We have requested a response in writing. A discussion is good, but we will continue to press for that. Thank you. Thank you, senator. Thank, you mister chairman. Chairman gensler, the last time you came before the committee, i ask you to move expeditiously to adopt Asset Management advisory committees recommendations on diversity. Last october, 22 senators, including nine members of this committee, sent you a letter supporting the recommendations and asking for immediate approval. Can you give us an update on the status of adopting these recommendations . So, thank, you senator. We have looked at there were four recommendations. There are some sub points in those recommendations. I think we have informed your staff about this with regard to two important ones in there. One is a recommendation around staff guidance, how Asset Managers are selected and whether years of service or their assets under management could be taken into consideration or not. Another one is with regard to eo complaints and how those complaints are shared with other agencies and the like. I think we have made Good Progress on those as well. I feel that the staff will shortly be butting out that guidance. We continue to look at the other two matters. Look, i appreciate that you are giving some of these recommendations serious attention. At the same time, i must say i am disappointed in so many other areas. The fcc has taken bold steps to protect consumers, to strengthen markets such as your proposed Climate Risk Disclosure rule. However, when presented with a max non controversial unanimous recommendation that would promote diversity in the Asset Management field, you havent been as aggressive. Can you commit to make concrete progress on these recommendations by the end of the year . So, senator, i take very seriously how important diversity, inclusion, equity is broadly in our society, but to the fcc as an agency, our Senior Leadership is probably the most diverse and inclusive that we have ever been as an agency. We continue to lean into tried to make sure that our Agency Everyone can bring their best self to work and we get the benefit of the talent across this great nation. In terms of policy, it is held up in court right now, but last year, a self regulatory organization, nasdaq, put in place a list of requirements with regard to their board of directors and i were city. That was their decision, not ours. It predated me. We approved that. On these four committee recommendations, as i said, i think we have made some pretty Good Progress on two of them. I think that guidance will be out in the near term. We continue to work on the others. Id like to highlight one of the recommendations that i think would be particularly impactful. Invest in companies andthe a mae fcc require enhanced disclosure by Investment Companies and Investment Advisers regarding diversity within their workforce and leadership. You and i have spoken about this. I just heard your comments now. I think that disclosures about diversity are incredibly important. That is why i introduced the improving corporate governors during diversity act. Do you agree that enhancing diversity disclosures for advisory firms, Investment Company boards, and consultants would empower investors and Fund Managers to make more informed decisions . Again, as i said, i think that we benefit in our organization at the fcc and our great nation by tapping into the talents across our diverse nation. We are continuing to look at this with regard to disclosures. One of the key findings of the study is that for my colleagues, amac hes an Advisory Board that is created under the fcc. One of their findings is that, quote, Investment Performance by diverse Asset Managers is equal to or greater than the Investment Performance of firms that lack diversity and ownership in Senior Leadership despite differences in size and length of track record. That is why they recommend at the fcc issue guidance clarifying that fulfillment of fiduciary duty does not require automatic exclusion of Asset Managers who are new to the industry or do not meet a certain threshold of assets under management. In your view, is it necessary for a fiduciaries to automatically exclude newer or smaller Asset Managers in order to fulfill their duty . Senator, on the guidance, i share that view. I think that you just said i think that is the guidance that the staff is working on to put out. The amac is a federal advisory committee. Let me close by saying that fundamentally using the excuse of fiduciary duty to exclude women and minorityled firms runs contrary to the actual data. The study along with a host of other studies by mckenzie, for example, and others have repeatedly shown that diversity led firms outperform their non diverse counterparts. So, given this data, i think that we can agree that newer, small or asset members being automatically excluded under the guise of fiduciary duty is actually not helping investors. Its harming them. That is why i have been pressing on these issues of continuing to work with you. We hope to have a robust response by the commission. Thank you. Senator kennedy from louisiana is recognized. Thank you, mister chairman, for being here today. I want to thank you and your colleaguess good work on implementing the holding Foreign Companies accountable act. Can you give us a quick overview about where we are . China, i understand, has come to the negotiating table. You have negotiated a statement of political. Could you give us an update on the status . Yes. Again, i want to thank you. Senator van hollen just came in. You shepherded in that through. I think the holding Foreign Companies accountable act gave us the additional leverage to work with chair williams down at the pco b. We said to the chinese last august a year ago that we would not be willing to send the inspectors over to china to look at the audit work unless we could get a very detailed prescriptive statement of protocol to effectuate the will of congress. At its core, how can you trust the numbers in these Chinese Companies unless there is someone in the u. S. Who is auditing the auditors, so to speak . They are inspecting investigating. They did sign that. We thought it was important to get that signed. The pcob descending inspectors over. I think it starts monday the 19th. It takes about 8 to 10 weeks to get through. We will probably know somewhere around thanksgiving or early december. I dont know if the chinese are going to comply. Theyve told me the Chinese Security asked said they will comply. Its pretty clear that no redactions in the work papers whoever the pcob need to take testimony from. They can share the information to us. They can pick whichever companies they want to look at. Im not sure they will comply either, but they move further toward compliance than at any point in the past. Senator van hollen and i have a bill that has passed the senate, as you know. It is being considered by the house to move the deadline from three years to two years with respect to which, if they dont comply, we tell them to leave our exchanges. I think that might help if we could get that passed and appreciate your good efforts there. In my last two minutes, i want to shift gears. I want to shift gears on the Climate Risk Disclosure. I dont mean to be critical. Im trying to understand. I thought senator tester raise good questions. What is your best guess of the cost of compliance with your Climate Risk Disclosure rules . So, one, i do support your accelerating Foreign Companies i do think it will continue to have the right leverage even if the chinese authorities, the chinese regulators allow for compliance of this year. What about next year . What about next year . I do support that. Thank you. In terms of the climate rule, we lay out in this proposal all the Economic Analysis. I dont need to speak for the numbers, but by company what is your best guess, if you could . Im sorry to interrupt you. I only have a minute left. Whats your best guess of the cost of it to comply . So, per company, we lay that out depending on the size. I