SEC Commissioner Luis Aguilar asserted that “fundamental” challenges face the SEC. He stated that these challenges “cut across several important regulatory responsibilities, and demonstrate the need for the Commission to evolve and adapt to changing times.” The Commissioner delivered his remarks before a Georgia Law Review Symposium titled “Financial Regulation: Reflections and Projections” held at the University of Georgia.
According to Commissioner Aguilar, the two major challenges facing the SEC are: (i) the use of its data and technology, and (ii) the increasingly interconnected nature of the global economy. Regarding the first challenge, he explained that while the SEC has made efforts to evolve into a more informed regulator through various data gathering and technology driven initiatives, the agency is still “struggling to keep up” with market and technological developments.
Commissioner Aguilar noted some recent efforts to address this issue, such as the Consolidated Audit Trail as well as a data tagging requirement. He stated, however, that the SEC must push forward with its efforts to embed interactive data into more of its regulatory filing requirements. He asserted that Congress should provide the SEC with the proper funding to utilize “cutting-edge technologies” and hire staff to analyze data, assess risk, conduct examinations, and detect and investigate fraud.
Regarding the globalization of securities regulation, Commissioner Aguilar stated that to protect American investors the SEC will have to “increase its efforts to communicate, coordinate, and cooperate with its international counterparts.” An important aspect of globalization is addressing cross-border fraud, and he stated that recent statistics “underscore the growing need for mutual cooperation in cross-border enforcement.” As companies increasingly have non-U.S. operations, the SEC must consider: (i) what it can do to prevent, detect, and mitigate the domestic impact of fraud originating from a foreign jurisdiction, and (ii) what it can do to foster global efforts to combat fraud and enhance market integrity.
Lofchie Comment: Much of the Commissioner’s speech focuses on the SEC’s need for more/better/quicker data. In this regard, his speech could have been delivered by numerous other securities regulators, banking regulators or the CEA. Whether the regulators actually need all of this information is an issue rarely analyzed. Regulated entities are becoming overwhelmed by increasingly demanding information requirements from an increasing number of regulators. Accordingly, it would be an improvement for the regulators to collectively analyze and aggregate their information needs, and consider how these can be fulfilled on a reasonable and coordinated schedule.
As part of any such information request, regulators should consider what use they get out of the information they now collect, and whether their process for determining what information is useful actually works. Many of the current information requests provide no discernible benefit (see Form PF). A process providing ongoing consideration of the value of the information collected would spur productive discussion as to just what information might be useful and for what purposes.