Transcripts For CSPAN3 SEC Chair Jay Clayton Testifies Befor

Members question the fcc chair about Digital Currency, shareholder protection and climate related financial disclosures. This is an hour and a half. Today we will receive testimony from security and Exchange Commission chairman regarding the wor they will testify hes going across the of the sec. I think if youre willingness to appear before the committee today. Mr. Clayton, youre willing to testify is essential to our mission at the sec, which is to maintain fair, orderly and efficient markets and facilitate capital formation. It plays a Critical Role and ensuring that our nation has Capital Markets so that the public can have confidence and trust in. It provides information to investors that that as americans prepare for the futures they may not only have a wide variety of financial opportunities, but they also have the information necessary to make informed Investment Decisions. Chairman clayton, you came before this committee a year ago with assures that you continue to take steps to ensure that the u. S. Capital markets remained the deepest, most dynamic and liquid in the world, and actions worth mentioning include the secs final role package on regulation and best interest which strikes the appropriate balance of increased transparency at investors relationships while preserving access to advice relationships and investment products. The sec also proposed modifying the definition to reduce the amount of registered subjects to the at a station requirements. I encourage the commission to move forward quickly in a way that provides relief to all smaller reporting companies. And this summer, the sec issued a concept seeking Public Comment on ways to harmonize the private securitys exemption, regarding the concept release, i encourage the sec to revise the regulation need for general solicitation advertising it sponsors, such as the Angel Investor groups. The sec should consider expanding the ability for Small Businesses to crowd fund. The definition of an accredited investors should be expanded modernized to account for qualifying expertise, not simply a monetary threshold and, it is important the sec update the definition of a Family Office to allow Family Officers in their clients to meet certain thresholds to be considered accredited investors. This committee has held a number of hearings during my chairman ship discussing the need to discuss the scope and approximately appropriate us the proxy voting process women. I commend the commission for his actions related to the proxy process. In august, the sec issued guidance to assist Investment Advisers in fulfilling their responsibilities on voting proxies on behalf of clients and clarified that proxy voting advice provided by proxy forms generally constitutes a solicitation. In november, after numerous round tables and thoughtful efforts led by commissioner rice, with the sec proposed two amendments to improve the accuracy and transparency of proxy voting country and you martin is shareholder proposals. I encourage the sec to continue moving forward these experts as perniciously following the comment period, this committee recently held an oversight hearing on the every mission we collect in this consolidated database, and helping collected. On october 16th, 2000, 19 the plan participants wrote to the sec to request to use customer id instead of receiving a Strong Social security numbers. And as to store only a year and instead of for this important individual count numbers. Chairman clayton, you previously expressed concerns about the information being collected and stored here and stated you believe the regulatory objectives can be achieved without the most sensitive pieces of investor information. I encourage you to quickly process the request to use alternative approaches. Finally, the sec has made modernization a focus this year. We look forward to hearing what you strategic up for innovation and financial technology. How the sec has been engaging with initial point offerings and other cryptocurrency related matters. I look forward to receiving updates on these and other as you see initiatives including your views on what we can expect final rules in these areas. Thank you, mister, chairman welcome, share clayton, over the past few years in this committee, we have seen the Trump Administration dismantle, we get upfront review of, this many of the protections that congress put in place after the last financial crisis, putting our Financial System and hardworking families around the economy at risk. The sec has flown under the radar but often the agenda has been the, same taking wall street side over and over instead of standing with investors, saving for retirement or college or a down payment, digging together the secs latest actions are making it harder to hold Corporate Executives accountable to investors and hardworking americans. And the mission is to protect those military Service Members from fight and misconduct and financial advice. You have brought some much damage but what you are adopting called regret firearms can nearly describe discourse but do not have to eliminate from our conflict. They need to work for the people who do you serve. Americans need to have confidence, that the professionals, that they are trusting with the hard earned money and working for them. Thats coming them for the foreigns own pocket. You can simply try to create a uniform for brokers and advisers, which would be the best way to give investors confidence that our interest comes first. You did not do that. That is not the only part of town frank you have undermined. Look at the s cbcs proposal. One of the most successful programs that you have created under. We have deprived workers to stand up under corruption. And when i see no place in good enough about illegal activity. The only way financial workers will be able to stop not to start for that we give them protection. Yet you ever, since inception of the program, a number of tips have increased in some yards by madame 10 . But after euro proposal in 2018, you introduced the cap on whistleblowers. A number of tests declined in 2019. The proposed would have rewarded a lot to put out a statement to clarify. Im not whistleblowers is a duty world, nowadays, to someone in this town. It always lives the syria lawbreakers. I do not see how you can make significant changes like this without understanding that the decline is a result of your actions and the environment of this administration has created. When talking about whistleblowers. And attacking instead speaking out of those. The sec continues to taper action and ill be Financial Systems accountable, we must encourage whistleblowers to identify misconduct wherever it exists. The secs recent proposal rule on proxy advisers. After a clear examples of the administration taking the side of corporate interest for him struggling to save an investment for the future. Proposals make a difficult for to hold Corporate Executives accountable. The proposal makes it harder for Institutional Investors to independent research and analysis from the proxy. The proposed roadwork of corporations access. And thats been Fund Managers who manage american money. The sec says the changes are necessary because it matters and inaccuracy. But what i provided a spot about powers. To intimidate approximately five years and their independence. It will probably shoulder proposal rule would make it easy for Corporate Management two sides shareholders and avoid john not critical issues. The amendment would stop proposals can stop opposite such as a disclosure of corporate political spending, separating the rules. And nondiscrimination policy. I am disappointed in the direction you have taken on these rules, that have for decades, for decades, the president s of both parties. I want investors to hold management accountable garbage matching themselves protect americans should begin with a simple concept putting the rights first. I hope the sec will remember that, but i would last week, over the last week we have over the last week and this week we have had we would have said, we have the mc uae. And i will be an sissi. Are defending the same policy in corporate interest reflected with any collective amnesia with what happened last decade or so. The president promised to look for america working people. But he was put betrayed those workers over and over again. Mister chairman i would like to offer this raising concerns about the fcc my cannon proxy advisers. Without a objection. Thank you. Chairman clogging you could make a presentation. Thank you chairman. Ranking member brown, ranking members of the committee. I appreciate the opportunity to testify in the second Exchange Commission. I want to start by thanking you, the support and its people. The dedicated men and women are our most important assets. With the resources caused last year, we have been able to throw over 100 new positions, with high quality individuals, who i believe will serve investors well. Since becoming chairman. The interest in iraqs have been in front of my mind. That perspective, a our staff has run out. I would like to highlight just a few aspects. First, modernization. Thats been a key avenue for advancing forecast thats an hour. In june interpretations designed to enhance the quality and transparency of the relationship for three and that stirs have. Or Investment Advisers. These images from link up duties and one with what i reasonable investor would expect. Both terms and cost. And products. I am so grateful to our experiment and dedicated staff for bringing long overdue regulatory nationalities and clarity to the support of area. Talking to buy that have taken place in our markets. Including a capital that has been raised in our Capital Markets. And Many Companies have been starting profit to the average or about going public at all. They have expanded key suspects. To increase the act of matt while maintaining or inheriting investment protective. Increasing the attractiveness of the public is, just one side of the crime. Im expecting revenue from structure, roger, mckee across the top and parliament are protected months Time Investment habanero private market. Should we should stop to ensure individual to perform well crack with my best Investment Protection for a fact this is a challenge. But we are making progress. Interaction democrats are making a difference investment in our markets. But also the monitoring of market functioning market risk. Trying to inspection and enforcement efforts. I want to our teachers and military Service Members. But we have focused their message here is simple. If your pet cats, Service Members or they dont, want to cant you. Perhaps you got the money back. And thats what have returned for 1. 