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Good morning. My name is Grace O'Hanlon. I'm a program attorney with the Practicing Law Institute. It's my pleasure to welcome you to the SEC Speaks in 2026. We are honored to be able to once again offer this annual program in cooperation with the Securities and Exchange Commission. PLI is a nonprofit learning organization dedicated to keeping attorneys and other professionals at the forefront of knowledge and expertise. Last year, we presented over 500 programs to over 300,000 attendees on a wide variety of legal topics, including approximately 100,000 individuals who attended pro bono programs through our scholarship program and our pro bono membership program for public interest organizations across the country.
None of this would be possible without the assistance of our faculty who contribute to and participate on our programs without compensation or reimbursement. I would like to take a moment now to thank them for their time and efforts. And I would like to give a special thank you to the staff members who assisted in coordination on behalf of their divisions and offices: Tom Carr, Karen Shimp, Tracy Hardin, Jeff Berger, Roxanne Roman, Matthew Jones, Jill Henderson, Melissa Astra, Adam Wendell, Julie Davis, Shayna Wilson, Michaela Dern, John Kavanaugh, Ann Marie Ettinger, Adam Anisich, Elizabeth Niscola, Anna Abramson, Jessica Ansart, Sonia Trico, Morgan Taylor, Thomas Starr, and Shirley Sa. Their assistance in coordinating this program has been invaluable, so we thank them.
Before we begin, a few administrative details. Those of you joining us via the webcast or watching the program on demand later may notice that our media player has been redesigned with updates to improve your learning experience. You can always access help and FAQs by clicking the support option on the right-hand side of the player, and we welcome your feedback. We would ask that those folks in the room please take a moment right now to check that your phones are turned off or placed in silent mode. Also, if you'd like to have a conversation with other attendees, please make sure to go outside of the room. Conversations conducted in the room are heard in the conference and are disruptive to your fellow attendees. For those attending in person and seeking CLE, please be sure to swipe in and out each day. All certificates will be emailed to you within one month of the program date, generally sooner. If you have any questions, please see a PLI representative.
Now, it's my pleasure to introduce you to the chair of today's program, the Honorable Laura S. Unger. Laura is a former 78th Commissioner of the US Securities and Exchange Commission, where she also served as acting chair during her four-year tenure at the SEC. She played a pivotal role focusing on the influence of technology within capital markets and authored the influential 1999 report, "Keeping Pace with Cyberspace." Following her government service, Laura has built an accomplished career as a public company board director. She has served as an independent director and committee chair for organizations including eToro Group, BermudaRe, MBNA, Merrill Lynch IQ Funds, Ambac Financial Group, CA Technologies, CIT Group, Navient Corporation, and various Nomura Group companies, leading key committees such as nominating and governance, risk, and audit. She has also worked extensively with Children's Hospital over the last two decades, including as board member and nominating governance chair. Her most recent awards include the Sandra Day O'Connor Board Excellence Award and Directorship 100. She is a member of the Economic Club of New York. It's my pleasure to turn the program over to Laura at this time.
So, good morning everyone. After several years of not being at SEC Speaks, this is a great opportunity to spend the next couple of days with you. So, I look forward to that, and thank you for your introduction, Grace. So, I have a couple of things I have to say. One is to the members of the press: if you have any questions regarding anything said by SEC staff, please reach out to the Office of Public Affairs, and they will address your questions and/or get you whatever information you need. The second is a disclaimer, which I haven't given for a number of years, but I'm going to give one now: none of the comments here are anything other than the opinion or ideas of our own or the people making them, and not any of the other commissioners or staff. I think I mangled that. I guess it has been a while, but in any event, you get the idea. The disclaimer holds.
So over the next couple of days, we will have a number of panels from the SEC divisions and offices to talk about various rulemakings, cases, and trends, and hopefully get some incredible insight from the commission, the staff, and the commentators. We'll hear from Chairman Paul Atkins first, Commissioners Hester Peirce and Mark Uyeda, and then as I said, the division heads. So it is my distinct honor to introduce the chair of the SEC, Paul Atkins, who is the first speaker.
Paul is a friend and a colleague, despite the fact that I was walking out the door when he was coming in in 2002. So, he was sworn in as the 34th chairman of the SEC on April 21st of last year after being nominated by President Donald Trump and confirmed by the Senate. Before he came back to the SEC, most of you probably know Paul from Patomak Global Partners, which is a firm he founded in 2009 and grew to be a rather large and global firm of experts. In the past and continuing today, he has led efforts to develop best practices for the digital assets sector. He was an independent director and non-executive chairman of the board of BATS Global Markets. And from 2012 to 2015, Chairman Atkins—wait, no, sorry, he was on the board. I need practice. 2012 to 2015. And he was a commissioner, as I was saying before when I walked out, from 2002 to 2008. Sorry about that.
And then in 2009 to 2010, he was appointed as a congressional member of the TARP panel, the Troubled Asset Relief Program. And before that, he was a consultant on securities and investment management matters. And before that, he served on the staff of two chairmen, Richard Breeden and Arthur Levitt. So as you can see, Paul has had his hands in many issues over the years and has served in many different roles at the SEC. We are so happy to have him as the chairman, and he has already done an incredible job in less than one year. He will now come up to the podium to talk about his agenda, what he's done, what he's going to do. Let's welcome Chairman Atkins.
Well, thank you very much, Laura, for that very nice introduction, and it's great to see you all again. I have to pinch myself. It's hard to believe that almost a year ago—not quite—I was here at the same podium talking to SEC Speaks. I'm closing in on my anniversary on 21 April. Still lots to do. I really thank Laura for taking on this task of spearheading this year's program alongside our hosts at the Practicing Law Institute. I should also like to acknowledge our many participants for being here today, including those who are tuning in virtually. And of course, I must not neglect to thank my fellow speakers from across the commission for contributing their time and expertise in order to discuss these issues with you all. The strength of the SEC as an institution has always rested on the dedication of its public servants, and this annual opportunity for SEC staff to speak publicly about their work is an occasion for all of us to recognize the rigor and high purpose that animates it.