just dont want to misspeak. Its from a couple hundred thousand dollars to what the total . The total cost, i think senator toomey accurately quoted it. You might not have been in the room. Its measured in the single digit billions across the entire economy. What we benefit from i understand. I understand. Im sorry to interrupt. Im running out of time. Here is my question. It will cost billions of dollars to comply. Those are scarce resources. Senator tester has to spend the money to comply. They cant spend the money on Something Else. Presumably, the purpose of the rule is to focus investorss attention on their wares risk of Climate Change so they will demand that companies do a better job. The purpose of which is low to lower the worlds temperatures. Am i actually, thats not the purpose. The purpose i mean, i could speak for the five member commission, but also for myself. We are not a merit regulator. The purpose actually is not to do what you said. Its just for investors to get the information. I think the people supporting the rule, that is their thats not why i support it. Okay. Fair enough. I think that is what most people expect. You put pressure on the companies to disclose shareholders put pressure, people do better job. I would like to see why you are asking senator tester and the other people to estimate. I would like to see some sort of estimate of how much all this money spent on compliance is going to lower world temperatures. I mean, we are spending i believe in clean air and bright water. I want to be able to eat and live indoors. What bothers me is why we are spending these trillions of dollars of scarce resources china gives 60 of his energy from coal. La nts and we havchina has 3500 coal fd power plants. We have less than 100. We dont have any kind of agreement with india or china for them to reduce emissions, so we spend all of this money and world temperatures are not reduced. Chair gensler, answer the question briefly. The good news is that that is not what our authorities are or what motivates this one commissioner. It is about actually helping investors get more consistent information even if they want to invest in what might be a brown asset rather than a green acid. They will get more consistent information. They will probably lower some of the greenwashing that is out there and other things like that. Thank you for your indulgence. Senator van hollen of maryland is recognized. Thank you, mister chairman. Great to see you, mister chairman. Great to see an fcc chairman from the great state of maryland. Great to see my senator. Yeah, right. Let me pick up on the first point that senator kennedy raised in terms of implementation of the Holding Foreign countries accountable act. I just want to thank your team for pursuing that. I also agree that we can shorten the time period to two years. I want to thank senator kennedy for his work on the idea is to make sure we protect american investors, especially smaller investors. By ensuring that all Companies Listed on our exchanges comply with our accounting. I know you had tough to go shooters with china. Thank you for keeping us informed. The ultimate proof is on the putting, right . I do want to salute you and your team for all your efforts to date on that. I also want to thank you for moving ahead on a rule to crackdown on abuses of ten b 51 trading plans. Senator fischer and i introduced we are monitoring that carefully. I dont know if you saw the wall street journal article back in june. They revealed clear abuses by insiders in these areas. When insiders benefit, it means the investors lose, often because these are game to take the games before the overall value of a company decreases stock value. I want to thank you for that and remind you of that. I also want to thank you and your team for recognizing the real issue of fraudulent scams, securities scams, often directed against seniors. These amount up to three billion dollars every year. We have a bipartisan bill here. I know the chairman or Ranking Member is probably tired of hearing about it. I appreciate their support for the bill. That is to empower states to better crackdown on this fraud by creating a federal grant through the fcc to help them out. We have heard testimony on behalf of state Insurance Commissioners and state securities commissioners strongly indicating their support. You recognize this is a big problem that we should deal with to get i do. I think that fraud, and as you said in the other community or sometimes it is affinity based fraud we see all too much of it at the fcc in our weekly enforcement meetings. I am sure you do. We want to pass this legislation just to better fortify states to crack down on this kind of fraud. We are working with you on the ticker legislation as well, senator scott from florida and i. I want to ask you about something you and i spoke about before, which is country by country reporting disclosures by big multinational corporations. We are seeing a jurisdiction around the world, including the eu, and now australia move toward increased Disclosure Requirements for large multinational corporations to disclose the countries in which they booked profits and pay taxes as a way to mitigate task risks to investors. We have a changing International Tax environment and clearly companies that have put a lot of eggs in their profits in the sketchy tax evens. Their investors are at risk. That is why we believe as part of providing investors with necessary information that we should provide country by country disclosures. I was pleased to see the fcc take steps to protect investors s interest in may by allowing them to put forward a proposal of amazons Shareholder Meeting that would ask the company to disclose its country by country reporter in. My question, mister chairman, is, in this rapidly changing International Cooperation tax landscape, can you look at this question about whether new investor disclosures are needed in this area . So, senator, i thank you. We are looking at it. As i discussed with you when we got together on the phone, the Financial Accounting standards board actually has a problem we sometimes autumnal. I want to say publicly here that i support the Financial Accounting standards wards project around breaking out in his aggregating tax reporting for Public Companies. I believe that i dont want to speak for them. And the next handful of months, they are going to go forward and it breaks out. I dont think every country, but i think the top couple of handfuls of countries and then they will sort of promulgate back in Public Feedback and back and forth. I think that that would be a productive approach to have such disaggregation that it is considering right now. It is an active project. Thank you, mister chairman. I may have questions for the records. I appreciate it. Thank you. Senator cortez of nevada is recognized. Thank you. Chairman gensler, its good to see you. Let me talk a little bit about crypto regulation under your tenure. The fcc has pursued Enforcement Actions against crypto acid insurers. However, a few cases have been brought against the exchanges. Crypto assets are, as we know, traded primarily through the exchanges. The fcc has proposed that intermediaries should be read related under the exchange act. Why should crypto acid intermediaries and extreme visibly recognized under the exchange act . How would investors and Market Participants benefit from regulating Crypto Assets under the exchange act . Thank you. It is actually a fairly straightforward because of these 10,000 crypto tokens without projecting anyone i believe that the vast majority are securities. There is someone in the public betting on better futures, betting on anticipated profits on a common enterprise, a group of entrepreneurs in the middle. Given that, these intermediaries that often have 50 or 500 tokens or 150 tokens they are going to have a bunch of securities on that platform. How does it benefit the public . These Crypto Exchanges we protect against front running and manipulation. There is transparency. As you go into the New