2 billion dollars to our investors. Probably talk about some of the biggest impediment that we face. Situations where it is reconciled, such as a part of the scheme. Much appreciate the partisan work in congress to address these charges and welcome happy to be to continue tonight that you. And to ensure that thats not good at the money back. , no substantial increase. And a red market participants. And protect, cotton additional retail and thats not going to prove that live between the coast. I believe that type of document is important. Thank you don for paternity to testify again. To these questions. Hard time. And i sat down surrounding proxy advice. A proxy process and shoulder proposal. Thats gonna tell both about yams. On these issues. These roads have not been reviewed by the commission impacts and i commend the sec protecting the actions on the staff expertise. To address changes in the market that have occurred. A network remark you mentioned that you expect them should to address universal taxi. What can we expect to to these proxy processes. I, will have taken an approach directly flexibility agenda. Watch, would tend to get it done with the. That sounds agenda. Working on them and i would hope we would be able to move them forward in the next coming. I thank you. And i can appreciate the attention you have given that the storm focus to pander to completion. We will talk much you. Because the plan where the sec is one of the number megacities jones touchdown would. Specter i would not has affected and are working to be responsive on to Market Trends like cryptocurrencies . Appreciate the question. And the question thats what happened with that announcement. To speak about that particular product, it is not appropriate for me to do to stop. But the announcement was a regular beads oftentimes to recognize that determination women and sports our Financial System, and creating panic transparent. Thats coming. The natural economic crisis but it only shows. Take you time, for a better term. What is happening. Now, i have to recognize that is happening. Recognize our mission. Service and silence. Investment protection. And ensure that digitization at taking place. Welcome to both principles. But we should not be fighting that digitization, because if we fight it, it will go around us. Well, thank, you that mirrors my feelings, and i assume that when you say it is coming. Im sorry, senator, its here. Its here. Its here, its you already. I, see its here. Yes, it is here and, as i have said many times, again, leaving aside the specific proposals of libra, the issue is one which the United States and its allies and friends in the World Community need to lean on and set the rules of the road on, rather than the let it come develop on its own through other jurisdictions which are not as friendly to the United States and frankly through other currencies then the u. S. Dollar, one so, i encourage you and the other regulators to focus on this carefully, one of the first decisions that the United States has to make is who, among our regulators, are those who regulate and how will we regulate . As well, as what will be the specifics of how we set the rules of the roads, who i encourage you to pay very close and careful attention to this. Finally, the sec concept seeking Public Comment on ways to harmonize the private Securities Offering exemption, is a positive step and includes money key reforms. What are the next steps and timeline for the sec to act . Well, the next steps that are on our agenda, a proposal around the accredited investor definition. In your opening, remarks you highlighted one of the issues with the accredited investor definition which is that it is a binary definition based on wealth. I will say it simply, there are a number of people who have the sophisticated ability to assess investments, who may not meet those wealth thresholds and we should do a better job of identifying them. That said, the private markets have risks that are significant compared to the public markets, and we need to be cognizant of that. Thank you. Senator brown . Thank, you mister clayton, for one dozen, years wells fargos management recommended voting against shareholder proposals, asking the company to separate the role of chairman and ceo, a Corporate Governance past practice. Proposed limit shareholders ability to limit sensible proposals like this would have cut off wells fargo investors after four years of doing that even though in subsequent years it received support from 37 of shareholders, and we know separating chairman and ceos was a proposal because after wells fargo found itself mired in scandal and abusing his employees, had decided to separate the positions and took a victory lap with it. How do you justify a proposal like you made, that could limit shareholders from continuing to push for sensible governance reforms . Senator, about, that the question that you are asking, is after a shareholder proposal has been put on the proxy and settle shareholders to vote on, and garnered unless that majority support, substantially, last how long does it stay on the proxy . Right now, the threshold are, effective way to get more than 10 of the vote you can keep it on the proxy indefinitely. And that rule has not been changed since the late fifties early sixties, a combination of rules, at a time when communications and shareholder engagement were very different. Our proposal looks at increasing those thresholds. But still, if you were able to garner more than one in four shareholders in favor of your proposal, the proposal would be able to stay on the proxy. Well, you say that. That sounds, good but commissioner jacksons office study data for a decade after he lost in for, 2000, 18 and they, found we found the proposed rules wouldve excluded 35 of the proposals for an independent board share, 50 of Board Diversity proposals, and 40 of political spending disclosure proposals. These are all areas where corporations need to be doing, better shareholders deserve, but i hope you will consider that as you think this through, where we ought to go. Let me talk for a moment about whistleblowers. You recently tried to clarify your proposal to amend the Whistleblower Program, in saying that it will not create could you committed the final rule will be consistent with natural requirements . Absolutely. At any characterization of our proposal of is completely misguided, statutory methodist with commission to decide between ten and 40 of how much the whistleblower should be entitled to. I can tell you that what our proposal was intended to do was to make it clear how we make those decisions, particularly at the top and bottom end of the spectrum. I believe that transparency and how those decisions are made and i believe that Digital Currency<\/a>, shareholder protection and climate related financial disclosures. This is an hour and a half. Today we will receive testimony from security and Exchange Commission<\/a> chairman regarding the wor they will testify hes going across the of the sec. I think if youre willingness to appear before the committee today. Mr. Clayton, youre willing to testify is essential to our mission at the sec, which is to maintain fair, orderly and efficient markets and facilitate capital formation. It plays a Critical Role<\/a> and ensuring that our nation has Capital Markets<\/a> so that the public can have confidence and trust in. It provides information to investors that that as americans prepare for the futures they may not only have a wide variety of financial opportunities, but they also have the information necessary to make informed Investment Decision<\/a>s. Chairman clayton, you came before this committee a year ago with assures that you continue to take steps to ensure that the u. S. Capital markets remained the deepest, most dynamic and liquid in the world, and actions worth mentioning include the secs final role package on regulation and best interest which strikes the appropriate balance of increased transparency at investors relationships while preserving access to advice relationships and investment products. The sec also proposed modifying the definition to reduce the amount of registered subjects to the at a station requirements. I encourage the commission to move forward quickly in a way that provides relief to all smaller reporting companies. And this summer, the sec issued a concept seeking Public Comment<\/a> on ways to harmonize the private securitys exemption, regarding the concept release, i encourage the sec to revise the regulation need for general solicitation advertising it sponsors, such as the Angel Investor<\/a> groups. The sec should consider expanding the ability for Small Businesses<\/a> to crowd fund. The definition of an accredited investors should be expanded modernized to account for qualifying expertise, not simply a monetary threshold and, it is important the sec update the definition of a Family Office<\/a> to allow Family Office<\/a>rs in their clients to meet certain thresholds to be considered accredited investors. This committee has held a number of hearings during my chairman ship discussing the need to discuss the scope and approximately appropriate us the proxy voting process women. I commend the commission for his actions related to the proxy process. In august, the sec issued guidance to assist Investment Advisers<\/a> in fulfilling their responsibilities on voting proxies on behalf of clients and clarified that proxy voting advice provided by proxy forms generally constitutes a solicitation. In november, after numerous round tables and thoughtful efforts led by commissioner rice, with the sec proposed two amendments to improve the accuracy and transparency of proxy voting country and you martin is shareholder proposals. I encourage the sec to continue moving forward these experts as perniciously following the comment period, this committee recently held an oversight hearing on the every mission we collect in this consolidated database, and helping collected. On october 16th, 2000, 19 the plan participants wrote to the sec to request to use customer id instead of receiving a Strong Social<\/a> security numbers. And as to store only a year and instead of for this important individual count numbers. Chairman clayton, you previously expressed concerns about the information being collected and stored here and stated you believe the regulatory objectives can be achieved without the most sensitive pieces of investor information. I encourage you to quickly process the request to use alternative approaches. Finally, the sec has made modernization a focus this year. We look forward to hearing what you strategic up for innovation and financial technology. How the sec has been engaging with initial point offerings