Finally, before I share a few reflections, let me go ahead and give the normal disclaimer, and this pertains to everybody who will follow me up here on the podium from the SEC: that the views I and the rest of us express here today are our own, and in my case as chairman, do not necessarily reflect those of the SEC as an institution or of the other commissioners. Now, despite some fits and starts in recent years, SEC Speaks has long occupied a unique place on the commission's calendar. Over my three tours at the SEC, first working for two chairmen and then as commissioner, I noticed that this audience tends to hang on a speaker's every word. But I would do well to remember the counsel of Bill Casey, who at the very first SEC Speaks program some 54 years ago encouraged future chairmen to realize that the crowd is here to pay tribute not to you, nor to your colleagues, and this is a quote, "nor to the SEC in general, but," as he put it, "to the SEC in particular." And so it is today.
Over the course of this program, commission staff will explain in considerable detail the direction of our policy initiatives across every division and several offices. My aim this morning is a bit different. In lieu of previewing each of those efforts individually, I'd like to step back and offer a framework of how they all fit together as a cohesive whole, so that as you hear from our speakers, you understand not only the substance of the SEC's priorities, but also the shared principles behind them. Now, with a robust pipeline of rulemaking set for the year ahead, I think it's instructive first to contextualize them in the years that they follow—a period in which our regulatory framework too often struggled to keep up with the market that it oversees.
As just one example of the gulf between regulation and reality, our rules still default to paper delivery for shareholder communications. In an age of algorithmic trading and artificial intelligence, I believe that requirement ought to be a relic and not a standard. In fact, not long after the first SEC Speaks in the '70s, the late SEC Commissioner Roberta Karmel observed that, and I quote her here, "data-analyzing technology has progressed to a point of magnitude superior to that available just a few brief years ago." Commissioner Karmel added around the advent of the word processor, mind you, that, quote again, "Although these developments have augmented the complexity and efficiency of the private financial sector, the SEC has not enjoyed all the benefits of this improved technology." Her words were at once a warning and an enduring appeal for financial regulators to do a better job at keeping pace. We are resolved to answer that call by refusing to remain tethered to the tools or temperament of a bygone era.
Second, and on that note, a refusal to update the SEC's rules paired with a misguided regulation-by-enforcement campaign has killed many would-be products or driven them offshore. When innovators cannot discern fit-for-purpose rules, or when they face the prospect of a subpoena as the response to good-faith efforts to comply, the rational response is to build elsewhere. And they did. An entire generation of digital asset innovation developed outside the United States. Not because American entrepreneurs lacked the ambition or American investors lacked the appetite, but because American regulators lacked the will. Third, decades of accretive rulemaking have compounded into a compliance labyrinth so elaborate that it sustains entire industries whose sole function is to help public companies navigate the SEC's complex regulatory framework. When the cost of accessing America's capital markets includes retaining specialists to decode the SEC's regulatory regime to produce disclosure that only an academic would appreciate, then something is very clearly and deeply amiss. Our goal should be to increase the cost of fraud and manipulation, not the cost of compliance itself.
So against that backdrop, every initiative towards which the SEC is working, every rule that we propose, every interpretation that we release, and every institutional reform that we undertake largely falls into one of three categories: those that advance our rules to align with how markets operate today; those that clarify our regulatory regime to streamline oversight and unlock innovation; and those that transform our requirements by eliminating both the burdensome and the impractical. Together, these three pillars of Advance (A), Clarify (C), and Transform (T) form one integrated policy agenda that I'm calling our ACT strategy.
Let me begin with the first: Advance. To advance our regulatory posture is to bring it into honest alignment with the world as it is rather than as it was when many of our rules were first written. It is to recognize that a rulebook crafted for one era does not automatically serve investors well in another, and that the costs of pretending otherwise are borne not by the agency, but by our markets and the investors who participate in them. Of course, advancing new regulatory frameworks does not mean deviating from the SEC's core mission. On the contrary, it means fulfilling it with tools that are equal to the task. Indeed, the application of our enduring principles must reflect how markets function today and how we anticipate that they will function in the future.
Perhaps nowhere has the cost of failing to do so been more apparent than in our treatment of crypto assets. For years, the SEC dealt with these markets not through the issuance of rules, but through the might of our enforcement apparatus. Instead of articulating workable pathways for compliance, our message to the marketplace often amounted to a directive to adapt to us or else. We bothered not to adapt innate forms and disclosure requirements to innovative products, but demanded that the innovators adapt their products to our antiquated approach or else face the consequences. The problem, of course, is that innovation rarely pauses for regulation. It will either occur within a regulatory framework or around it. And in the case of digital assets, the SEC's regulation-by-enforcement campaign precipitated the migration of an entire class towards offshore jurisdictions, only compounding the commission's subversion of American entrepreneurs. That posture completely failed in its effectiveness. Advancing new regulatory frameworks means choosing a different approach. It means crafting rules that are clear enough to guide markets, flexible enough to accommodate innovation, and firm enough to protect investors. It's long past time that we do so.
Of course, as we modernize legacy rules for the 21st century, we must recognize that markets also depend on clear and coherent regulatory scoping. This brings me to the second pillar of our ACT strategy, which is to Clarify. Having been around the SEC and the CFTC now for three decades, I've seen firsthand how jurisdictional ambiguity can stifle innovation just as surely as ill-devised regulation. Quite often, the relationship between these two agencies has resembled two fortresses facing each other across a regulatory no man's land, and in that space lay the wreckage of would-be financial products. Entrepreneurs approached new frontiers with ambition, only to retreat when the answer to a fairly basic question remained elusive: whose rules apply?
Dually registered firms have long been forced to navigate two agencies, two regulatory regimes, two or more examination cycles, two reporting pipelines, and often two supervisory structures, even where the underlying risks are substantially similar. Of course, for registered firms owned by banks, we have to recognize that other regulators also play a role. By acknowledging this crazy quilt of supervisory authorities, we should recognize that the principle that ought to guide us instead is straightforward: where one agency's framework achieves comparable regulatory outcomes, then the regulator should accept the overlapping requirements of the other. Closely collaborating regulators ought to be cognizant of these issues and work them out collaboratively.
