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The SEC believes that its role in protecting investors helps explain why public markets are relatively larger in the United States than abroad. (Photo by SAUL LOEB/AFP via Getty Images)
AFP via Getty Images
The US Securities and Exchange Commission published its strategic plan for the next four years, and it wants your input.
News such as cryptocurrency and data markets are provoking debate about the role of the SEC. Should it use long-standing rules and control these new things, or will it stifle innovation? The draft strategy suggests that the SEC wants to stay on top of financial developments. Some in Congress or industry may disagree.
To better protect investors, the agency says it is implementing technologies such as machine learning for market monitoring. It also expands the disclosures companies must make about climate risk, cyber security and company employees.
The agency regulates a crown jewel of America’s economy: our securities markets. The US has only 4% of the world’s population, but its capital markets account for 40% of the world’s total. Most of the debt of American companies is taken up in public markets, while companies abroad take most of their loans from banks. The SEC believes that its work to protect investors and ensure orderly trading has contributed to the great success of US securities markets.
“The U.S. capital markets continue to support U.S. competitiveness on the world stage because of the strong investor protections the SEC provides,” the agency’s draft plan for fiscal years 2022 through 2026 said.
The regulator will not sit still. “We cannot take our leadership in the capital markets for granted,” said SEC Chairman Gary Gensler, with the draft’s release. “Technology and business models are always changing, and it’s important for our agency to evolve in kind.”
The plan recites the agency’s three missions: to protect investors; maintain fair and orderly markets; and facilitate capital formation. The strategic plan then lays out how the SEC aims to do those jobs better — after input from government auditors, Congress, investors, businesses and academics. The agency also wants input from ordinary investors, and encourages them to react to the plan on an agency website.
The agency experiences working more with foreign regulators. “The operations of major securities firms extend far beyond U.S. borders,” it said, “and new entrants into U.S. markets seek to avoid or evade U.S. securities laws.”
Changing markets pose a challenge, the plan notes. The rules governing markets must keep pace with high-speed, 24-hour global trading. Companies are inventing new financial instruments and cryptocurrencies. New business forms are emerging, creating funds and markets outside previous regulatory frameworks.
To improve resilience, the agency is moving its computer systems to the cloud. And to prepare for volatility caused by pandemics, or new assets like crypto, the SEC says it may ask Congress to expand the agency’s authority.
Finally, the agency says it needs to be well staffed. It strives to expand its diversity and enhance its expertise in products beyond equities – including crypto, derivatives and fixed income.
Write to Bill Alpert at [email protected]
