SEC Commissioner Kara M. Stein delivered remarks to the American Bar Association Business Law Section’s Federal Regulation of Securities Committee Fall Meeting on how regulators should proceed to ensure efficient regulation in capital markets.
Commissioner Stein stated that the SEC should begin by completing statutorily mandated rules such as the Volcker Rule. Stein conceded that finalizing this rule has not been an easy task since five federal agencies are charged with implementing the rule. Additionally, Stein noted, “The rule we are evaluating now is not the rule that I would have written,” although, she added, she hopes that it will be reformed and finalized by next year’s meeting. Stein also mentioned that the JOBS Act rules, Crowdfunding rules, and Reg A+ should be prioritized and finalized.
Stein went on to list other areas of regulation that should be addressed on a qualitative and quantitative level, such as market microstructure and technical glitches, the role of the proprietary data feeds, and the role of “dark pools.” Stein noted that a good first step in assessing these areas is the SEC’s MIDAS initiative, which collects relevant market data. Stein also mentioned that the SEC is working on completing the Consolidated Audit Trail (“CAT”) to increase the amount of data which the SEC can use to address problem areas.
Commissioner Stein also addressed the question of “how to deal with the mismatch between short-term funding sources and long-term liabilities.” Stein stated that, despite a lot of attention, money market funds are only one part of the funding ecosystem, and regulators must ensure that businesses have capital when they need it by examining the incentives that drive the selection of funding sources, such as preferential tax, accounting and bankruptcy treatment.
She went on to mention the work of the Public Company Accounting Oversight Board (“PCAOB”) and its approach to improving audit quality through increased auditor transparency. Additionally, Stein stated, while she is a proponent of personal accountability, the question of whether audit partners should be named in reports where their opinion appears must be addressed.