In short, our goal is to draw clear and abiding regulatory guidelines—lines that give innovators the confidence to build without fear of being caught in a crossfire of their government's own making, and therefore lay a foundation for super-app trading networks. As one example, earlier this month, the SEC and the CFTC entered into a memorandum of understanding under which both agencies will usher in a new level of harmonization by aligning regulatory definitions, coordinating oversight, and facilitating seamless, secure data sharing between agencies. We will ensure that our rules and regulations deliver the clarity that market participants deserve. Among the first outputs of this new era of harmonization focused on clarifying rules and regulatory jurisdiction is the token taxonomy and crypto interpretive guidance that the SEC recently published and the CFTC, I'm happy to say, joined with us. And as I said earlier this week, while the interpretation provides long-needed clarity, I should like to assure this audience that it amounts to a beginning and not to an end.
Finally, the third pillar of my program for this year and next is to Transform our rulebook by trimming immaterial requirements that burden the market without a corresponding benefit to investors. Many SEC disclosure requirements that began as a framework to inform have steadily become instruments to obscure, to insulate, and to sustain a highly specialized cottage industry of advisors and consultants. Along the way, we've drifted from the immutable objective standard of materiality as enunciated by no less than the Supreme Court back in 1976, which is what a reasonable investor would consider important in deciding whether to buy, sell, or hold a security. Unfortunately, this standard seems to have devolved in the past few years into the notion of a subjective standard of what any particular investor may be curious to know.
One can also see this drift manifest as a dragnet in places like Rule 17a-4, particularly in the so-called off-channel communications matters, through which the commission allowed the extension of regulatory requirements for broker-dealers to a point that strains any common-sense understanding of the vague "business as such" standard. Similarly, the commission has permitted the same result in a crazy quilt of similar but differing standards for document retention with respect to other registered entities. We very clearly need a spring cleaning to enable reasonable investors to separate the wheat from the chaff when reviewing offering documents, periodic reports, and proxy statements. The attic, the basement, and the garage have all accumulated their share of clutter, and they make it difficult to find the load-bearing beams. Accordingly, our Division of Corporation Finance is actively engaged in a first-principles review of our disclosure requirements with materiality as its North Star.
Corporate disclosure is scarcely the only area where the commission's focus has drifted from Congress's intent. The Division of Enforcement is also undergoing a course correction by prioritizing cases that provide meaningful investor protection and strengthen market integrity, rather than technical rule violations in situations where investors have not been harmed. To those ends, we have directed the division staff to investigate the types of misconduct that inflict the greatest harm—such as fraud, market manipulation, and abuses of trust—and away from approaches that measure success by volume over real investor protection.
Lastly, following a court's remand of two rulemakings related to securities lending and short sales, we have an opportunity to holistically re-evaluate these rules. I've directed the staff to make recommendations regarding a reporting regime that balances the policy goals with the burdens of reporting. This ruling also serves as a useful reminder that cost-benefit analyses are essential in ensuring that our policies are sound and able to withstand the test of time.
You all have been very patient and attentive. Let me close perhaps where I began, with a reflection—in fact, a request—from Chairman Bill Casey in his remarks at that inaugural SEC Speaks program. As Chairman Casey concluded that day, and I quote him here, "In these and in other endeavors, the commission needs your ideas. Do not be passive or receptacles for the views of us who will be addressing you. Urge us. Make us do some hard thinking. It will be good for us, good for you, and good for the commission, and good for the law." The strategy that I have described today—advancing, clarifying, and transforming our rulebook and regulatory frameworks—is not work that this agency can accomplish alone, nor is it work that we should seek to accomplish alone. Success depends on the ideas that you all offer and the scrutiny that you all apply.
Indeed, as aficionados of the SEC—and I'll refrain from saying groupies—you all have a role in helping us to oversee our initiatives and holding us accountable for them. Few understand this institution as well as you do, from its history to its habits. You can see our warts, our successes, more clearly than most. That perspective is indispensable to us. So, I hope that you will take Chairman Casey's counsel to heart and challenge us, push us, make us think more critically about the rules that we write and the decisions that we make. America's investors, innovators, and entrepreneurs are counting on us to get this right. I look forward to working with you all to ensure that we do. Again, thank you for your time, and please enjoy the remainder of the conference today and tomorrow. Thanks.
Thank you, Chairman Atkins. I think what's really interesting about what you just said is that the body of the federal securities laws remains intact and very relevant, and we just kind of need to revisit how it's applied, especially given the increasing complexity of today's markets, and you're just the person to do that. So good luck. Our first panel is led by Jim Moloney, who is the director of the Division of Corporation Finance. Jim became the director in October of 2025. He began his career, I believe, at the SEC for six years and then joined Gibson, Dunn & Crutcher, where he worked for 25 years, ascending from corporate associate to equity partner. While there, he served as a longstanding co-chair of the firm's securities regulation and corporate governance practice.
Joining as commentators of this increasingly growing panel is Kathy Casey. Kathy is currently an advisor with Patomak Global Partners. She had more than two decades of experience in senior government regulatory, legal, and policy roles. She finished her term as SEC commissioner in 2011, and during that time, during her tenure, she was the principal representative in various international fora. She was the international commissioner, really. And before that, she worked in the US Senate. In fact, Kathy and I became sort of the charge that led from the US Senate Banking Committee to the SEC as commissioners, which you'll see over the next few days—there have been several people on that same path. She currently serves as non-executive director of HSBC and as a member of the Board of Trustees of Penn State and chairman of the board of Penn State Health. She's also a member of various advisory and other boards, including the Public Company Accounting Oversight Board Advisory Council.
The other commenting commissioner is Elad Roisman, who's a partner at Cravath, Swaine & Moore in the corporate department and a former commissioner and acting chair. While at the SEC, Elad led a process to improve the proxy voting process, which thank you very much—that is a very intense and heart-wrenching task which he did a very good job of. He played an instrumental role in modernizing the regulation of the US equity markets as well as the treasury markets. He joined the SEC after serving as chief counsel for the Senate Banking Committee, and before that he served as counsel to Commissioner Dan Gallagher. He was chief counsel of NYSE Euronext and a corporate lawyer in private practice. So my other required comment is that you consider the comment of these panelists, and I say this every time so that you will get CLE credit for listening to the comments and everything else. So I welcome the Corp Fin panel. Thank you very much.