and other cryptocurrency related matters. I look forward to receiving updates on these and other as you see initiatives including your views on what we can expect final rules in these areas. Thank you, mister, chairman welcome, share clayton, over the past few years in this committee, we have seen the Trump Administration<\/a> dismantle, we get upfront review of, this many of the protections that congress put in place after the last financial crisis, putting our Financial System<\/a> and hardworking families around the economy at risk. The sec has flown under the radar but often the agenda has been the, same taking wall street side over and over instead of standing with investors, saving for retirement or college or a down payment, digging together the secs latest actions are making it harder to hold Corporate Executives<\/a> accountable to investors and hardworking americans. And the mission is to protect those military Service Members<\/a> from fight and misconduct and financial advice. You have brought some much damage but what you are adopting called regret firearms can nearly describe discourse but do not have to eliminate from our conflict. They need to work for the people who do you serve. Americans need to have confidence, that the professionals, that they are trusting with the hard earned money and working for them. Thats coming them for the foreigns own pocket. You can simply try to create a uniform for brokers and advisers, which would be the best way to give investors confidence that our interest comes first. You did not do that. That is not the only part of town frank you have undermined. Look at the s cbcs proposal. One of the most successful programs that you have created under. We have deprived workers to stand up under corruption. And when i see no place in good enough about illegal activity. The only way financial workers will be able to stop not to start for that we give them protection. Yet you ever, since inception of the program, a number of tips have increased in some yards by madame 10 . But after euro proposal in 2018, you introduced the cap on whistleblowers. A number of tests declined in 2019. The proposed would have rewarded a lot to put out a statement to clarify. Im not whistleblowers is a duty world, nowadays, to someone in this town. It always lives the syria lawbreakers. I do not see how you can make significant changes like this without understanding that the decline is a result of your actions and the environment of this administration has created. When talking about whistleblowers. And attacking instead speaking out of those. The sec continues to taper action and ill be Financial System<\/a>s accountable, we must encourage whistleblowers to identify misconduct wherever it exists. The secs recent proposal rule on proxy advisers. After a clear examples of the administration taking the side of corporate interest for him struggling to save an investment for the future. Proposals make a difficult for to hold Corporate Executives<\/a> accountable. The proposal makes it harder for Institutional Investors<\/a> to independent research and analysis from the proxy. The proposed roadwork of corporations access. And thats been Fund Managers<\/a> who manage american money. The sec says the changes are necessary because it matters and inaccuracy. But what i provided a spot about powers. To intimidate approximately five years and their independence. It will probably shoulder proposal rule would make it easy for Corporate Management<\/a> two sides shareholders and avoid john not critical issues. The amendment would stop proposals can stop opposite such as a disclosure of corporate political spending, separating the rules. And nondiscrimination policy. I am disappointed in the direction you have taken on these rules, that have for decades, for decades, the president s of both parties. I want investors to hold management accountable garbage matching themselves protect americans should begin with a simple concept putting the rights first. I hope the sec will remember that, but i would last week, over the last week we have over the last week and this week we have had we would have said, we have the mc uae. And i will be an sissi. Are defending the same policy in corporate interest reflected with any collective amnesia with what happened last decade or so. The president promised to look for america working people. But he was put betrayed those workers over and over again. Mister chairman i would like to offer this raising concerns about the fcc my cannon proxy advisers. Without a objection. Thank you. Chairman clogging you could make a presentation. Thank you chairman. Ranking member brown, ranking members of the committee. I appreciate the opportunity to testify in the second Exchange Commission<\/a>. I want to start by thanking you, the support and its people. The dedicated men and women are our most important assets. With the resources caused last year, we have been able to throw over 100 new positions, with high quality individuals, who i believe will serve investors well. Since becoming chairman. The interest in iraqs have been in front of my mind. That perspective, a our staff has run out. I would like to highlight just a few aspects. First, modernization. Thats been a key avenue for advancing forecast thats an hour. In june interpretations designed to enhance the quality and transparency of the relationship for three and that stirs have. Or Investment Advisers<\/a>. These images from link up duties and one with what i reasonable investor would expect. Both terms and cost. And products. I am so grateful to our experiment and dedicated staff for bringing long overdue regulatory nationalities and clarity to the support of area. Talking to buy that have taken place in our markets. Including a capital that has been raised in our Capital Markets<\/a>. And Many Companies<\/a> have been starting profit to the average or about going public at all. They have expanded key suspects. To increase the act of matt while maintaining or inheriting investment protective. Increasing the attractiveness of the public is, just one side of the crime. Im expecting revenue from structure, roger, mckee across the top and parliament are protected months Time Investment<\/a> habanero private market. Should we should stop to ensure individual to perform well crack with my best Investment Protection<\/a> for a fact this is a challenge. But we are making progress. Interaction democrats are making a difference investment in our markets. But also the monitoring of market functioning market risk. Trying to inspection and enforcement efforts. I want to our teachers and military Service Members<\/a>. But we have focused their message here is simple. If your pet cats, Service Members<\/a> or they dont, want to cant you. Perhaps you got the money back. And thats what have returned for 1. 2 billion dollars to our investors. Probably talk about some of the biggest impediment that we face. Situations where it is reconciled, such as a part of the scheme. Much appreciate the partisan work in congress to address these charges and welcome happy to be to continue tonight that you. And to ensure that thats not good at the money back. , no substantial increase. And a red market participants. And protect, cotton additional retail and thats not going to prove that live between the coast. I believe that type of document is important. Thank you don for paternity to testify again. To these questions. Hard time. And i sat down surrounding proxy advice. A proxy process and shoulder proposal. Thats gonna tell both about yams. On these issues. These roads have not been reviewed by the commission impacts and i commend the sec protecting the actions on the staff expertise. To address changes in the market that have occurred. A network remark you mentioned that you expect them should to address universal taxi. What can we expect to to these proxy processes. I, will have taken an approach directly flexibility agenda. Watch, would tend to get it done with the. That sounds agenda. Working on them and i would hope we would be able to move them forward in the next coming. I thank you. And i can appreciate the attention you have given that the storm focus to pander to completion. We will talk much you. Because the plan where the sec is one of the number megacities jones touchdown would. Specter i would not has affected and are working to be responsive on to Market Trends<\/a> like cryptocurrencies . Appreciate the question. And the question thats what happened with that announcement. To speak about that particular product, it is not appropriate for me to do to stop. But the announcement was a regular beads oftentimes to recognize that determination women and sports our Financial System<\/a>, and creating panic transparent. Thats coming. The natural economic crisis but it only shows. Take you time, for a better term. What is happening. Now, i have to recognize that is happening. Recognize our mission. Service and silence. Investment protection. And ensure that digitization at taking place. Welcome to both principles. But we should not be fighting that digitization, because if we fight it, it will go around us. Well, thank, you that mirrors my feelings, and i assume that when you say it is coming. Im sorry, senator, its here. Its here. Its here, its you already. I, see its here. Yes, it is here and, as i have said many times, again, leaving aside the specific proposals of libra, the issue is one which the United States<\/a> and its allies and friends in the World Community<\/a> need to lean on and set the rules of the road on, rather than the let it come develop on its own through other jurisdictions which are not as friendly to the United States<\/a> and frankly through other currencies then the u. S. Dollar, one so, i encourage you and the other regulators to focus on this carefully, one of the first decisions that the United States<\/a> has to make is who, among our regulators, are those who regulate and how will we regulate . As well, as what will be the specifics of how we set the rules of the roads, who i encourage you to pay very close and careful attention to this. Finally, the sec concept seeking Public Comment<\/a> on ways to harmonize the private Securities Offering<\/a> exemption, is a positive step and includes money key reforms. What are the next steps and timeline for the sec to act . Well, the next steps that are on our agenda, a proposal around the accredited investor definition. In your opening, remarks you highlighted one of the issues with the accredited investor definition which is that it is a binary definition based on wealth. I will say it simply, there are a number of people who have the sophisticated ability to assess investments, who may not meet those wealth thresholds and we should