SEC Commissioner Hester Peirce asserted that commissioners should not substitute their judgment for decisions made by investors, particularly with regard to (i) the decision to invest in a company that requires its shareholders to arbitrate any shareholder claims against the company (rather than go to litigation) and (ii) investments in bitcoin or other digital assets.
In remarks at the University of Michigan Law School, Ms. Peirce stated that (i) the SEC is no better than an investor at evaluating the investor’s best interest. She pointed to the SEC’s decision not to approve the public offering of the Winklevoss Bitcoin Trust. Ms. Peirce said that regulators should have allowed investors to decide whether a new investment is worthwhile.
Likewise, she said that the SEC should reject calls for it to become a “more activist regulator” and should not attempt to stretch SEC authority to limit mandatory arbitration between a public company and its shareholders. In this regard, Ms. Peirce questioned whether prior actions of the SEC, in discouraging corporations that were going public from requiring shareholders to arbitrate disputes, were actually within the scope of the SEC’s authority. Ms. Peirce observed that the SEC is required by the Federal Arbitration Act to “respect private contracts that favor arbitration.”
Lofchie Comment: Commissioner Peirce has become the voice of “liberalism” (in the very, very old-fashioned sense of the word): belief in limited government, government respecting the rights and abilities of individuals to make decisions, and government agencies not stretching the bounds of their authority to accomplish what officials decide is “good policy.” Note Commissioner Peirce’s views (and wit) in Motherhood and Humble Pie: Remarks before the Cato Institute’s FinTech Unbound Conference (summarized here). At a time when so many call for the government to expand its authority over private persons, Commissioner Peirce’s defense of the individual (including the individual’s right to screw up) is welcome.