York Stock Exchange oriented nasdaq or the like, this committee has worked on laws long ago. I complemented chair fletcher who was here in 1934 and it. Long ago, for that very reason, the public benefits. Right now, frankly, there is a fair amount of noncompliance. We are going to continue to try to work with the intermediaries and get them inside our regulatory tool kit to adjust and facilitate. There are some differences as senator toomey and i talked about earlier. Would you be able to the enforcement to identify potential Money Laundering activity . It is more the remit of the department of the treasury. However, one of the key things under, as i said, the Money Laundering laws, the fcc our registrants, the broker dealers, have certain compliance obligations where the financial once they register or whether they should register, and even if they dont register, they are legally required to. They have to comply with that. Let me jump back. I do think that his willingness to explore and understand the thank you for your position and how you perceive regulation. We now have a whole new generation of investors that are really conscious about green and going green. There are new investors that are looking at ways to invest and be consistent with their values and their role, correct . There are. There are also investors that are just thinking because of climate risk, it could affect the Financial Performance of the company. It could affect the supply chain. It could affect the competition. It could affect future regulations. They are thinking about how to value today that future transition risk. Thank you. There was also conversation and i appreciate this as well. The issue of greenwashing. I know that some major global Asset Managers have stated that the integration label proposed a greenwashing risk. Could you talk a little bit about that address it . There are Asset Managers managing trillions of dollars that are saying to the public, we will invest your money, in something that is Carbon Neutral or green and the like. To me, it is about truth in advertising. We have put out some proposals earlier this year to address what stands behind a name, literally, the name of a fund. Are you living up to the commitments you made to your investors when you ask for their money . That is important about the integrity. It would address some of this, what is sometimes called greenwashing. Thank you, mister chair. Thank you, senator cortez. Senator rounds from south dakota is recognized. Thank you, mister chairman. Well, i was going to start out today visiting a little bit about farmers and ranchers. I understand that senator tester beat me to it. The fact that we really do have a concern about the ambiguities that some of our farmers and ranchers have right now with what they are going to be expected to try to share with providers or products to them with regard to downstream and environmental impacts. It really is of concern. The ambiguity with what can be guesstimate and so forth is when you need to take a second look at that. Senator, i concur with you. We talked in the anti room earlier. We thought that proposal had the right balance because we said that it is only an estimate. Its only if it is material or if they made a commitment to it. They have a bag safe harbor. We heard a lot from the farm of yours bureaus. We will take a look at all the Public Comments and see how we can ensure that it doesnt touch those private actors. Thats precisely what i really wanted to talk about. Its one thing with the rules. Its another thing when there is an expectation that once the rules have been established, if they are really ambiguous, that means that each time they have to come back to a regulator to ask whether whether or not would that causes concerns for people who want to invest. I just say, if youre making rules on these, and you are clearly making rules on these, a lot of them, lets be as precise as we can. They eliminate a lot of questions that are better coming up. Let me go into just a couple of items very quickly here. Adi speech you delivered last week, you quoted joseph kennedy, saying no honest business should fear the fcc. You went on to say that given the nature of crypto investment, i recognize that it may be appropriate to be flexible in applying existing Disclosure Requirements. Matt levine openly questioned the sentiment on a calling for bloomberg, stating the fcc has been suing crypto projects for illegally issuing securities for about five years now. Put in that time it has not issued any rules or proposed any rules or put anything on its rulemaking agenda about adaptively securities and Disclosure Rules for crypto projects. I echo mr. Levines comments. It seems to me that you want to regulate an entire marketplace but clearly it doesnt appear that you have rules in place to do so at this time. In my mind, this is simply unacceptable. I know that your background in the private sector you have a great history in the private sector. This is kind of confusing to us. I have heard it from a variety of companies who claim they try to work with you and with your organization but then you turn around and you have hit them with some pretty heavy Enforcement Actions or slow walk the process. Mister chairman, you keep telling crypto entrepreneurs and the companies to come in and register. Has anyone actually tried to do that . It to answer your question, there are companies that are actually registered under the disclosure regimes. I would say this. Not liking the answer from the ftc does not mean there isnt guidance. In all fairness, most of these tokens, the vast majority are securities. Thus, the intermediaries are likely to be in noncompliance with Securities Laws right now. We are really trying to work with who we are talking to, a wide swath of these organizations right now, to get the properly registered, to get them inside the remit. This is what we do with all respect to mr. Levine. We have been pretty clear. My predecessor, chair clayton, was pretty clear through commission actions. We are going to continue to protect the public as best we can. Thank you. As of august 2022, the fcc had proposed 32 new rules in just 11 months. It is preparing at least another 19 for release in the next year. These are complex rule makings that will greatly impact markets, capital formation. In addition to that, these rules are being implemented in an overlapping timeline. They affect the same or interconnected Financial Products and market sectors. However, despite the linkages between the various proposals, the fcc has assessed the Economic Impact of each rule independently in isolation from the others. Implementing these proposals simultaneously without consideration of the cumulative and crossed sector affects will most certainly lead to unintended consequences. Mister chairman, why has the fcc not considered the cumulative and the cross sector effects when simultaneously implementing these proposals . It most certainly could lead to a negative and unintended consequences for our Capital Markets and broader economy . Senator, we actually do consider even with as we just, really its 34. Moving along i would note that chair athlete in, during his four years, did a little over 60 final roles. We have about 50 on our docket. Chair shapiro we are about the same 40 to 60 range during their four years. We might have been sooner getting them out to proposals. We do consider those cross issues. Sometimes we reopen proposals for that reason like we did with stop lending and stock buyback. There was this cross consideration. We have done it in some other areas. We are even looking now at whether we should do that in some areas and reopen some for that cross consideration. Lastly, i would say that we get comment letters after the Comment Period as well. We this is over the years. We do it now. Staff reads them. They put them in. It takes us it tends to take us months, sometimes a year to 18 months, to finalize a rule after is proposed. Thank you, i wish we continue the conversation but my time i think you still have myself a