do a better job of identifying them. That said, the private markets have risks that are significant compared to the public markets, and we need to be cognizant of that. Thank you. Senator brown . Thank, you mister clayton, for one dozen, years wells fargos management recommended voting against shareholder proposals, asking the company to separate the role of chairman and ceo, a Corporate Governance<\/a> past practice. Proposed limit shareholders ability to limit sensible proposals like this would have cut off wells fargo investors after four years of doing that even though in subsequent years it received support from 37 of shareholders, and we know separating chairman and ceos was a proposal because after wells fargo found itself mired in scandal and abusing his employees, had decided to separate the positions and took a victory lap with it. How do you justify a proposal like you made, that could limit shareholders from continuing to push for sensible governance reforms . Senator, about, that the question that you are asking, is after a shareholder proposal has been put on the proxy and settle shareholders to vote on, and garnered unless that majority support, substantially, last how long does it stay on the proxy . Right now, the threshold are, effective way to get more than 10 of the vote you can keep it on the proxy indefinitely. And that rule has not been changed since the late fifties early sixties, a combination of rules, at a time when communications and shareholder engagement were very different. Our proposal looks at increasing those thresholds. But still, if you were able to garner more than one in four shareholders in favor of your proposal, the proposal would be able to stay on the proxy. Well, you say that. That sounds, good but commissioner jacksons office study data for a decade after he lost in for, 2000, 18 and they, found we found the proposed rules wouldve excluded 35 of the proposals for an independent board share, 50 of Board Diversity<\/a> proposals, and 40 of political spending disclosure proposals. These are all areas where corporations need to be doing, better shareholders deserve, but i hope you will consider that as you think this through, where we ought to go. Let me talk for a moment about whistleblowers. You recently tried to clarify your proposal to amend the Whistleblower Program<\/a>, in saying that it will not create could you committed the final rule will be consistent with natural requirements . Absolutely. At any characterization of our proposal of is completely misguided, statutory methodist with commission to decide between ten and 40 of how much the whistleblower should be entitled to. I can tell you that what our proposal was intended to do was to make it clear how we make those decisions, particularly at the top and bottom end of the spectrum. I believe that transparency and how those decisions are made and i believe that Congress Gave<\/a> discretion to make those bands, those decisions, i want to say personally, im not speaking to the rest of the members of the commission, i think the program has been extremely beneficial to investors and i support it. Again, you say that you support it. I believe what you do, but i have also seen that the proposal you made has had a chilling effect. Weve seen the numbers change in the last year. Are you sort of the 5000 dollar number, 5000 dollar tip number which is slightly down from last year, but still, our tips, complaints and referrals which is people identifying issues for us, and we had another 17,000 of those, and i think they investigate, them we try to target, initially in the first week they are received. Anybody see the problem, but us know. All, right let me just close, mister chairman, with a counter senator grassley who wrote a letter to the commission and said, in establishing the Whistleblower Program<\/a> congress was not concerned about a report, if, anything the large sort of history Shows Congress<\/a> was more concerned about potential whistleblower awards, so let me do one more oh, go ahead, i yield back. Thank you. Senator. Mister clayton, i want to talk today about the collapse of a company which just laid off 2400 workers, ready, christmas 20 of its workforce due almost entirely to the incompetent degree of wework founder, adam new bern. Bloomberg reported that the fcc was investigating mr. Newman for fraud . If the sec investigator newman . We do not comment on whether we are or not investigating. Let me put a different. Way hypothetically, speaking of Real Estate Company<\/a> was going public, and the ceos wife and nephew had been given positions named chief grand impact officer and head of wellness, which kind of sound like phony, made up jobs to me, might not be something that the Secs Enforcement Division<\/a> would look into . Let me hypothetically speaking i want to take a step back and say that transactions between the principles of companies, family members, other interests, are something where transparency is essential. The ceo that same company sat on the Competition Committee<\/a> in effect allowing him to determine his own salary, with that we consider some of the sec might want to look into . We are very interested in the types of issues you identify, should be transparent to investors. If the ceo and trademark, a common mark like we, then sold this company for 600 million, dollars some of that we need to be disclosed it might be concern to the sec . Those types of transactions are required to be disclosed. Im just one final hypothetical, if the ceo of that company had credibly been accused of transporting Illegal Drugs<\/a> and a private jet across international boundaries, and spending billions of dollars of his companys money on lavish parties which famous dgas and on julio, tequila would that be responsible governance . Let me say. This hour Disclosure Requirements<\/a> around the background, character, and activities of directors and officers are Public Companies<\/a> require disclosure that would enable people to make these types of judgment. So, let me say this about the secs attorneys. I want to commend you for your work in the wework initial public offering. They filed a perspective almost nine months before they went public and your lawyers did not played a discrepancy in it like, for, instance that they claim, a 100 an occupancy rate of all their buildings, or some financial magic known as contribution, or community adjustment, whatever that means so, it is good that sec caught, this unfortunately caught it at the lastminute. We need a system catches fraud earlier before so many workers were injured. All of those things, though, are like you said, adam newman either did as a matter of record or was credibly accused of and couldve done and at least one of them, transporting Illegal Drugs<\/a>, i hope he is currently under investigation by the department destined for crimes and i helped the enforcement evasion of sec is investigating item neumann because hes a billionaire, who received a 1. 7 billion dollar payday to walk away from the smoking rubble of this company or, as he preferred to call, it not a company, a state of consciousness. He was able to extract that panel, because the Corporate Governance<\/a> structure made him ten votes per share, the kind of super voting stock that enabled him to hold his company hostage until the other investors paid him just to go away and stop destroying its value. The sultan contract 485 medallion contract in case they need to subject our of tequila. A box is a lot of money for an executive, but certainly to stand up for someone for a company. Leadership requires stamp captain accountability and that includes corporate ridership. Thats what is absent in this case what im human and what workers in this company. The wall street biggest banks and reforms. A lot of us often among polls show younger americans have doubts about capitalism and open socialism. For good reason. Given the brutality and poverty but socialism has inflicted on people. Pakistan is the reason people in america are open to socialism. And i read. Im tempted to ask to respond to senator captains question. You would have proposed child major rules. Round with respect to proxy advisor farms. The average to shareholder proposals. These are the complicated rules and i presume you are going to receive significant numbers i learned some comments that will have to be clearly and arrived. David expedition for capital deliberation. I think that our browns comments reflected on some of the potential pitfalls in these roles. I dont talk to, just looking, at the investment have conducted a steady. Since 2016, that are sec already dead and adapted is for 160 days robert innocuous rows. So i would ask, is that you would come to be very deliberate and Capital Projects<\/a> and do that in a way so its forgotten 13 days, i want to be correct. I kept for. And the consequences being significant. Can we got . Yes. I believe you have on my counter for tomorrow. Welcome to engagement on this. I want to hear from people all types. God. Let me talk to the issue of the status, legal and institutional cultural and some of the bag academy firms. I see sec acted building a dollar penalty. I dont after receiving what information about inspections of the forum would be conducted by the Public Company<\/a> oversight board. They sec she had an internal training exam by problem ensuring and mckinnon test results. In addition to finding on the far. A principal orbit for, a second ranking individual, was convicted of that and i was. The proceedings suggest that there might be problems, thats not, what cohen institutional. On top of. Two times, last month, then a lengthy article about behavior in that spot. Which i think you are aware of. Youre right, im not . And watch what five, the tabloids again. It was a very toxic article and very unflattering to ill be industries. Forced, to use it because that shows us significant, and second, what type of specific actions do you anticipate taking this year with respect to the issues . So yes im a read, i do consider them thats significant. The Financial Reporting<\/a> that someone can really, is the bedrock of our Capital Markets<\/a> system. And im quoting, that people can count on your wedding, it is essential to that. What thats chief accountant we are engaging a regular basis with these firms and efforts to improve our equality and through the pcaob it is not just a domestic issue, it is an international issue. That she a captain to take on additional rwanda which is to ensure equity across the globe. Investors should understand, that if not uniform. In fact i do not believe it is our high quality in many places outside the United States<\/a> as it is here. The last thing to do we have to try to lift that. And we are trying to do that. Talking to a good number approving or equality. Thank you mister chairman. Thank you mister. Thank you read. Senator kennedy. You, mister chairman. Good morning mister chairman. I want to talk to you about the Public Company<\/a> accounting oversight. I think the imam that is pcaob. Yes. Do you . If pcaob we have three functions. The, inspection and enforcement. Thats likely my review the i dont Public Companies<\/a>. Its the right . Yes ideals. Such a private companies. I. Number. An artist. We have a barrage of 56 companies from fans in china. More could carry about 1. 