Thank you, Commissioner Unger. It's great to be back. My name is Jim Moloney, Corp Fin division director. I think many of you know me, or maybe you read something about me in the press. I've been back with the division for about five, six months now, and it's been going very well. We have a lot of rulemakings underway. But before we start, I just want to give the disclaimer for everybody so we don't have to have everybody give a disclaimer. As I give my disclaimers, I say it's just Jim. Just what I think. It's not what the commission thinks or any particular commissioner, any staff member, any division. It's just Jim. And when you meet all my fellow colleagues up here, that stands for them, too. It is just Christina Thomas, Duc Dang, Sebastian Gomez, Luna Bloom, the rest of the folks out there, Ted Yu. We keep going: Commissioner Casey, and all the way out in the back, Elad Roisman. All my good friends—I speak for them when I say they are speaking for themselves.
Where are we today? As you heard from the chairman, ACT: Advance, Clarify, and Transform. We're going to do a little drinking game here. It's early in the morning, so whenever anyone says advance, clarify, and transform, you are to take a sip from your coffee. This will energize you. This will get you focused on what we're all talking about here today. This is important stuff because we're about to embark upon a number of rulemakings which will advance—I don't see people drinking—advance the commission's mission to modernize the rules and clarify them. Still not seeing people. Okay, a few over here are drinking; they're catching on to this game. And what we will be doing is we will be transforming. Any of you who read the commission's interpretive release yesterday, you no doubt picked up on the theme of transforming, that things can transform: they can be a token, they can be a security, and they can transform into something that's not a security.
So these are exciting times. I'm not sure how many of you know that today is the day in 1792 for the first Wall Street crash. That's right. We've had many crashes in the past; that was the first. I think the 6% Treasury bonds dropped by 10% issued by the Bank of the United States. Some trivia for you. Well, we can't stop the market from fluctuating, but what we can do is we can advance the rules—things that were written in 1933 and 1934, which were handed to us by Congress. It's our job, not just as the commission, but also as the division and the other divisions, to transform and to clarify how those rules written close to 100 years ago apply to the technologies today. So, I'm going to shut up now because I am going to sit down and let this brilliant team of specialists who are working with me in the Division of Corporation Finance and our two former commissioners at the end weigh in with their thoughts about this exciting mission that you're about to see unfold in the next year or two. Thank you very much.
All right. Thank you, Jim. Good morning, everyone. I'm excited to be here today. I'm even more excited to be back at the SEC acting as your deputy during this transformative time at the SEC. I think anyone in the audience who advises public companies is well aware of the division's efforts to clarify the rules that we have on the books. In the last year, you've seen a lot of publication of new and amended CD&Is, no-action letters, and other guidance. As the chairman has said, it's a new day at the SEC, and I hope you've noticed that the door is very much open. We've really been happy to have a lot of meetings and discussions about what we can do to help provide clarity to the market.
We're working hard also to advance not only a large number of rules, but a large number of what Jim refers to as blockbusters, and I'm really excited for those to start coming out in the near future. My colleagues are going to cover many of the rulemaking efforts underway, but I wanted to highlight two that are particularly near and dear to me: Rule 14a-8 and Regulation S-K. On Rule 14a-8, we are taking a close look at the SEC's involvement in this space, including whether it's appropriate, whether we ever even had the authority to create this regulatory regime over shareholder voting, which is typically the jurisdiction of the states.
On modernizing Regulation S-K, another major area of focus right now, we have an open comment file in case anyone wasn't aware of that. It closes next month. We've been really encouraging members of the public to write in with data and concrete suggestions for revisions to Regulation S-K. And I wanted to take a moment to note that internally, work is well underway. We have a team of lawyers and accountants in Corp Fin led by Robert Errett, Jennifer Lopez-Molina, and Seth Min who have been doing an incredible job taking a close look at the rules on the books, making recommendations, and digging into the history of the requirements. Michael Arnold just joined the SEC from private practice, and he's going to take a leading role in transforming Regulation S-K, and we're in the process of hiring additional people to work on these efforts as well. So please stay tuned. It's really exciting. Again, these are just two examples of the blockbuster rules that we're working on. So I'm going to turn it over now to my colleagues to give you more of a sense of what we've been acting on and what you can expect from the division in the coming months and years.
Hi everyone, thank you. I feel like I should have actually sat at the end since I will not be talking about any rulemaking or cool policy initiatives. But since I'm here, I'll go ahead and start. What I wanted to do was actually just give three updates on the disclosure review program. One is going to be an update on our transactional review program, the second is our annual review program, and the third is something related to our comment letter dissemination. First, I think most people are aware that there was a long—not the second short mini government shutdown, but there was a long government shutdown in October that then bled into about half of November. As I was sitting there, you can imagine, it's a pens-down situation where basically staff couldn't review anything that was already in process prior to the shutdown. Me, Sebastian, and a handful of folks every day were looking at spreadsheets showing the inflow of filings coming in every day that we could not review. That list grew over time, got to a point where it was over a thousand filings.
And of course, when we reopened, filings just keep coming in. While we wanted to continue focusing on the important mission of investor protection, we didn't lose sight of capital formation. When we reopened, there was a very concerted effort to try to limit the impact of the shutdown on capital formation. Just to give you a data point: when we first reopened, there were a lot of instances where what we call the time to first comment—that's when the first comment letter goes out or the first round of review is done on an initial registration—we were in the 70-day ranges for that. I'm delighted to say that at this point now, we're at an average of around 30, which means there's a decent number of reviews where we are actually completing the first round even under 30 days.
That really is just a testament to the hard work and dedication of the staff because it takes a lot of additional effort to be able to deal with a backlog that significant. To give you a sense of the lift that the staff had to undertake, focus on the initial registration statements because those are critical to capital formation. If I look at the date when the government reopened on November 13th up till today, the staff has processed the initial round of comments on over 600 filings. If you look at that same period last year—so the same number of days—the staff actually, based on a normal flow, processed just a bit over 300 filings. In terms of the transactional initial registration statements, the staff was able to process more than double the amount with, you take into account, the number of staff reductions we've had and departures. I'm always impressed when I look at as we were just whittling down that time to first comment. I'm just proud to see the efforts that the staff put in to get to the point now where we can actually share that good news. But I would remind you that if you have specifics to your transaction, please still feel free to reach out to the staff, and we'll consider any type of timing considerations that are unique where we can help to smooth out the process.
