And Exchange Commission chairman jay clayton regarding the work and agenda of the s. E. C. I thank you for your willingness to appear before the committee today, mr. Clayton, your willingness to testify is essential to our oversight much the s. E. C. The mission of the s. E. C. Is to protect investors, maintain fair, orderly and sufficient markets and facilitate capital formation. It plays a Critical Role in ensuring our nation has Capital Markets that the public can have confidence and trust in. It provides information to investors so as americans prepare for their 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 clay torngs you came before this committee a year ago and assured us you would continue to take steps to ensure that the u. S. Capital markets remain the deepest, moshgt dynamic and liquid in the world. I commend you and the s. E. C. Staff for actions taken over the past year. Actions worth mentioning include the s. E. C. s final rule package on regulation best interest which strikes the appropriate balance of increasing transparency while preserving advice on investmentrelated products. They modified the filer to reduce the number of filers. I encourage the commission to move forward quickly in a way that provides relief to all smaller reporting companies. And this summer the s. E. C. Issued a concept release seeking Public Comment on ways to harmonize the private Securities Offering exemption. I encourage the s. E. C. To revise the regulation d to allow for general solicitation and advertising by sponsors such as Angel Investor groups. The s. E. C. Should consider expanding the ability for Small Businesses to crowd fund. The definition of an accredited invest youer should be expanded and modernize to account for qualifying expertise not just simply a monday taesh threshold. Its important the s. E. C. Update the definition of a Family Office for those who meet certain threshold to be considered accredited investors. This committee has held a number of meetings during my chairmanship to discuss the appropriateness of the proxy voting process and other aspects of corporate governance. I commend the commission for its actions related to the proxy process. In august the s. E. C. Issued guidance to assist Investment Advisers in fulfilling their responsibilities when voting proxies on behalf of clients and clarified proxy vote advice provided by proxy firms generally constitutes a solicitati solicitation. After roundtables led by commissioner royceman, they have two proposals. I encourage the s. E. C. To continue moving forward with these efforts expeditiously following the comment period. This committee recently held an oversight hearing on the consolidated audit trail or c. A. T. Ive expressed concerns about what will be collected in the consolidated database and how it will be protected. The c. A. T. Plan participants wrote to the s. E. C. To request to use krmplgts amplgts t. Customer i. D. Instead of receiving and storing Social Security numbers in the c. A. T. As to store only a year of birth and firm i. D. S instead of full dates and birth and individual account numbers. Chairman clayton, you have previously expressed concerns about the information to be collected and stored in c. A. T. And stated you believe the regulatory objectives of c. A. T. Can be achieved. I encourage you to quickly process the request to use alternative approaches. Finally, the s. E. C. Has made modernization a focus this year. I look forward to hearing about your strategic hub for innovation and financial technology. And how the s. E. C. Has been engaging with initial coin offings and other cryptocurrency related matters. I look forward to receiving updates on these and other s. E. C. Initiatives including your views on when we can expect final rules in these areas. Senator brown. Thank you, mr. Chairman. Welcome, chairman clayton. Nice to see you again. Over the past few years in this committee weve seen the Trump Administration dismantle, we get a frontrow view of this, many of the protections that congress put in place after the last financial crisis, putting our Financial System and hard working families around the economy at risk. The s. E. C. Has flown under the radar but often the agenda has been the same, taking wall streets side over and over instead of standing with investors, saving for retirement or college or a downpayment. Taken together the s. E. C. s latest actions are making it harder to hold Corporate Executives accountable to investors and hard working americans. While i appreciate the Enforcement Divisions initiatives including those to protect teachers and military Service Members from fraud and misconduct and financial advice, youve done so much damage by adopting what you call regulation best interest under that rule Brokerage Firms can merely disclose but dont have to eliminate firm level conflicts. It should be simple. Investment firms need to work for the people whom they serve. Americans need to have confidence that the professionals that theyre trusting with their hardearned money are working for them not scamming them to line the firms own pockets. You could have simply followed congresss guidance in dodd frank to create a few dishary standard for brokers and advisers which would be the best way to give investors confidence that their interest comes first, but you didnt do that. Thats not the only part of dodd frank youre working to undermine. Look at the s. E. C. s proposal to amend the Whistleblower Program, one of the most Successful Programs created under dodd frank. We need brave workers to