number, so you can call me anytime, sir. Thank you. Senator smith of minnesota is recognized. Thank you, chair brown, and Ranking Member. Its interesting, this is apropos of senator rounds comment about crypto, i was not here earlier because i was at the banking committee, where we were having a conversation about issues i was at the ag committee, where am . I am a little confused. Ive been running around. Anyway, i just note that there are a handful of us, you, senator brown, senator warnock, and i, who are on the agriculture we should create a Regulatory Framework [inaudible] as well as the jewel securities. I think we have an important job to do. Chickens, or i want to go to the question materiality. These laws, theyre grounded in the concept of materiality, and since we emerged from the great depression, we comes with its risks, but investors ought to have information about they need to put in the evaluate those risks and make good informed decisions. And this is especially important today since half of families have investments in the stock market, including their retirement nest eggs. Could you talk to the committee, broadly speaking, about how Climate Disclosures for Public Companies are Material Information for investors . Its material because, as the Supreme Court says, substantial likelihood and reasonable investor is considering its significant in their mix of information, and right now, its really remarkable whats happened in the last ten or 20 years. So many investors are considering it, and why are they considering it . Because theres a future chance of transition risks. They might have to change their operations, their competitors might change our operations, laws might change, these companies that are listed here in the u. S. , operate around the globe. On average, you look at the top 500 or 1000 companies, half their operations are overseas, until it can affect all that, but its material because, investors get to decide what risks they take, and investors are saying it, in their common file, if you look at the top 300 or 400 of the investors, the big Asset Managers, it adds up to 50 trillion dollars of assets under management that have come in, mostly supportive of this. I know theres a lot of good discussion about what are we doing about formers im not getting caught up in scope three, which is a good conversation but, mostly the Investor Community has come in in these 14,000 comments supportive. Its good for those investors to be able to understand what those risks are in a more comprehensive and clear way. Absolutely. And investors get to decide if somebody says i think those risks are significant, but it companies managing them well, i should invest in. They might say, i think the market is overpricing a stop and i might say, i want to sell that stock, because i dont think i think that assets that are emitting a lot of emissions are still going to be profitable. Thats up to investors. On another topic, i want to touch base on i was pleased to see the sec take action and responsibility in the private fund market, including that hedge funds have an outsized presence in our economy, 18 trillion dollars in assets, and a substantial portion of that includes Retirement Savings held in Pension Plans for teachers and municipal employees and others. And in recent years to and the private fund advisor rules and how they can interact with eliminating conflicts of interest issues, protect investors, and protect the integrity of the private fund market . Weve done two sets of rules for private funds. One to promote greater efficiency. What that means is lowering the cost its actually grown from that number, to 21 trillion. It probably would take revenues of about 300 billion dollars plus, and that means those teachers, firefighters, pensioners are getting a little lower potentially return. So it helps them. So we are trying to promote greater efficiency, transparency, fees, performance, and side letters. You mentioned the form private fund. That is something that was put in place after the 2008 crisis. Congress thought the sec and our sibling agency, the cftc, should get more information about these funds with regard to mitigating and monitoring for systemic risk, the big crisis of 2008. And we are updating those forms. Thank you very much, mister chair. Senator lummis for my own ming is recognized. Thank you, mister chairman. Appreciate youre holding this hearing on the important work of the sec. Chairman, it is great to see you again. Youve had a chance to see that bill, that deals with section 301 of that bill. I agree with statements you and your predecessor, jack layton, have made that initial coin offerings where Digital Assets are sold to investors expecting to profit from the sellers efforts should be could sit heard investment contracts. Senator gillibrand and i share your concerns about information gaps that can when Digital Assets are later used and traded by others and the need to ensure make informed decisions in the market. So we believe that it is those who raise the money through an initial sale of Digital Assets and those that continue to provide essential managerial efforts should be held responsible to provide disclosures to the market and the innocent secondary purchasers of Digital Assets that may or may not be aware that they are trading in security should not be in our act, the responsible financial innovation act, rather than attempt to impose new, difficult to impose rules on secondary purchasers, not in section 301 of the bill provides for Robust Technology neutral disclosure obligations that would hold responsible those who benefited from that fundraising, not the innocent users of Digital Assets who have no way of knowing what the sponsor is up to. So my question is this do you have any thoughts on the need for disclosures in the Digital Asset market, and section 301 of our bill . So i thank you for the question. It was good to meet with you and senator gillibrand and discuss these as well. I think that the disclosure, as you say, is key. Weve recently we are setting up a new Industry Office to help the disclosure in this field, in our Corporate Finance area. I do think, as you say, the innocent purchase, or the public, does not have a disclosure obligation when they buy a stop on the New York Stock Exchange, and its not the public that should have a disclosure obligation if they buy some crypto security token. But the entrepreneurs, the sponsor, the promoter, the entrepreneurs, thats where the disclosure obligation ought to be, and i think we have authorities now to facilitate and actually have a different set of disclosures, just as weve had in other fields. We have different disclosures on something called Asset Backed Securities that we do for equities. But i do think, respectfully, we might differ from what i think might be in the question. I think in the secondary market, five years after a stock is issued, the stop of a great u. S. Company is issued, there is still a disclosure obligation. I think thats what congress did. In 1933, they passed a law saying, youve got to make a disclosure if you raise money for the public. But congress that wasnt enough. And in 1934, they came back and said, you know what . We also have to cover the secondary market in two ways, cover the intermediaries, the Stock Exchange and the broker dealers, and also say that theres got to be whats known as periodic reporting. The annual report. And so maybe theres no difference here, but i think the investor should not have an obligation. Its the intermediaries, and come and a price or the folks in the middle. Are you thinking that the disclosure option, or obligation, would be similar for initial coin offerings under our bill, or should be under our bill, similar disclosure options as were instituted in 1934 . That i think theres things that might be different, there might not be aborted directors and things like that. I really do think your bill had a list, we might differ on that list, we might have Different Things put on that list, but its not necessarily, as you say, everything