As you can imagine, one was actually working probably on some level more hours than normal to get to that point, but another was actually providing flexibility to the staff because the transactional review program is a selective review program. So where we were able to make adjustments, we did. The second thing is we also have an annual review program. That's where we always comply with our SOX mandate, and it's in Section 408 of SOX. When we reopened, we had to make a decision to basically halt the annual review program to focus on the transactional filings, but I'm happy to say we have now kickstarted and restarted the annual review program. It actually works out because we're sort of in that 10-K cycle now—most companies have filed their 10-Ks—and so the staff is actually in full swing performing annual report reviews, and I have zero concern that we will comply with our SOX mandate. The number of reviews will probably be less than prior years, but in terms of complying with our SOX mandate, there's no risk there that I'm aware of.
The third update I wanted to give is related to the comment letter dissemination process. I know it's sort of a cottage industry out there for people to aggregate all of our comment letters and provide insights on the type of comments we provide. Due to several factors, including staff departures and the shutdown, I am sad to share that we're probably five months or so behind on disseminating our comment letters. So I would caution folks from actually going out there and, whether you're using Intelligize or whatever, trying to track trends and then come up with a takeaway or have some type of commentary about, "Oh, the volume of comments are down." A function of that is going to be because there is a delay in the dissemination of the comment letters. But we are actively working to address this, and we're looking at several solutions, including transforming the process. To this day, it's still a pretty manual process. So we're looking for ways to automate it to be able to speed it up and get it back to what people are used to, recognizing that transparency on our part is important as well.
One tip for folks: one of the things that sort of slows down the comment letter dissemination process is that we make an effort to not disseminate PII because people will submit correspondence that includes PII, and we work to prevent that from happening. If on the front end you could be more mindful when you're submitting correspondence and just double-check that there is no PII. Some examples are sometimes people will include exhibits with their correspondence or other ancillary supplemental documents, and we've seen instances where bank account numbers are included, addresses are included, tax ID numbers. If you could just sort of clean that on the front end, it actually would help us on the back end as well.
Before we move on, I just want to say: Duc and Sebastian, and I guess we had Cicely LaMothe at the time and Michael Seaman who's not here, during that 43-day government shutdown that was outside our control, you guys did an amazing job at triaging the filings that were coming in and getting us dug out from that backlog. Having been in private practice for 26 years, with everybody out there in this audience mostly sending in registration statements, filings, correspondence, and requests, just from somebody coming from the outside in and seeing how five or six people continued the division running for a month and a half, it was amazing. Thank you, guys.
Thanks, Jim. Appreciate that. I'll now pass it on to Sebastian.
Thank you, Duc. Good morning, everyone. Let me tell you that the best part of being up here is looking at the audience and seeing so many familiar faces: current SEC staffers, former SEC staffers. Really appreciate all the support. We're very thankful for the staff at the SEC and everything they do, so thank you to them. But we're also very supportive of those alumni of the SEC who continue to support the work we do every day in your careers. So big thank you.
I wanted to expand today a little bit on what the chairman talked about and give you a little more about how we are advancing clarity with respect to crypto assets, and give you just a description of what we did in the interpretive release that the commission just put out this week. It's only 68 pages, but we did cover a lot of ground in those 68 pages. I like to think of it as three different buckets. Let me just go through the three different buckets and give you my take of what the commission did to continue to provide clarity with respect to the federal securities laws and their application to crypto assets.
The first category is that the commission in the interpretation provided a crypto taxonomy. We are the SEC, so in plain English, what does that mean? That means that the SEC went ahead and created different buckets of categories of crypto assets, and then went on to provide an interpretive analysis of whether those buckets of crypto assets constitute securities or are not securities. The interpretation is grounded on a very familiar case: Howey from 1946. As we think about it, what is novel here is the fact that crypto asset is something where the commission had not provided a clear interpretation as to how that case applies to these categories.
So what are the categories? First of all, digital commodities. Digital commodities are what most people think about crypto assets today: Bitcoin, Ethereum, XRP, Solana. These are what people mostly think are crypto assets, and the commission determines that they're not securities. Second, digital collectibles. Digital collectibles are what most people think as meme coins, digital representations of art, the tokens that you will use as part of a video game, things that people will collect. Again, the commission applied the Howey test to those and determined that they're not securities. Third, the commission looked at digital tools. Digital tools are probably the one that most of us are least familiar with, and these are types of crypto assets that perform a function. For example, there will be a token that will represent your ability to access a concert or your ability to show that you have a membership in a certain group. Again, the commission applied Howey to digital tools and determined that they are not securities. Finally, the commission applied the Howey test to stablecoins. But in this case, it was much easier because as part of the GENIUS Act, Congress determined that stablecoins as defined in the GENIUS Act are not securities. So the commission noted that in its interpretation.
With respect to digital commodities, digital collectibles, digital tools—all these categories of digital assets that are not securities—the key outcome, the key takeaway of this is as you apply the Howey test and you look at the prong of: is the investor expecting profits as a result of the essential managerial efforts of others? Does that apply to these situations? What the commission concluded is in all of these situations, the value that investors get is not as a result of the essential managerial efforts of the innovators of these assets. Therefore, they're not securities. So that leaves us with the fifth category: digital securities. And this is the one that most of you will care about. This is the one that is squarely within the framework of the federal securities laws. What constitutes a digital security is any of the items that otherwise fall within the definition of security. Think a share of common stock that has been represented on the blockchain—in other words, has been tokenized. With respect to those, the fact that something has been tokenized does not make it not a security. Because the underlying instrument is a security, the digital securities will be securities.
The second bucket of what the commission covered in this interpretation is the fact that even though some assets may not be securities, they may be part of an investment contract. What the commission did is went through an analysis of when is it that a crypto asset that is not a security becomes part of an investment contract, and even more importantly, when is it that such assets that became part of an investment contract cease to be part of an investment contract. The first part of that test we're all very familiar with. Over time, the Supreme Court, other courts, and the SEC have interpreted when is it that something becomes an investment contract. The commission noted in this interpretation that when an innovator is developing a project in which the underlying asset itself is not a security, they may make representations or promises in order to induce investors to invest capital in that project. Those representations are the ones that become the essential managerial efforts of those innovators. Therefore, the purchaser is expecting profits because of those essential managerial efforts that are represented by those promises made to them. At that point, even though the underlying crypto asset is not itself a security, it has become part and the subject of an investment contract that is created because of those promises and representations. This is how the orange grove became part of an investment contract.