2 trillion dollars. How many both companies i dont have a Chinese Government<\/a> . Trying to come up with a precise number two that question would be a fool. Sure. Thats. I am certain that the Chinese Government<\/a> has a significant in those government. The stock i companies under the president are becoming more and more prominent. How many of those Chinese Companies<\/a> are complying work have about targets are working with pcaob . To pcaob reveal that its . Pcaob request to work paper and with respect to those companies, access to the world papers has generally not been available. So basically, something china on american exchanges. They have companies that are companies. Pcaob if not able to review the arts because the company says no. Is that right . Thats correct. And that is the problem. I would . Recently, because rubbing that directly has taken, in my view, to. Pcaob and i thought they had about a big four out of generally through a food in those. To ask what they are doing to ensure and give us comfort that they are not doing is out of the same quality of the artwork and other jurisdictions. Does that . I do not know yet. That is not a one time direct. I expect to engage with them again. And i wanted to make sure that you understood how important this is so eugene in the lab of my office and i have pcaob. We want to encourage companies from all over the world to raise capital United States<\/a> because our markets are very efficient. But there is a reason that might be sec pcaob. And that attack sure these companies, these foreign companies, that are top American People<\/a> and ive investors the truth. And the Chinese Companies<\/a> do not seem to be cooperating. Does not seem to be getting better. So what this time, crying and not limited to american investors,. And of course we have had trouble in the past with already companies that do not really art. I would like you to take a look at accountable. Basically said, it could not have three years to cooperate with pcaob. And after three, if they do not allow us to review the audit and im sorry questions. I get elected. Do you think that would be affected . Thats what you. And i will look at it. Just because a company is debt lifted denim in the u. S. Investors will not continue to win that. Thats true. Put another one. It would potentially foreign companies. Well no . It will. It would detention of investors. , that many of them, will be going again. Is that correct . So. Thank you mister chairman. Similar. Thank you thank him. Im concerned about before one time to manipulate u. S. Companies in the investment particularly in the media and technology sector. In 2017 david issue when it recommended that Congress Might<\/a> sec transparency regarding Chinese Media<\/a> contest sponsored by the Chinese Government<\/a>. And for a provision to make sure it is very hard to disclose their attempts approaches and u. S. Companies. We see a role to play. Tampa 19th investors will become a Beneficial Owner<\/a> of more than 5 have an issue with certain to be fcc. Im not closed, or describes with insufficient evidence undermined the free flow to the American People<\/a>. So our question is, how does the sec according to ensure that Foreign Investors<\/a> are not accumulating significant shares in Public Companies<\/a> especially in the meantime Technology Sectors<\/a> without filing the requisite disclosures . Senator, your question is a really good one. It is the other one i have asked here. Im just kidding. You have to. You occasionally have to have fun. laughs control over a Public Company<\/a> is something our markets and investors need to know about. It essentially turned over 5 , not just an individual or, a concerted efforts i dont. Are extremely important to our investors. We do try to monitor and look for violations of those rules, want you to know and im not going to get it too much detail. Our ability to track who from the u. S. Right, it is very robust. Sometimes upon investments occur through overseas account, if not a best. And im concerned about. So i appreciate your acknowledgment of that. Whatever you really do not have the ability to independently verify the information and i crime energy shot team. Talk to comply with . Im looking for ways to enhance our ability. So im asking about. American public. Foreign investors. Would you do you think you sec should move on to try to buy factor . Im not sure. Look as to what you find wrongdoing. What a bad value tonight which is that are taking place . Are very good at noticing that time. Pected let me ask you, this when you do find a suspected violation, how does the sec in force and what penalties are assessed against persons or entities found a broken the law . I can think of some episodic ones off the top of, my head but to give you a general, answer right, now it is, difficult i can get back to you on that. We have seen violations indifferent contacts, in the takeover context it is different from others. So, let me give you an example. There, is i am aware, of a public violation of a large Radio Station<\/a> network in the country that ultimately found that in fact Foreign Ownership<\/a>, because of litigation, they did not know who these creditors were, but ultimately through litigation found that Foreign Ownership<\/a> exceeded the cap. They brought that to the attention of the fcc under their due diligence. Then, there should have been a de filing by this entity but there was not and so the question is, in circumstances like that now, here you have a foreign entity, a group of predators abroad who are now owning an excess of the percentage permitted under the fcc, who did not make a 13day filing, which is the only way a company would know whether or not they have that Foreign Ownership<\/a> existing in their publicly traded stocks and so then, the question is, what happens to that entity . If it were to have teeth at the end of the day, through this 30th to try to protect ourselves against Foreign Ownership<\/a>, that exceeds the applicable allowed under the under the, law you need to have some teeth in the 13 the process and i really hope that as chair, you will look at that because it comes to the essence of information, we are all making decisions on, based on Public Information<\/a> our medias, but what is controlled by a foreign entity, you have to wonder whether or not it is just an investment or whether it is an attempt to ultimately make influences. Understood, thank you. Senator, tell us. Thank, you mister, chair mr. Clinton, thank you for being here. I thank you and your team are doing a great job. I did not want to touch on something, you and i have had a discussion, a couple of times and some of the proxy advisor farm rules, i know you dont put out amendments on november the 5th and i appreciate your taking this seriously, and moving forward with, gardens and that his potential amendment. Im particularly just interested in making sure that they propose rules give impacted companies an opportunity to consult with proxy advisers and address any potential errors or conflict of interest but, as you are working forward, how do you think the proposed rule actually can help ensure that the proxy firms continue to play an Important Role<\/a> in the marketplace . But also balance that against some of the interest that i have talked about in terms of conflict of interest. Let me be clear on, this proxy Advisory Firm<\/a>, Service Firms<\/a> like, this they do play an Important Role<\/a>. Data, it is very efficient, to clinch the data on a collective basis and provide that information. They can provide other services, what the proposals are looking at is really three things. One, is to make it clear the solicitation, any fraud rules apply. Now, if you are materially misleading statements, something i think we should address. Conflict disclosure. If you have conflicts to the extent that they would be material to the investor, you should disclose them. And, then the last one is one that you, and frankly, a more tricky one, is trying to improve the accuracy and completeness of the information, investors, from all areas of which to make a decision. I think all of those can be accomplished. In our framework. We do it in many other areas. We make sure that we have transparency around conflict and trading, the anti fraud rules apply to people with significant influence in our marketplace and try to improve accuracy, that is what we are striving for and we welcome comments. Thank you. Are you looking beyond the rules that you all proposed on november the 5th . Are you looking at other areas of rulemaking . Moving forward . Automatic voting . Any other priorities . Senator, i cant say the beyond that, any specifics in the area, voting other then the plumbing, trying to improve our plumbing, is very archaic and the proxy area and also, universal, proxy i think theres been enough debate about that where we could now move forward with the proposal. Just one other thing. Because ive heard some concerns over litigation, and how it may increase in this space and, have you looked at this . You have. And the things that you would be looking at the sec . Happy to hear from people who have a concern about an increase to be clear, the proposal makes it clear that there is no new right of action or a private right of action created. Another area i want to touch, because i know in here we have had some of our members and i think some of the folks on the commission have expressed some concerns about buybacks, potentially stock buybacks, and potentially placing limits on that. I, for, one that it is a business trying to figure out the best way to deploy its capital. Would any kind of restrictions or additional restrictions on buybacks, what with the consequences be to mom and pop shops or, i should say, mom and pop investors, and over time, if we limited optimization a deployment of capital, but negative impact could it have on the average investor . It is difficult to say with any degree of decision precision, but i agree with the premise of your question which, is Capital Allocation<\/a> decisions, whether to buy a company, whether to invest in a new, line whether to pay a dividend, or whether