that a big Multinational Company is doing. Senator gillibrand and i want to continue to work with you and your staff to make sure that any of those sorts of gaps that you have identified in our bill can be addressed because i dont see our bill having an avenue to come before this committee or the congress before the end of the year. But we do intend to have it to reintroduce it in january, and we want to make sure that between now and january, weve worked with you and your staff to make sure that we can address items that we can mutually agree need to be i look forward to that, and particularly, as i said earlier, in ways that we can ensure we dont undermine the hundred jillian dollar Capital Market and the definition of security, the definitions of other things, that we talked about unintended consequences of our bill before, with you. We want to address those unintended consequences. Obviously, you see things that maybe we dont, because of your perspective. Mister chairman, thank you. Really appreciate your being here, mister chairman. Senator ossoff from georgia is recognized. Thank, you mister chairman. And chairman, great to see you. Fifth to see you again, senator. I routinely ask you this question, ive also put this question periodically to chair powell and secretary yellen. What do you see is the most significant threats to financial stabilities, or to put it another way, what keeps you up at night . You dont want me to say my daughters, okay. I think, in terms of we are living in uncertain times. I dont need to say this. But with the war in eastern europe, in ukraine, with Central Banks around the globe moving from a accommodating to tightening with the remaining challenges, geopolitical challenges, between great nations, and also with covid, and commodity prices. All of that in the mix, what i look at and think about is the relationship between the Banking Sector and the hedge fund sector, and investors, the relationship between the Banking Sector and commodities, commodity traders, thats called a prime brokerage relationship. Those relationships, i think a lot about. I think about resiliency in the market, and thats why we have about a dozen or 15 projects in the treasury market, what we are trying to do, the money market funds and shortening this cycle and the like. If we do our job well at the sec, we will have greater resiliency for the stresses that come in the future, and those stresses come become , because we always have ups and downs and economies. We have these longer term projects, but near term, its these issues that i just raised. Lets talk a little about the treasury market, you highlighted that in previous testimony. You issued propose rulemaking in the last several days. Can you please breakdown into lay persons terms the nature of concern about liquidity in treasury markets and how the actions you are proposing would address them . I would say to the american public, its a bit its a quarter of our entire Capital Markets. 24 trillion dollars. You can think of it as the base. Its the foundation of our financial house. Everything else is built upon the treasury market. What we found is we had real disruptions, called him jitters, i hate to say it in the house way, its like theres termites in the foundation. Every few years we had them in the 19 80s, the 1990s, and weve had them in the last six years. It puts some pressure in our central bank, the federal reserve, and sometimes that opens up and provides using its bounds she quit it into the marketplace as a lender of last resort. I think by ensuring that all the viewers, the High Frequency trading dealers are registered and regulated. Second, that we are these are trading platforms that are regulated and some of those armed and really importantly, getting the benefits of something that sounds boring, but its called clearing. Its the back office, which lowers we worked really closely with secretary yellen and her team, and tara powell and his team, on those proposals. Do you think that the persistent concern about the crudity in the treasury markets threatens the feds ability to execute open Market Operations in a crisis . If i might say, if we do these suite of proposals in the treasury market, it will bring where competition. Historically, there was a group of primary dealers, and that started to broaden out to these principal trading firms, High Frequency trading firms, and others. And i think that we will build greater resiliency and also increase some competition in the marketplace. Lets follow up on this, and that will have my office get with yours please, id love to have a meeting. With my brief remaining time, id like to ask about something of particular concern to georgians. We have a thriving military communities, based communities, veterans committees in georgia. The sec has in the past, as recently as december of 2021, filed Emergency Action to shut down a multi Million Dollar ponce that targeted Retirement Funds held by veterans. Id like to ask for your commitment that under your leadership, the sec would redouble and intensify its efforts to ensure that within your jurisdiction, you are identifying and cracking down on schemes that could be or harm americas veterans. You have that all georgians and veterans, if you see something, we have a tips complaint referral system. We have whistleblower systems. Please let us know. Let the sec know. We are a little understaffed, i think we should have more staffed , follow up and pursue those leads thank you, senator ossoff. Senator hagerty is recognized. Thank you, chairman brown. Chair, i was reviewing your testimony last night, i was struck by a term that you used as you described the nations Securities Laws and regulations. He described them as the Gold Standard. I dont believe thats true anymore. What weve seen here in america over the past two decades is the number of publicly listed companies declined by more than 40 . If you look at the u. S. Share of global ipos, weve shrunk to less than 20 in the past decade. Why is that . Its because every new regulatory requirement that you impose on Public Companies and add to the already crippling costs of operation as a Public Company. The consequence of all these regulations is to encourage companies to stay private, or look abroad to do their ipo. You rolled out 32 proposals in the past year, including your esg disclosure rule, which would cause hundreds of millions dollars a year in Compliance Costs, its created tremendous uncertainty in the marketplace. This would undoubtedly make matters worse. America had such a big league in terms of having the worlds best Capital Markets. Capital markets that have allowed businesses to succeed here and thrive. But its been in spite of, not because, of this increasingly crushing red tape. More regulation is a recipe for the prominence of the american Capital Markets to die a slow death. If we continue down this path, there wont be any investors left to protect. American workers, american consumers, and retirees cant afford that. So chairman, under your tenure at the sec, youve rolled out an unprecedented slate of aggressive proposals. Among the many troubling trends in your short term, mr. Chairman, has been an expansion of the secs purview into sophisticated market under the guise of, quote, consumer protection. Not all markets are accessible to retail investors, the sec is traditionally adopting differentiated levels of paternalism given the market. The two most egregious and are the private funds rule and the secs announcement that it would begin to for significant Disclosure Requirements on fixed income securities, including those that are regulated under rule 144 a. Your staff claims that these new rules would enhance Investor Protection, but as you noted, the qualified investors that invest in these products are not unsophisticated. They dont need hand holding yet these new rules would pose significant new costs. They will act as an impediment to american innovators so my question to you is, do you think that the distinction between large and mostly Institutional Investors versus