stand up to corruption and abuse when they see in their workplace Financial Companies scamming people or engaging in other illegal activity. The only way individual workers were ever able to stand up to powerful wall street firms is if we give them protection. Weve already seen a Chilling Effect from your proposal. Each year since inception of the program the number of tips has increased in some years by more by more than 10 . But after your rule proposal in 2018 introduced a cap on whistleblower awards, the number of tips declined for the first time in 2019. The proposed cap on awards raised so many alarm bells that you had to put out a statement to clarify. I know whistleblower is a dirty word nowadays to some in this town. It always is to serial law breakers. I dont see how you can make significant changes to a Successful Program like this without and understanding that the decline in tips is a result of your actions in the environment this administration has created in its talk about whistleblowers attacking rather than protecting those who speak out against abuse of power. As the s. E. C. Continues to take fewer actions and hold the largest Financial Systems accountable, we must encourage whistleblowers to identify misconduct wherever it exists and to help uncover complex frauds. The s. E. C. s reebt proposed rules on proxy advisers and shareholder proposals are often clear examples of the administration taking the side of corporate interests over americans struggling to save and invest for their future. More proposals make it difficult for shareholders to hold Corporate Executives accountable. The proxy advisers can make it harder for Institutional Investors to have timely from the firms they hire. The proposed rule would give corporations access to Investors Research before the public Retirement SystemsInvestment Fund managers and foundations who manage americans money. The s. E. C. Says the changes are necessary because of errors and inaccuracies. But youve provided scant evidence of those errors. It would give them a new tool and threaten their end pence. The overhaul of the shareholder proposal rule would make it easier for Corporate Management to silence shareholders. The amendments would stop proposals could stop proposals for votes on issues such as a disclosure of corporate political spending separating the roles of board, chair and ceo and nondiscrimination policies. Im disappointed in the directions youve taken on these rules that have for decades, for decades through president s of both parties and s. E. C. Chairs of both parties allowed investors to hold management accountable all while executives are further entrenching themselves and ignores workers and shareholders. Protecting workers hard earned savings should begin with a simple concept, putting their rights first. I hope the s. E. C. Will remember that. But over the last week over the last week, we have just last week and this week weve had nearly all the financial regulators come before this committee. Weve had the fed, the fdic, the ncua, today the s. E. C. All defending the same policies that amount to a wish list for wall street and corporate interests all afflicted with the collective amnesia about what happened in the last decade or so. The president promised to look after ordinary, hardworking people, but he and the people hes put in charge of these agencies betray these workers over and over and over again. Mr. Chair, id like to offer for the record this letter from the ohio Public Employee retirement system. Without objection. Thank you, mr. Chair. Thank you. Chairman clayton, you may make your presentation. Thank you, chairman crapo, Ranking Member brown. I want to start by thanking you for your support for the commissions mission and its people. The dedicated men and women of the commission are our most important asset. With the resources congress provided last year, weve been able to lift our hiring freeze and fill around 140 new positions with highquality individuals who i believe will serve investors well. Since becoming chairman, the interest of our longterm main Street Investors have been front of my mind. With that perspective, a perspective our staff has long held, i would like to highlight just a few aspects of our work over the past year. First, modernization has been a key avenue for advancing all three aspects of our mission. In june, the Commission Adopted a package of rules and interpretations designed to enhance the quality and transparency of the relationship our main Street Investors have with their brokerdealer or investment adviser. These measures bring legal duties and mandated disclosures in line with what a reasonable investor would expect while preserving access in both choice and cost to a variety of investment Serve Services and products. Im so grateful to our experienced and dedicated staff for bringing long overdue regulatory rationality and clarity to this important area. Were also working to respond to the substantial changes that have taken place in our markets. Including that more capital is raised in our private markets than our Public Markets and Many Companies are staying private until they are very large or not going public at all. Weve expanded key aspects of the jobs act to increase the attractiveness of our Public Markets for companies while maintaining or enhancing inve investor protections. Increasing the attractiveness of our public Capital Markets is just one side of the coin. Were also exploring whether through Fund Structures or other measures we can increase the type and quality of opportunities