Now the next part, the one that I find more interesting, is when is it that that investment contract ceases to exist? Often we stopped our analysis at the fact that an investment contract was created and federal securities laws apply, and for most situations, we don't care anymore about it; that just ends the question. But with respect to crypto assets, what matters here is that as that project develops, it gets to a point in which there is no longer an expectation of profit because of those essential managerial efforts. The reality is those promises and representations that the innovators gave that were inducing others to invest—those promises and representations are fulfilled, and therefore those investors who are looking at that project are no longer relying on those efforts in order to expect profits. The reality is they have moved on and the expectation is that the project now is living on itself.
Let me take that back to the orange grove. Say, for example, hypothetically that at some point an investor that initially was living in New York and had no ability to actually tend to the orange trees, pick the oranges, and turn them into orange juice decided that New York was too cold and wanted to move down to Florida. At that point they said, "Mr. Howey, I actually don't want anymore for you to do the work for me. I don't want to be part of the service contract. I am going to take that back and I'm going to become self-sufficient." At that point, you're no longer relying on the efforts that Mr. Howey was doing, and therefore you are now actively working within that orange grove. At that point, none of us would expect that that investment contract exists today.
So, this is not that novel. What's novel here is that the Commission is actually providing clarity in this space and allowing us to have a better set of framework as to how we think about how innovators progress from having an investment contract and then how that investment contract ceases to be part of it.
Finally, the third bucket: the interpretation provides clarity on a number of transactions that are related to crypto assets—airdrops, protocol mining, protocol staking, and wrapping. Some of this the staff had already provided guidance on as to whether they constitute the offer and sale of a security in the form of staff guidance. The Commission adopted some of that guidance and made it its own. With respect to some of the other ones, it's new topics. I know that there's less of a focus on this part of the interpretation, but it's key in order for the crypto infrastructure, the crypto market, to continue to function and to provide the clarity in this space.
As the Chairman mentioned, the key here is that we also did this jointly with the CFTC. The CFTC joined in the interpretation to provide guidance that they will interpret their laws in accordance with the interpretation that the Commission provided here. So, it shows the two agencies working together in this space.
There's a lot of resources about this. We put out not only the interpretation, but a fact sheet. I know that this is the time of the year when many of you get called to go to school to your kids and tell them about what you do at work. For us lawyers, that is very hard because it's really hard to explain to someone in elementary school what we do. If you are in that situation, I encourage you to take a look at Jim's statement with respect to this interpretation. It's the Little Golden Books story of Howey and how the investment contract was formed and how the investment contract ceased to exist. I'm not going to suggest that you actually read it to your kids at night, although that might be very helpful. But if you're thinking of ideas as to how you can turn this into that successful presentation for career day at your kid's elementary school, it's a great way to start there.
You know, I just want to thank Sebastian. He is the guy who runs the railroads on the rulemakings, and you probably saw the Reg Flex Agenda has like 22 rulemakings. So, in his free time, he becomes a crypto specialist along with Andy Sheffller. But I think you can see—you guys are the experts in the room—you can see why this is such an exciting moment in time. This is earth-shattering, and I know it's hard to wrap your head around. But I also want to get commentary from our Commissioners, Casey and Roisman, at the end as we go along. I don't want them to run out of time down there. So if they have thoughts on the things that we're talking about, I invite them to chime in.
So thanks so much. Actually, Sebastian, I just want to follow up. You highlighted the most recent interpretive release and the work with the CFTC on this, and obviously the Chairman highlighted in his remarks the landmark release. Just curious on a more operational level: can you talk about what that means for the Division going forward in terms of working really closely with the CFTC?
Sure. I think sometimes we enter into MOUs, and you're waiting to see what is it that that means in practice. I think you couldn't see a better example of what that means in practice when we follow the MOU shortly after by putting pen to paper on an interpretive release showing that we're working together. But I think it's bigger than that in the crypto space. The Chairman mentioned the importance of the clarity that only Congress can provide on a permanent basis in this space, and how important it is—the efforts that Congress is doing with respect to advancing the CLARITY Act.
Once Congress completes the CLARITY Act, it's going to be very important for the two agencies to work closely together. And as the Chairman mentioned in remarks earlier this week, him and Chairman Selig at the CFTC are very much looking forward to show how this MOU in practice is going to work as we continue to further clarity in the space. Did you see I used the word "clarity" one more time there?
So thank you for the question to give me that chance. The last thing I'll say about the MOU is it's much broader than just crypto assets. Take a look at it. But this shows how across the SEC, all different agencies are going to be working on a number of work streams with the CFTC. I think it's the best we can do in Washington. We have two sister agencies, and I think it's great that we're going to be able to collaborate together.
Yeah. So, I've been drinking. I think it's incredible. You said it's 68 pages, but it is really sort of the landmark piece that the Commission has never done. And I know in Jim's statement, it's the final chapter in the book of Howey. I really did like the Golden Books story. I almost envisioned someone like an old Ford driving down the roads to these orange groves. Like all good books, people want more, right? So sometimes the characters appear in other books. Do you think that this is sort of the final thing, or do you think there's going to be more coming? And the last point is I hope people in Congress are listening because the SEC and CFTC are doing great, great work. So hopefully they'll be able to continue to do that even after clarity.
So Jim called his statement the last chapter in the book of Howey. Keep in mind that he said the last chapter in the book of Howey; he didn't say the last chapter in the book of crypto assets. And for those of you who are interested in what's coming next, if you go to the page where we put SEC statements, the Chairman gave a speech at the DC Blockchain earlier this week, and he forecasted what he would like to see in the space as next steps. Rather than taking his thunder, I encourage you to take a look at that. But he is describing how we can move forward, and the next step would be to actually provide additional clarity for those who are looking to raise capital and come up with exemptions that are bespoke to the needs of crypto assets in order to facilitate capital formation with respect to those. So take a look at that statement because I think the Chairman does a great job of showcasing what it is that he would like to see in the months to come. So a short answer is lots more coming.