to buy back stock, those our board of directors decisions, understanding the idiosyncrasies of the company and what they believe is best for long term interest of the company. To put a point on it, im not qualified to make that decision for them. I agree. Thank you. Not that you would not be in the boardroom, but in your current capacity, i do not think it is the appropriate role, in your current capacity, thank you very much. Senator smith. Thank you, chair, and hello again. Nice to see you again, mister clinton. So, i would like to follow up on the line of questioning that senator brown and senator reid started around these shareholder proposal rules, and, so last, month as the sec voted along party lines to adapt to these two rules that i think will make it harder for investors to seek votes on shareholder proposals, and so i am concerned about this, and i wanted to ask you about something but specific to this. In your statement, when the commission improve these restrictions, you cited several Public Comment<\/a> letters, and you said something to the effect, of how these letters struck you the most because they came from long term Mainstream Investors<\/a>, including an army veteran, a marine, veteran a police officer, a teacher, and a Public Servant<\/a> and a mom and this is all great except of course it turns out there is some question about the validity of his comments and according to bloomberg news, several of the letters that you cited were not actually Mainstream Investors<\/a> at all and they did their investigation which found that the retired teacher said she never wrote a letter, and the military vet, it turned out that they were the brother and because of the chairman of his pretty Advocacy Group<\/a> that was paid for by the corporate supporters of these sec initiatives so, bloomberg went on to say that one of the retiree said that he did not write a letter bearing his name and the Public Servant<\/a> cited said that she had just allowed a Public Affairs<\/a> for him to use her name without even knowing what it was about so, i want to just ask you a little bit about this. Given that you cited these letters, does this have any effect on your thinking about whether this is a good idea . Well, a couple of things, one is, we have an investigation done of this issue. Im just going to leave the specifics of that. I am very interested in hearing directly from individual investors. In particular, directly, not filtered by groups. One of the reasons we have conducted a large number of town halls in connection with a standard of conduct rulemaking is that when you interact directly with investors, you get a lot of good information. I would agree with that. So, during this comment period, i encourage many individual investors as they can to share their thoughts with us and we will be doing town halls where they will have the opportunity to speak directly. And so, you are investigating these sham letters from the public to try to understand what happened here and how they got included . Im not but as soon as bloomberg, but very shortly after the bloomberg article came out we contact our general counsel in the office of inspector general. Do you think it should be illegal to submit comments under a false identity as happened here . You, know im not going to get into that here. I think that the comment process is an open process to the extent that things happen, i do not think that i just want to leave it at that for now. We will see what happens with the investigation. Well, im certainly glad to know that you are investigating this. I think that is really important and if youre basing decisions about what to do on comments and public interactions that end up to be fueled by corporate Advocacy Group<\/a>s, that i think is a problem. That is why we have an open process. Okay. Let me ask you another question. I also served on the Agriculture Committee<\/a> and so this question relates to that to a certain extent. In august, the Commodities Futures Trading Commission<\/a> agreed to settle allegations that this food giant craft had manipulated the wheat market and the settlement agreement, they approved, it was unique because it included no factual findings or conclusions of the law and prevented the commission from making any public statements about the settlement and this is very concerning to me because i think u. S. Is and should have the right to know what federal agencies are doing when they are settling cases, so, my question to you is, are you how common is this practice . Is it happening at all, that you are aware of, at the sec . So, no, you are asking a very openended question. I am not aware of any situation of the type that you described. I want to make sure i carve out any kind of National Security<\/a> or intelligence are out from what i am saying. That is appropriate in these types of circumstances but as far as ordinary commercial actors, i am not aware of any. I have to leave it at that. Okay. That is of great concern to me as well so, thank, you thank you mister chair. Thank, you senator miranda. Chairman, thank you, thank you to the ranking member, mister chairman, thank you for joining us and i will start by committing you for your leadership the sec, appreciate the agenda you have helped to accelerate over the last year. I also appreciate the openness of your comments, today your response to questions and the conversations we have had in office and with members of this committee. I do want to raise a concern a, what i believe is occurring, an increased use of enforcement, often referred to as regulation by enforcement. At least one commissioner recently asserted that when the commissioner sees a widespread problem affecting investors it should, quote, issue its own guidance and probably get a roll up an end the problem for it hurts investors. And quote. Under the belief it is both batters for investors in like proportions and is better for investors than a large Enforcement Initiative<\/a> and provides regulated industries with appropriate notice of what the sec expect from them. Do you agree with that or have a comet as to what was being compete conveyed there . Senator, your question highlights one of the challenges of regulating a broad market. If you see conduct that is clearly problematic, theres no reason to provide guidance. Just got to deal with. If you see widespread conduct that is why that is, lets put it this, way a new area, people, you, know reasonably could conclude reasonably could conclude one way or the other, my view is that guidance, and loud guidance is the best way to deal with that. Life is complicated, a lot of things fall somewhere in between. I think one of the things you and i have talked about is the clash initiative. I think where we were was much closer if not all the way at the end of the spectrum, people have different views but i appreciate that spectrum and i think our Enforcement Division<\/a> and our Inspections Division<\/a> understand that. Part of my job is to make sure they understand that and make the appropriate selection, how to pursue conduct that needs to improve. Mister, chairman in that regard, you have said before that staff yet i think we often see they point to risk alerts and proceedings by other participants as a justification for the appropriate notice. I was used february 2018 election Disclosure Initiative<\/a> regarding disclosures for conflict of interest from certain fee arrangements as an example. Fcc staff pointed to a 2016 risk alert as evidence that they were given sufficient notice about what the fcc expects from regulated firms in disclosures such as the use of may versus will. However i understand that the initiative has penalized firms for activities dating back to 2014 and beyond. In other words, to the notice that you are claiming occurred. Is there something here that i should be worried about . I dont think theres something here in particular. But the principles that you articulate or something we should always be concerned about. We should not be in the business of gotcha, but we do need to be in the business of making sure that we enforce. If theres to be a change in the wall that should be the commission. That isnt really the issue and i dont know exactly what the due process means in todays world the notice has always been something that is included in the due process in order to come i would hope those that you have the ability to regulate if they knew what position the fcc was, they would comply voluntarily. If theyr their seemingly was ne it denies them the ability to voluntarily comply and it eliminates the opportunity for them to have the due process. Senator cortez. Thank you for appearing today. Im going to talk a little bit about my concern and what can be done and what you are giving to prohibit requests from clients. Let me give you an example. I sent a letter along with some of my colleagues to limit the ability of broker dealers and Financial Advisors<\/a> to inherit money from the clients and its a big concern. I know its the former attorney general there is fraud associated and granted i understand some family members could have exceptions for certain relationships but most importantly concerned about the fraud that is associated with it. My question is twofold to you think they should prohibit Financial Advisors<\/a> to receive the request from the client is and what are you doing to address that issue . On that specific question. On the area of the elderly many of whom are in a position wheren where they may have diminished capacity or not have support, we are very concerned about that. What specifically we are doing, we are doing a lot at the fcc to recognize that many of our investors are getting older and we need to deal with that fact including implementing the senior say fact which allows brokerdealers to hold off on disturbing funds if they think that something inappropriate is going on. Im happy to engage with you further on this issue. I would officiate that because i think its an issue that needs to be addressed and i look forward to seeing what you doing to address the issue. I also appreciate your attention to preventing Retail Investors<\/a> from falling victim to fraud. The thing that has proposed a rule for dishonest brokers and their firms to operate, last month along with my colleagues they sent a letter asking them to strengthen the proposed rule 4111 to expel firms in a broker with history of fraud. Another finalizing this now and it should be passed to the fcc for you to take a look at, my question is will you ensure rule 4111 is clear that unscrupulous natural cannot continue to operate and secondly, when will the fdcpa approve or when you and to separate looking at that rule and approving it or having a common with respect to 