mom and pop investors is somehow an important . Or is there some other motivation thats driving the sec under your guidance to dedicate so many resources to go after these larger investors . These investors that all of your predecessors i think and rightly given a degree of autonomy to. Senator, i think there is a distinction between whats called a Credit Investor and a non accredited investor. But i do think in the private funds role, if i can address that, this is now a 21 trillion dollar asset under management that the general partners, the Asset Managers, who oppose what we are doing, i understand that, but those Asset Managers probably collect over 300 billion dollars a year in revenue, and what does that mean . That means the issuers who are on one side and the investors on the other have that 300 plus billion dollars in the middle. So i think that you gave us that responsibility to look to promote competition and efficiency in these markets. You did it in 1976, you did it in 1996 twice, we had that responsibility. So in that proposal we took a lot of the recommendations from a group of limited partners, state Pension Funds, state treasurers, and a group called we look at them and said, how can we promote greater competition for transparency to those investors, those sophisticated investors this is going to lower the cost of investment . This is going to increase the cost where are you going with this . I think that we might have a healthy debate on this, but i think that actually, when youve got general partners that are taking 300 billion dollars out of the economy, this will help promote greater competition. Increase regulatory cost, in a sophisticated market, i dont buy that one bit. Its Greater Transparency to the investors of the fees and performance. These are sophisticated investors, mister chairman. This is damaging to the marketplace. Ive been on the other side of the table there, Small Companies that need to Access Capital to grow are going to be deprived of that capital because of this type of overreach. Thank you, mister chairman. Senator warner from virginia is recognized. Thank, you mister chairman. And i want to stay on this topic for a moment i do think, from a historic basis, as weve talked, and good to see you again, mister chairman, you are in that range of what your predecessors have done, but i do think it is an aggressive agenda. Candidly, a lot of it i support. I may disagree with so my colleagues on the other side. But because youve been moving quickly, one of the things id like you to fill in a little bit more, both on how you make sure that you determine appropriate comments times, and i know in some of these regulations, have a sense than the common, times some that you feel may have been too short. Id like you to give us more specificity about this interaction, not simply in terms of total economic costs, but possible conflicts. Im going to come back and follow up for a moment on cybersecurity areas, but i would like to get the sense, if all of these regulations get passed by the commission, how are you holistically looking at their interoperability . I think its a good question. We do it proposal by proposal in the Economic Analysis. We benefit from the Public Comment, and i would say, we have a long tradition of regardless of what the Comment Period is, 60 days, whatever the Comment Period is, when comments come in after the Comment Period, we still the staff considers, it we write it up, we put it in. If it comes in, not at the one day we are finalizing, and generally on average, it takes a year, a year and a half to finalize these things. So i encourage people to continue to say, if you see that interaction, but secondly, we also occasionally, we publicly reopen something, and we did that earlier this year on there was a security lending and a stock buyback, and we reopened we sort of said, those are so closely in a related, lets do that. Again, as you are focusing within your purview, let me give you an area that i have to roland tension rules. I worry about conflict. Im chairman of the intelligence committee, i think Cyber Security issues, in my litany of things that keep me have a night, thats one of them. Im surprised we have not seen more from russia in light of the invasion from ukraine. We work in a bipartisan way, really hard, to get an across the board mandatory cyber Incident Reporting legislation through in trying to write make the right timing, making sure that you dont interfere with the criminal investigation, youve got a similar sec company requirement, because i do believe that take a few minutes, i want to get one other quick question after. This take a moment or two and tell me how you do that potential interaction between something thats outside your purview, this dhs system requirement, and your sec cybersecurity its a great question because the Securities Laws are about those investors, understanding the material risk, and material events, and so we put out a proposal, as you said, about corporate Public Companies making how they manage cyber risk and how they have a material incident. Its got to be a material incident. And then report that within four days. Weve also been a conversation directly with the department of justice and the department of homeland security. You know the particular leadership there, we had great conversations. We had one important question in that proposal about National Security and we can tell you about, it would take more than the 50 seconds later to tell you about it. And working with the department of justice on that. The more that you can spell out, maybe not just here, but how the process of this intersection between an agenda, again, i generally support, with my last three seconds to touch on a topic that i cant believe your predecessor, jack layton, started down this path, and you and i have talked about this before, and actually encouraged more action, and thats capital reporting. We discussed many times, many of my colleagues, going through this litany about how we have assets on a balance sheet, changing dramatically from tangible assets to intangible, lots of some disclosure legislation on this. Ive been a big advocate for talk to me a little bit about how you think moving forward, because i believe Human Capital investment is extraordinarily material for all these companies who say their workforce is the most important asset. Speak to that if you will. Chair clayton did put out a rule. We have two years of following of that rule, we are looking at those first two years and seeing what worked, what didnt work. But i know this from my days when i was at wall street, when you bought or sold the company, there were two or three key pages with the Key Statistics about the workforce. The turnover rates, when they get paid, what were the benefits, et cetera. Whats the training like, are they unionized . These are the key things when you buy or sell a company, so why should the public shareholders also get that similar information and you heard recently about a letter that i think former sec and we are taking a look at that letter as well. Thats encouraging, i look forward to work on that. Thank you. Senator daines from montana. Thank you. Good to see you again senator. [laughs] we did not do that on purpose, even though you probably think we did. I hope not. I would never assume that, senator. Thank you. Chairman, i want to get right to the chase here, and i noticed that my colleagues already talked about the proposed climate close rule, ive looked at it, i think the truth is beyond reasonable and i would recommend it be withdrawn. The massive burdens that it will place just on large companies, but also Small Companies. I happen to think that [inaudible] with whom we also do business, and i really want to zero in on the scope three emissions problem. The question, do you really think its reasonable to Ask Companies to collect, analyze, reconcile, report on things literally such as whether the Company Employee is a tesla or a pick up. That in essence is what the commission is doing when it expands with these