So one other question, and again maybe for Sebastian or others: I did note the Chairman's speech and anticipation of potentially formal rulemaking coming. Just how do you all think about, whether it's guidance or formal rulemaking, as you're looking to provide greater clarity, particularly in the digital asset space? Just curious about making those judgments about where an interpretive release might make sense and where formal rulemaking might make sense, particularly with an eye to longer-term sustainability and confidence in the rulebooks going forward. Thanks.
Yeah, I'm happy to take that. As you all know, interpretations are not something that creates new rules. Interpretations is just the Commission providing its views on how the law applies in their views. Keep in mind that when we are interpreting case law, a court might decide to look at it and interpret it differently. We can't control the courts. We're hoping that the courts will look at this interpretation as they are thinking about cases in this space, but we can't bind the courts on this. Only rules can bind the courts. And even within the SEC, sometimes when we think about the '33 Act and the '34 Act and how those worked, they were not crafted with the idea of crypto assets back then. Only Congress can actually change statutes in order to provide certainty in this space.
So I think the congressional action here is extremely important to provide something that is very definitive. In the meantime, as the Chairman mentioned, it's key for us to provide the clarity that the market deserves within the parameters of the rules we have. So the interpretive release is doing that. Notice-and-comment rulemaking is where we actually will do new rulemaking. And again, within the exemptive authority, we have the ability to create new exemptions, all within the parameters of what's given to us by Congress. So to the extent that we move forward and the CLARITY Act is still being worked on, I hope that we can go ahead and provide additional clarity in the form of new potential rulemaking in that space. But at the end of the day, if we want this to be permanent, I think that's when Congress comes in.
Yeah. And I would just add, if you saw my first statement, it talked about movies and each rulemaking as sort of a separate movie, and there will be sequels. So the interpretive release is sort of the tip to foreshadow what's to come, laying the groundwork, if you will, for the CLARITY Act when that comes. But the Commission is not sitting on its hands waiting for that to happen. We are moving with full speed on all cylinders. So, I'm very excited to be back and have all my team here working on these different rulemakings. There's a lot more to come.
Well, I think I'll take that excellent segue. Thanks, Jim. But we're going to take a hard pivot away from crypto assets. Before I dig into the meat of my comments today—which you may have guessed are largely going to focus on our rulemaking pipeline, in particular what I'll call our more bread-and-butter rulemakings—I do want to jump in on... I'm sure folks have seen the recent interp bandwagon. I just want to give a shout-out to Jeb Burn and his team, the Office of Small Business Policy, for their tremendous effort updating a number of our interpretations in several areas, including Reg A, Reg Crowdfunding, Form D, Rule 701. Jeb will be talking about some of those interps more this afternoon, so I hope folks will stay tuned for that.
So, on to rulemaking. I know that everyone is very interested in having a better sense of the timing of things, and I know you all know I can't tell you very much. I'll also just acknowledge that our Reg Flex Agenda has been coming out with about a half-a-year delay. So, right on time, I would expect that our fall '25 agenda will be published in the very near future. But I do think at this point folks have largely digested the last Reg Flex. So I'm just going to go into a few of those blockbusters that we keep talking about.
The first ones I'll talk about, I'm very excited about. These are really transformative rulemakings focusing on the sort of '33 and '34 Act framework. The first one I'll mention is the enhancement of Emerging Growth Company accommodations and simplification of filer status for reporting companies. For those that were in tune for this panel last year, one of the things I talked about was just how complicated the current filer status regime has become between the accelerated filer statuses plus smaller reporting companies, emerging growth companies, never mind FPI and asset-backed securities issuers. These all have different thresholds and tests for whether you are in one status or another, and as a result, it can be sometimes very hard to know where the accommodation lines are or if those lines even make sense anymore. So we are looking to rationalize that system and leverage the success of the EGC accommodations as we think about how to encourage companies to go public and stay public, especially when we're thinking about that small to mid-cap area.
So on the '33 Act side, we have shelf registration modernization, as it's called in our Reg Flex, but as we're really calling it now, registered offering reform. Consistent with filer status, this rulemaking's goal is to encourage more companies, especially small and mid-cap companies, to go public and stay public. Really, what this effort is doing is considering ways to build on the success of the shelf registration system that the Commission introduced 20 years ago in securities offering reform, which was a very innovative and transformative paradigm at the time it was adopted. So building on those successes, I think you'll see some very interesting things on the '33 Act side, in addition to the filer status rulemaking on the '34 Act side.
From here we can then move to disclosures, right? We have our '33 and '34 Act frameworks, and now we have to think about what are companies actually having to disclose and is there room to rationalize that. On our Reg Flex Agenda, I know folks have seen the Rationalization of Disclosure Practices item, which is admittedly very broad, and that's on purpose. I won't repeat some of what Christina Z already mentioned about efforts underway on a real rigorous re-review of Reg S-K, but I will just mention the other topic that this Reg Flex item is meant to encompass, and that's executive compensation disclosures. Folks know we had a roundtable last summer that was a really exciting event. We got amazing input there, and there was a corresponding comment file. We received over 60 comment letters with really great insights into executive compensation practices, how that disclosure regime is working or doesn't work. We're taking into consideration all of those comments as we move forward.
I'll talk about a couple of major themes in how we've heard from the comment file that disclosure is useful to investors. The executive compensation disclosure regime, we understand from commenters, allows an assessment of the compensation committee's effectiveness, provides a basis for say-on-pay decisions, enhances company decision-making on compensation in light of access to peer info, can show the economic cost of named executive officers to the company, can help identify retention risk, and can help investors assess the alignment of pay, whether that's realized or realizable, and performance. I think these are some of the major benefits that we are hearing from the comment file and want to ensure that a future disclosure regime will continue to address.
Commenters who are critical of the current regime, by contrast, noted that the remuneration structures and related disclosure requirements have become increasingly complex, and it can often be difficult for the disclosure to fully illustrate the connection between pay and performance, at least the way that the comp committee and the board really think about it. There can be a lack of comparability. The disclosure can be difficult to digest and does not reflect the actual nuances of an issuer's business. The compensation practices may inadvertently create misimpressions that can be counterproductive to effective disclosure.
So again, this is just giving you objectively what we heard from the comment file as some of the concerns around the current disclosure regime and whether the prescriptiveness of it really aligns with how companies think about compensation today. Of course, the staff is working away, taking on this excellent feedback from the comment file and developing recommendations for proposed rules that the Commission can consider. So, stay tuned for that.