4111. Generally our view, its a privilege to work in the security markets and a privilege that you can lose and should lose if you misbehave. I want to be careful not to prejudge havent seen the text of the rule but i have long been supportive of the concept that are in the rule including, if youre going to hire somebody who has a history with the registration of the requirements that should reflect that youre taking more risk than someone who does not. Thank you. Let me also, i appreciate the concern around Digital Currency<\/a>, this is an area that along with the chairman of paying very close attention to and i know your comment is here and we should not go around it, i absolutely agree and im hopeful as we move forward that you are putting resources to addressing and taking a look at this and what can be done but at the same time coming back to congress and talking about what we can do with you to be prepared for the future of Digital Currency<\/a>. Because it is coming and we need to be prepared. Thank you. But i do have one final question with respect to the enforcement i was glad to see the fcc had taken action against crypto currency firms that fail to comply with prior interim requirements from raising funds for investors. However, according to a recent article at the wall street journal, three of the companies mr. Deadlines to repay people who bought their token. What is fcc doing about crypto currency companies that fail to comply with the fcc settlements one, and 2d have enough resources within the Enforcement Division<\/a> to address these issues . Let me try and summarize what can happen with settlement. We try to structure settlement and i think were trying to structure in a way that tries to get the most money back to investors over time. Sometimes that means allowing payments over time. Enter tar enterprise to continuo get the money back. And sometimes they feel. Because they were not Good Companies<\/a> to start with. That paradigm applies to the situation that you identified. In terms of resources. I think we can do our job, when i first took this job i did not know what i would do with significant Additional Resources<\/a> now i feel better but we can have Additional Resources<\/a> particularly in some of the emerging areas and we can put them to good use and your job how to how i feel about it. Thank you. Thank you, senator cramer. Thank you chairman for being with us in your candor. I want to go down on the certified audit trail which is great by design to collect a lot of personal sensitive financial information. Information on every retail brokerage client in our country which should amount to buy my calculation over 100 million clients. That in itself itself, that much data intensive information has challenges in an addition to that, with 3000 people in 24 organizations have the ability not only to access but default downward into their systems. I did not used to be paranoid what ive come to a point where the ability for institutions to secure that much data with this broad application concerns me. I would love for you to help me feel more comfortable with the fcc is doing to protect against attacks and cyber challenges with that risk. The cat is a good example of how we should look at a lot of large data projects. I agree with your concern and the question is, not what data would be like to have, but what data do we need to have to do the job. We are going to reprocess with the sros and others, i think we can significantly limit i said speaking for myself, from information from individuals should enable us to do her job and have a cat function in a way it was envisioned to function. So that reduces the risk because the data is not as sensitive and of course the other side of the coin is what type of security protections do put in place and how do you ensure that those security protections can evolve as the threat of all. Thats a general summary but were working on reducing the Sensitive Data<\/a> and ensuring folks have insight into it and we continue to improve the security protection. Just go further my understanding that the firms are required to sign the cat reporter agreement which in essence, shield sros from liability. Anytime we start to shield in institutions or individuals from liability i was asked why is that necessary. If the safeguards are in place, it only adds to my insecurity if you will. From my point of view, this is a highly risky and i believe a breach will eventually happen but i hope the sec can prevent the obviously print. Im aware of the issue around the allocation of potential liability in a meeting tomorrow with representatives of the sro committee and the Dealer Community<\/a> to discuss the issue. I appreciate that. Busy day tomorrow. It sounds like a. Thank you, mr. Chairman, thank you for being here. I want to ask you about the Commission Engagement<\/a> on the task force for climate related financial disclosure, how are you working with the task force . We are working there are International Bodies<\/a> sfb, iosco, and output that you there, we are working with all them on this issue because market disclosure issues of this type are global issues not just domestic issues. And i would say on medium to light heavy we are fairly engaged to some other issues. Specifically what are you doing. We are working the reports and working on repose proposals. I think it goes beyond that. I personally have recently met from the io and spoke with them. Trying to bring to bring decision useful information to the marketplace. Thats a good way to look at a. You say were not quite there yet . It is hard. Are you actively enforcing your 2010 guidance on Climate Disclosure<\/a> . If what you mean by actively enforcing it, are we actively Monitoring Companies<\/a> to see if theyre following it and to the extent that they are not addressing that. I think the answer is a clear yes. One way you can more actively enforce it is to put issuers on notice that Division Corporate<\/a> finance will be examining. Thank you. I think people listen more carefully if you say you examine for this. To be clear, we have been examining and i would encourage people to look at the comment letters that become available publicly. I had this problem in a number of categories, and politics that are mostly in terms of your commission and mostly through that part of the problem but a couple of other problems, one we have to develop instruments and process that work across platforms and the planet so when you do disclosures youre comparing apples to apples but the other part of this, whether or not you as an agency are leading versus waiting for tc fd and others and see how things play out in the ecosystem that is working on this, would you consider the sec a leader, follower or participant. Where you put yourself in the. Definitely a participant, i would say a leader of a useful lens, including articulating ways that we can use the information that is being generated to further our what i would say is monitoring oversight, there are a bunch of voluntary regimes as you know, tc fd in the carbon disclosure project. And some organizations that come under your jurisdiction are making voluntary disclosures under tc fd and others in a separate less informative disclosure as it relates to climate risk to you. Do consider it appropriate for the commission to look at those voluntary disclosures and incorporate into risk and also. I dont know that im fully examine for this, not just in this area but in many areas we look at companies and Public Disclosure<\/a> that require statutory disclosure and whatnot and compared what theyre seen in other places and Ask Companies<\/a> please make sure you reconcile these force to the extent. You think you can be useful, theres a number of ways to look at that one problem is you have different ways to disclose a climate related risk do you think the fcc can lead or assist in developing a more consistent comparable thorough disclosure of a climate risk . Let me say this, i think we have a great deal of expertise in assisting in disclosing risks in a way that investors can use it. And were trying to bring that to bear in all areas and what we do including the. Thank you. Senator rounds. Make you mr. Chairman. Good morning. I want to followup on the issue of consolidated trail, it seems to me that you suggested there will be modification or we can expect modification based upon the amount of data that can be collected. Im concerned because clearly there is a high probability that there would be breaches and as an example having an employee to take home a notepad with data on it, any type of a process in which employees can gain access and then lose if nothing else. These seem to be ways in which data could be lost and were talking about the consolidation of data from a lot of different entities into one location in which seems to be making for a prime opportunity for nefarious activities. My question is number one, when we talk about the limitation of liability as senator cramer suggested, it bears to mind that somebody still has not lost and the question is do you believe the rules as are being laid out or the guidelines as we see them and limitations for some, are these fear the way that their set up to limit the liability and will you go so far to review that process of limitations that are being put in place today . The short answer is yes, do you want the longer answer . Yes, i do. The longer answer is your premises right. When you allocate responsibly you generally try to allocate it to the people can that can best address the risks who are responsible for. That is something that is in my mind as i look at the sink. I just want to bring attention, i think this is a serious issue and it does not mean you dont need to consolidate an auto trail but if youre going to go that route then theres gotta be something in which data has to be kept in a secure entity and if you cannot do that, which im not sure that you can then perhaps we should look at a more limited amount of data and it sounds to me like youre looking at that but along the line making certain that where the possibility of risk is that in the blame does not lead the location. There is a responsibility and authority combined for the production of the risk. Understood. I want to give you an opportunity should i say, that clarifies the suggestion that libra might be ridiculous. I want to go into this with the following. I know theres been a number of folks that whether or not its libra which is an attempt to do something different, if we simply walk away from that and say that is ridiculous and the product is ridiculous which is the way i heard it, we pick winners and losers. Im not asking judgment, if my comments that any product is ridiculous, i tell you what, i dont know. What