scope of rules and emissions. Senator, what we have in america now is that we have many companies, hundreds that are disclosing Greenhouse Gas emissions to the public. And there including also not all of them, but many of them, something around this scope three. So this is for the public listening, this is the downstream or your suppliers, what were trying to do is bring some semblance to, thats some standardization. So what we said is that its not a mandate but if you have a commitment, if you publicly said youre managing it, or if you excuse me, its not a mandate. So the rule would give the companies leeway whether they need to expand the scope through or not . Yes, its only a proposal. The adoption is still not happened. The proposal was a mandate on what was called scope one and scope to. Then we took a different approach on scope three. And we said, if the company deems that its material, or if the Company Already has made a public commitment to manage scope three. If thats totally voluntary on their part. Then we said, you have to estimate, and weve gotten a lot of comments on this, and theres no goal to touch we had a good conversation with senator tester and rounds, theres no goal to touch farmers in any of the states that you represent, or ranchers. Senator lummis with abby carved out explicitly . Its a very wide net as you know. But its from the Public Companies point of view, are you making a commitment to the public on how youre managing it . This Public Company. And how are you estimating it . We said estimating it. We said there is a safe harbor. We put some Legal Protections on it. Again, were looking at these 14,000 comments, and were trying to balance this out. The one thing is is that we have to ensure that the Public Companies that are this or that about scope three arent frankly misleading the public. Well, i hope here is out. I think youve heard a lot of concern on both sides of it. I look forward to more conversation. Im watching whats going on in europe, california. It just moves from Climate Change to go to climate insanity in terms of dealing with the base load issues, National Security, economies, and i dont want to see our country follow the same path that weve seen in europe. Theres been a lot of time talking with european leaders, they wish they had a radio on this. I think this is one reason that we could come together. And we want something here in the u. S. That we adopt a role and its sustained in court. If we dont, large u. S. Issuers will have to comply with the european regime. The european regime says if you have more than 150 million euro of sales in europe, youve got to comply with the regime. Yeah, theyre gonna have a really tough winter. We say our prayers, pray for a warm winter in europe. Chairman, i want to talk about b d c for a moment, Business Development companies. They play an indispensable role in providing credit for miller margaret. The impact of btc in the investors is the application of the sec acquired fund fees and expenses. Youre getting acronyms, cdcs simply when you apply the f f e to btc a overcounts the true cost of bcs theyre five misleading investors. Senator menendez and i have introduced the access to Small Business investor permits btc to move 100 percent of the fe disclosures to a footnote. Let me cut to the chase on the question. Does the sec plan to fully address the misleading disclosure that a fe creates for bc investors in lieu of the current workable the sec has proposed . Would you agree that bbc investors to serve the parity and disclosure with rates . Thats a lot there. There is a lot there. I look forward to helping with Technical Assistance on your bill. But also on Business Development companies being owned by other funds, mutual funds. Theres a transparency and what in the there was a transparency that the investors and the mutual fund need to see all those cost and rolling up on those cost. I think thats what youre trying to address here. Im out of time. He is a chairman read . Chairman brown is still there. Senator reed from rhode island is recognized. Thank you very much. Mister chairman, welcome. Weve introduced legislation, s 4857, private markets, transparency and accountability act. The registration would require nations to register with the sec and they would be subject to Disclosure Requirements. I think its necessary because weve seen the decline in public registrations and extraordinary increases in private companies that are controlling. Some Public Companies, some other companies. Can you describe the main difference between the Public Markets and private markets when it comes to Investor Protection . We benefit in this country, a vibrant Capital Market, Public Markets and private markets. My dad never had a company that was caught up in your bill. But he had a Small Business with 30 employees. I think thats very helpful. Theres a difference in disclosure and a difference, as you said an Investor Protection. Because Congress Gave this agency a remit about those Public Companies and to protect against the disclosures there, its truthful, we protect against fraud manipulation. Thats of course different if its a private company. Not that my dad wouldve done this. He was buying and selling stock with his partners. Again, i think in the, when the sec came about, most of the private companies, relatively small, family owned. Thats not the case today. Its estimated by outside Public Service sources theres about 1200 companies in the u. S. That are what they will call unicorn, worth more than a billion dollars in the total market value is about four trillion dollars. The disclosure and the Investor Protections for those companies are not at the same level of strength as a Public Company . Its interesting, its not under our agreement, but the disclosures to the holders is privately negotiated between the holders in those companies. Its not the same level. I just want to quickly shift gears a bit. This is the 20th anniversary of i think youre quite familiar with. It was a response to the scandal of enron demonstrated why investors need gatekeepers in our financial market, especially accountants. One concerning trend is that the big for Accounting Firms also have lucrative Consulting Services to companies. What steps is the sec taking to independents over seeking non audit revenue . Thank you, i was sitting in the seats behind the chair and Ranking Member when it was senator graham. And you are. I think what senator sarbanes and senator graham voted for that bill. They tried to do in that bill was to ensure that there was some separation between the audit function and consulting and so forth. Ive asked, i think that theres been some lessening of that separation over those 20 years, i have asked a number of things. The office of chief accountant at the sec, ive also asked the board at the pc will be. Ive told all five of the members there, could you put on your agenda as well to update the standards, the pcob standards and the sec standards about the separation and independents . I also know the acting chief accountant has given speeches on this recently and leaned into this. Just a final question. Theres been several major cases with Accounting Firms over the past year, ethical lapses, professional problems. But those findings are basically not disclosed to the public. They are maintained by the regulatory agency. We have legislation that would make them public. I think thats important. Its important to know whether has been engaged . It would be, its one of the compromises between senator and senator sarbanes as i remember. Senator warren for massachusetts is recognized. Thank you, mister chairman. In march the sec proposed a Climate Risk Disclosure rule that takes a big step towards increasing the efficiency of the economy and Financial Markets by requiring companies to inform investors about the climate related risks that affect their businesses. As part of this, rule the sec proposes the companies disclose their Greenhouse Gas emissions. Company submissions are classified into three different categories called