main Street Investors have in our private markets. I believe we should strive to ensure individual retirement portfolio can look like a wellmanaged pension fund with robust investor protection. In is a challenge but we are making progress. In many other areas, modern sdmrags efforts are making a difference for our investors and our markets. These efforts not only include rule makings but the monitoring of market function and market risk. Turning to our inspections and enforcement efforts, i want to highlight our teachers and military Service Members initiative where we have focused additional enforcement and education resources. My message here is simple. If youre ripping off teachers, Service Members or veterans, we want to catch you, punish you and get them their money back. Returning funds to harmed investors continues to be a priority and this year we returned over 1. 2 billion to harmed investors. Ive previously testified about some of the legal impediments we face in obtaining funds from bad actors in situations where fraud is well concealed, such as a ponzi scheme. I very much appreciate the bipartisan work in congress to address these challenges and welcome the opportunity to continue working with you to ensure that defrauded investors can get their money back. Finally, i note we have substantially increased our efforts to engage directly with investors, entrepreneurs and an array of market participants. In particular we have allocated resources to our Retail Investors and entrepreneurs that live between the coasts. Thank you for the opportunity to testify today and i look forward to your question. Thank you very much. Chairman clayton, as i highlighted in my opening remarks, the s. E. C. Has taken a number of critical steps to modernize the guide anz and rules surrounding proxy advice, the proxy process and shareholder proposals. This committee has held multiple hearings and the s. E. C. Has conducted roundtables on these issues. These rules have not been reviewed by the commission in decades and i commend the s. E. C. For taking these thoughtful actions on the staffs expertise. Based on the staffs expertise to address changes in the markets that have occurred. In your public remarks, you mentioned you expect the commission will address proximating and universal proxy. When can we expect to see actions to modernize this proxy process . Chairman crapo, weve taken if its on the nearterm agenda, we intend to get it done within the year. Those items are on the agenda. Staff is working on them. And i would hope we would be able to move them forward in the coming year. Well, thank you. Again, i appreciate the attention you have given it and encourage your strong focus on it to bring it to completion. Moving to a different issue. Facebook announced a plan to introduce a new cryptocurrency called libra. While s. E. C. Is one of the jurisdictions over libra, can you explain how other regulators are working to be responsive and innovative to marketplace trends such as cryptocurrency . Sure. I appreciate the question and the question highlights what happened with that announcement. Im not going to speak about the particular product. Its not appropriate for me to do so. But the announcement was a focal point for regulators of different types to recognize the digitization and digitization of the plumbing and other financial aspects, including payment transfers. It is coming. The ill just say the natural economic forces that it unleashes, taking fat out of the system, for lack much a better term. Its happening. Now, we have to recognize thats happening. Recognize our mission, safety and soundness, investor protection, fair markets and ensure that as that digitization takes place, were being true to those principles. But we should not be fighting that digitization. Because, you know, if we fight it, it will go around us. Well, thank you. That mirrors my feelings on it. I assume when you say its coming sorry, senator. Its here. Its here. I see. Its here. Yeah, it is here. And as i have said many times, again, leighing aside the specific proposal of libra, the issue is one which the United States and its allies and friends in the World Community need to lead on and to set the rules of the road on rather than to let it come and develop on its own through other jurisdictions who are not as friendly to the United States and, frankly, through other currencies than the u. S. Dollar. So i encourage you and the other regulators to focus on this carefully. One of the first decisions the United States has to make is who, among our regulators, are those who regulate and how will we regulate, as well as the specifics of how we set the rules of the road. I encourage you to pay very close and careful attention to this. Finally the s. E. C. Concept released seeking Public Comment on ways to harmonize the private securities option exemption is a positive step and includes many key reforms. What are the next steps and timeline for the s. E. C. 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 its a binary definition based on wealth. Ill say it simply. There are a number of people who have the sophisticated able to assess investments who may not meet those wealth thresholds and we should do a better job identifying them. That said, the private market has risks that are significant compared to cognizant of that. Thank you. Senator brown. Mr. Clayton, for a number of years wells Fargo Management has recommended voting against, asking the company to separate the role of chairman and ceo, a. The amendments you proposed to eliminate simple