i do know is, there is a great deal of friction in the marketplace the digitization can reduce. We need to make sure to the extent that the happens and were still being true to our statutory missions are crossed the federal Financial Regulatory Committee<\/a> in our Investor Protection<\/a> in efficient markets, at the banking i dont want to fispeak for them but safety and soundness. We cannot lucite of those things because of a new technology but we cannot rely on Old Technology<\/a> to ensure we do those things. You looking at definitions now that come from a 90yearold law. Let me cut to the chase, do you see a difference between and see it as a separation between crypto currency and perhaps a Digital Currency<\/a>, do you see this as being the separating issue where you have a Digital Currency<\/a> today and in some respects it reverses integration. You have an obligation in this case as a regulator where you look in a book. Let me say this, theres a lot going on, its complicated. Weird have a great deal digitization in our Financial System<\/a>, i do believe there is a difference between a sovereign backed medium of exchange in a private medium of exchange. I want to say to you and this committee, i have heard you and i appreciate that we meet something, we should be engaged with you. And i thank you for that. Thank you mr. Chairman. Thank you sir. Senator van hollen. Thank you, mr. Chairman, welcome mr. Chairman. A couple of things first that i want to associate with kennedys remarks over legislation require that Chinese Companies<\/a> withstand our exchanges and meet the same audit requirements that we require everybody else. It seems to be common sense. Second on a number of occasions weve had hearings that he raised the in the issue of the strong correlation between the timing of insider share selling and stock buybacks, since we last discussed that, commissioner jackson and others have prevented presented more evidence that the timing is not a coincidence and executives may be manipulating the timing at the expense of the shareholders. I am disappointed that you and the commission have not moved forward more rapidly to investigate this. I am disappointed instead your focus on strengthening the hand of already very strong ceos and corporations at the expense of their shareholders in many cases. With the proxy advisory regulation that you post. This seems to be an answer in search of the problem. There are issues and we know what you described as a plumbing and trying to figure it out and i agree with the conflict division provision. But what you are doing is saying if i go out and hire somebody, an independent proxy advisor to make recommendations to me about how i should but with my shares, that proxy advisor has to go to the company and the ceos and get them to essentially comment and they get to have a number of reviews. I really dont need a nanny to advise me. If i dont want to hire a proxy advisor, i do not have to. What troubled me more, you try to present this as a concern of main Street Investors<\/a> prewhen you roll this out, you attempted to create the impression that this was something a lot of main Street Investors<\/a> care about. I tell you, i sit on the committee and served on the house, senate, ive not had a main street investor come up to me and say this is a concern. If there are other look forward to it. But you got duped when you rolled out. Senator smith asked you about that but the reality is in addition to the fake letters that she mentioned, people who you cited who apparently says now she did not write the letter, there were a number of letters that you cited that were cruelly orchestrated by a group called 60 plus. For those of us who have been around for a little while we know what 60 pluses. Its a dark money front group that corporations use for messaging. They dont have to disclose their donors. It sounds great and makes it sound like theyre taking care of seniors. But we found out their donors include corporations like chevron and exxon and so it turns out that a number of the letters you cited were relatives of the head of 60 plus. Are you aware of that . I have now heard this, i was not familiar with the group 60 plus. Were you aware of the retired couple you cited are the mother and fatherinlaw of the head of the 60 plus association . Maybe because you just told me. Are you aware they told the reporter that had no connection with the letter . No. Are you aware that the military veterans that you cited other brother and cousin of the chairman of the 60 plus association questioning. If a company had done this we can go after them for deceptive practices for misleading statements. I know you did not intend to do that. You became the vehicle for that. And you became the vehicle for that as you try to roll out this provision that it was looking out for main Street Investors<\/a>. Wasnt that your intent . Regardless of this, i still believe were looking out for main street. It does not appear to me, this is the top priority in this does not make it had but it does mean you should be cautious before you say its a top roadie of mainstream. This is the top priority of a lot of corporate ceos that do not want to be secondguessed by proxy advisors. Isnt that true . So look, lets see what we agree on. Disclosure conflicts. I said in my remarks, that is number one, there is two in three will get to three. Disclosure conflicts, commensal responsibility for what youre saying, the antifraud rules should apply. Okay . The last one, i will tell you, i am open for discussion on all of them, the last one on how we ensure better accuracy, i am very open if people think that what will we are proposing is too onerous but we can get to improved accuracy in another way, i am open. As you know theres an ongoing lawsuit on this issue because the basis for your rulemaking is that the proxy solicitation the proxy o undr proxy advices the same as a solicitation theres a three 2 vote. There are Different Levels<\/a> but that goes to the heart of the question of your authority. My question, are you willing to delay the real making process pending the outcome of the lawsuit . I will not commit to that today. What if you go through the process and the lawsuit says theres no authority to do it. Unfortunately thats a risk that we run. The advice weve gone that we should be very comfortable or where we are. My biggest concern right now is the way you tried to present this when you rolled it out. I am not backing away from the fact that we want to do whats in the best interest the letters that you cited were orchestrated by a Dark Money Group<\/a> that is funded by many of the corporations that stand to benefit from your proposal. They are advocating for that, theyre using this group to funnel their money through and you become their mouthpiece. I think its important for you to retract those statements and let the public know that you were duped, you did not intentionally deceive anybody but the letters that you used to make the case that this was for main Street Investors<\/a> were in fact orchestrated by a group that is funded by the very big corporations that are pushing hard for the role. Thats a deceit on the public, not from you but you became the vehicle for that. I hope you make it very clear that you find outrageous that the people who hope that you will do this, these are people who were pushing hard for this to happen and you became the vehicle for their fraudulent attempts to make it sound like this is all about street investor. Senator brown would like to ask another question. First to comment, thank you for your comments in the back and forth with the chairman. We hear always in this committee particularly from that side of the aisle from momandpop investors in all the trump nominees want to take care of the nominee and the momandpop investors and i think senator van hollens investigation shows often times the momandpop investors have some front to not take conspiratorial in this town and in these days but its clear thats whats happening for so many of the Dark Money Group<\/a>s. Let me go to a different place, early in my Opening Statement<\/a> i mentioned that i asked for inclusion of a letter from the employees retirement system and i appreciate that he crucially did that. They waited last year end the roundtable and proxy voting. Its a raise concerns and changes to the role that make proxy advisor advice more expensive, less independent, less timely and can only public tension participants. It would do all those things under the pretense of improving conflict disclosure but the rule would go far beyond that by giving companies to bites of the apple to review proxy research before it gets to an investor. How do the sweeping changes in institutions did not ask for and could compromise the research they pay for, how does that benefit investors . Senator, i think robust conflict disclosure when its material, does benefit investors, they should know what incentives people have when theyre making statements. I do believe if youre making statements in an attempt to influence or solicit votes, generally any broad principle should apply. On the last one, how to increase accuracy, like i said to van hollen, i remain open to ways to deal without but lets be clear of what were trying to achieve, were trying to achieve that the investor has a robust mix of information on which to make an Investment Decision<\/a>. If that comes from a proxy Advisory Firm<\/a> in combination with the company, so much the better. Thank you for that. It looks that a lot of us took the power to far in favor of companies and management needs to be more accountable and not lesson shareholders need more tools and not fewer in the direction that you seem to be going is not that. Lets be clear, say on pay and other engagement mechanisms, this what i want to achieve is that people who are making the Investment Decision<\/a> in the voting decision have these good and accurate a mix of information they cannot. Thats what i want to achieve. Thank you. That concludes the question and no one i think you chairman claim for being here today and your strong leadership at the fcc. I appreciate it. For senators who wish to submit questions for the record those questions are due on tuesday december 17 and i encourage you chairman to please respond is probably as you can to them. This is our last hearing for this Congress Unless<\/a> we schedule another one. We have had a lot of productive hearings, i want to thank all of our senators for making that happen in our witnesses and those have come before us. Its laid a foundation for what i expect to be a significant amount of productive effort. With that, this hearing is adjourn. Thank you. 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