scopes. So, chair chancellor, just so we can set a baseline here. Lets run through an example lets say im exxon. My scope one emissions would be from things like my companies vehicles and methane lakes that occur at the well head of the wells today. Scope to emissions would be those from electricity i purchase, for example, in order to power my operations. Scope three would cover upstream emissions from the production of what i buy, like the chemicals i used to refine my oil into gasoline or diesel fuel. And the downstream emissions from what i sell, like the refined gas or the diesel my customers by the pump do i basically have that right, chair gensler . Yes. Good, you need all three scopes because otherwise a company could just stop doing the filthiest part of their business, and hire some smaller, non reporting company to do the same filthy work. And then report themselves as greater. So, chair gensler, for a fossil fuel company like exxon, what percentage of their total emissions are scope three missions . I suspect you might know that better than i. I havent looked. Its often over a half, and it could well be, in some companies, i dont know exxon, some companies its as much as 90 . Well, youre close on that last number. According to an s p global analysis, about 88 of the emissions of these fossil fuel Companies Like exxon our scope three emissions. So in other words, oil and Gas Companies have scope three emissions that on average, as you say, its about 90 of the total emissions. The rule the s and c for already gives companies way too much wiggle room in disclosing scope three missions. Evidently that wiggle room is not enough benefit for exxon. They and their trade association, the American Petroleum institute, have been fiercely lobbying the sec to drop scope three disclosures entirely from the final rule. Exxon wants to [inaudible] when their own work trucks were on the road, but not about emissions from all the other trucks that are fueled by exxon diesel when they are on the road, or to say it another way, Companies Like exxon dont want to tell investors or the public about nearly 90 of their emissions. Effects on in the American Petroleum institute get their Way Investors would remain in the dark about how companies would be affected down the line when policymakers get serious about tackling Climate Change and, for example, put significant restrictions on trucks that are powered by fossil fuels. Chairman gensler, if a Company Discloses only 12 of their total emissions to investors, do you think investors have the information that they need in order to evaluate whether or not that company is well positioned to succeed in a greener economy with much stricter regulations on emissions . So i look at it this way. Many companies today are already making commitments about all three of the scopes. More are making commitments about school one into, many are also making commitments and our proposal was if youre making a public committing if, europe managing, it you are how do you manage that what you dont measure . And we also said it was material, using a Supreme Court test of materiality, that you would have to measure it but we got a lot of comments on this, as youre right. I understand this, the question im asking is much more narrow, its a straightforward investor question. If Climate Emissions are going to become more important in valuing businesses as the Regulatory Environment changes. If you only have to disclose 12 of your emissions, does an investor have the information that they need to make a good Investment Decision . Again, a quote from her if we look at the top three or 400 investor letters we got that managed tens of trillions of dollars of assets, most, i dont remember the percent, most are supportive to have all three scopes part of this disclosure. At straight from the investors rather than from me. Actually, i think thats exactly the right point. For months now the big banks, the Pension Funds and Investment Management companies have been asking for this three information because its crucial to making good infestment decisions decisions. I appreciate your making, working to protect investors and not submit a killer industry. Because that is the job of the sec, and were happy that youre doing. That thank you, senator warren. Senator toomey has a couple of questions. Thank you, chairman, ive made no secret about my concern that there are people in this administration and congress for that matter who wish to use financial regulators as the tool by which they will advance a liberal agenda. Ive criticize this among other reasons because its so undemocratic to have unelected Unaccountable Agency bureaucrats making the tough decisions that should be made by the accountable parts of our government. Ive criticize the fed, mister chairman, im putting you in this category. And the Climate Disclosure rule i think is the example. You know well the Supreme Court held in the West Virginia versus epa case, the apa lacked the authority of the greener act to regular gas emissions. Coming to that conclusion they relied on the major questions doctrine. In that the court held that the economic and political significance of the asserted authority, the agency must point to clear congressional authorization. Among the factors that they used to decide that something is a major question, the court noted it involved a novel approach, involved technical and policy expertise, not traditionally it by the agency. Such a consequential decision is unlikely to have been left by congress to Agency Discretion and the agency had adopted a scheme that congress had considered and rejected multiple times. Chairman, it looks to me that the climate rule you have promo proposed, under the major question doctrine, is, doesnt have congressional authority. My question is, in light of the epa versus West Virginia case, have you given any consideration to reasoning that rulemaking . Thank you, senator. We take seriously the courts, particularly the Supreme Court. We are considering 14,000plus comments in that comment docket. And reconsidering it in light of our authorities and the law. Id say, most of the comments or supportive. Investors are using this information now when they want the information. I think it does fit into our 80 or 90year history of how we do disclosures that the disclosures already being made. So what im wanting to finish on, we have a role to ensure that theres not only Investor Protection as the law said, fair dealing. That the actual disclosures are not misleading in the lake. Well, as i predicted, if you go ahead with something substantively similar to the proposal, youll find a very unsympathetic court with regard to the authority. Like you, senator toomey, thank you gensler. The questions are do one week from today, september 22nd. We asked you to respond to any questions from 45 days. Thank you, the committee is adjourned. Thank you, chair, thank you Ranking Member toomey. [inaudible] thank you. His back. ] the january Six Committee returns wednesday for its ninth hearing, ahead of the release of the written report. Expected by the end of the year. You can watch the hearing live beginning at 1 pm eastern on cspan 3. Cspan now, or anytime on demand at cspan. Org. Cspan is your unfiltered view of government. Were funded by these Television Companies and more, including, wow the world has changed, today the fast, liable Internet Connection is something no one can live without. Wow is there for our customers with speed, reliability, value enjoys. Now more than ever, it starts with great internet. Wow supports cspan as a Public Service, along with these other television providers. Giving you a front row seat to democracy. Veterans Administration Officials testified this new policy implemented after the Supreme Court struck down roe v. Wade, providing Abortion Services to pregnant veterans when their lives are at risk or in cases of rape or incest. A test to ride before the House Veterans Affairs committee. Are the meeting platform was ready to begin . Yes. Please provide a five second count. Five, four,