SEC Acting Chair Piwowar Emphasizes Disclosure in Regulation of Capital Markets

Before an audience of foreign regulators at the SEC’s 27th Annual International Institute for Securities Market Growth and Development, SEC Acting Chair Michael Piwowar addressed best practices for the regulation of capital formation. He emphasized the importance of disclosure for lowering the cost of capital and for protecting investors, and asserted that a guiding principle for regulators must be to determine whether the government is facilitating or interfering with the progress of capital markets.

Acting Chair Piwowar focused on the value of the disclosure regime. He said that prudential regulation in capital markets is a “misplaced idea,” and added that “while banks are in the business of minimizing risk, the capital markets are in the business of allocating risk.” He argued that disclosure is the most effective tool for allocating capital to the most efficient industries, and suggested that a disclosure regime for banks (which he called “market-based prudential regulation”) could also benefit investors.

In addition, he stressed that a regulatory agency should not “substitute its judgment for that of the market.”

Acting Chair Piwowar also touched on the subjects of enforcement, international cooperation, and emerging issues in FinTech.

Lofchie Comment: During his interim tenure, Acting Chair Piwowar is making significant efforts to return the SEC to its historical mission of enabling investors to make investment decisions on the basis of good corporate disclosure regarding facts of economic significance. These are necessary corrections to the course of an agency that had been used since the adoption of Dodd-Frank as an instrumentality of political partisanship without regard to the economic costs or the benefits of its rulemakings.

 

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