I'll circle back on one thing that is not on our last Reg Flex Agenda, which again is about a year old now technically, and that's semi-annual reporting. I think everyone is well aware that this is clearly in the pipeline based on comments from the President, the Chairman, and our Director. As the Chairman has said, quarterly reporting has not always been required. His goal is to have the Commission take its thumb off of the scale on whether quarterly reporting should be mandatory for all public companies, or whether instead the market can dictate the best reporting frequency based on investors' needs and the particulars of a company's business.
I'll turn now to this last Reg Flex item that I want to note, which is updating the exempt offerings pathways. With this initial lineup that I've talked about, I think it's clear that we're making it a priority to consider regulatory changes that will hopefully reduce costs while still protecting investors in an effort to make our public markets more attractive so that there are more public companies. But we recognize this is really only one half of the picture. Every public company starts its life as a private company, and so part of our goal has to be ensuring that capital formation is reasonably available at every lifecycle stage while still considering the protection of investors. By making sure that companies have access to capital before they go public, we're helping to ensure that there is a robust pipeline of enterprises that are growing ripe for the public markets. Accordingly, we're taking a close look at the exempt offering framework with these objectives in mind.
Before I turn to my final topic, which is really more rulemaking-adjacent, I just want to take a moment to give a shout-out to the Corp Fin rulemaking teams that are just grinding away at getting proposals ready for the Commission's consideration. We're obviously really excited about the agenda and for things to be out for comment so the public can kick the tires on all of these new ideas and approaches that we hope the Commission will approve. It really is an exciting time.
Our rulemaking teams, of course, include all of the staff in the Office of Rulemaking under the exceptional leadership of Valian Afshar as the chief of that office. But in addition, subject matter experts and staff from across the Division are jumping in to help with this tremendous agenda. This includes staff from the Office of Chief Counsel, Office of Mergers and Acquisitions, Office of Structured Finance, Office of International Corporate Finance, Office of Small Business Policy, our Chief Accountant's Office, and with help and expertise from staff in the Disclosure Review Program, including the Crypto Assets Office and the Disclosure Management Office. So it is a tremendous effort.
In addition, when we have to take so many folks on to help with such a big agenda, it takes away other resources, and folks have to pick up the slack. That's, of course, on top of a backlog and a shutdown and everything else. So, I can't really thank the staff enough for all the support for these efforts. The folks on the rulemaking teams are just doing a tremendous job, and we're so grateful and proud of the work they're putting in.
Needless to say, that's a lot of rulemaking, okay? A lot. Many of you know and remember Betsy Murphy. I could not think of a better person to pick up the torch and run the Office of Rulemaking than Luna, a fellow New Yorker who you can tell with her energy and zest and fast talking. She is a fellow New Yorker and she will get it done with her team. Thank you, Luna.
Thanks so much. And of course, I can't help talking with my hands, too.
That's the Italian in you.
If I can just not hit the microphone, it's a success.
With that, I'll turn to my final topic today, which again is sort of rulemaking-adjacent: this is the accredited investor definition. As I'm sure folks are aware, there's been different pieces of proposed legislation that have touched on the accredited investor definition. Some of them, like the INVEST Act, which passed the House with bipartisan support in December, and the Empowering Main Street in America Act, would require a new accredited investor examination to be created by either the Commission or a self-regulatory organization. Our Chairman has also talked about the possibility of an accredited investor examination and made the point that individuals with significant investment experience and knowledge shouldn't be excluded from the private markets in favor of individuals who have inherited wealth. So such examinations would certainly modernize the accredited investor definition and recognize that financial sophistication cannot be measured by income or net worth alone.
In an effort to increase investor access to private markets while ensuring adequate investor protections, the Chairman has directed staff in the Division of Corporation Finance to begin conversations with FINRA about the possibility of creating an examination, and those discussions are underway. If FINRA determines to move forward with creating an exam, or if Congress mandates it, there will be an opportunity for subject matter experts to be involved in developing the substance of that exam. There will be more on that in due course. We're still in early days in these discussions, but folks are welcome to reach out to the Office of Small Business Policy in the meantime, and we'll be happy to facilitate the connection with FINRA when the time is right.
I do just want to also shout out our colleagues in FINRA, who have just been tremendously helpful and eager to engage in this process. We're really excited about the possibility. I don't want to get in front of the Commission—obviously, all of those efforts are going to take some time, and ultimately the Commission would have to recognize that exam as an appropriate means of establishing accredited investor status. So this is a journey that we will go on together, but we're really excited that it's kicked off.
Well, just before I move on to my topic, I just want to see if the commentators have any thoughts on—
It's all great stuff. I don't want to interrupt. Just waiting to hear what's next.
Okay. Well, thank you. So I'll sort of bring the end of this panel to a conclusion here with some updates on some rulemakings on the Holding Foreign Insiders Accountable Act. I had to practice that a couple of times, which came as a bit of a surprise, sort of an unexpected Christmas gift from Congress to the SEC. It was enacted on December 18th and it had a short deadline of March 18th. So, a very short sort of rulemaking time. The staff immediately acted quickly because when Congress gives us a mandate, we have to comply with it and we have to meet the deadlines.
The first thing we embarked on was a rulemaking: pretty straightforward, but not much time to work on it, to be honest. We got it done two and a half weeks before the deadline. It's a fairly short release, but it has some pretty good footnotes. So for those who are really into Section 16, read the footnotes; that's really where the good stuff is. There will be a couple of things I'll highlight. One, the Commission made it very clear that this mandate for foreign private issuers to file Section 16 reports does not apply to 10% holders, unlike for domestic issuers. There was some bit of commentary about whether that was the true intent to exclude 10% holders, and the Commission thankfully took the effort to clarify very clearly that it does not apply. The second thing that we did get some questions on, and just since we're all securities law groupies here, I want to make it clear: the Commission did not include an Item 405 delinquent filer requirement in 20-F. So for those who are advising their clients and 20-F season is coming up, please keep that in mind.
The next step really was the exemptive order process. Congress gave the Commission the power to exempt officers and directors of foreign private issuers incorporated in jurisdictions that have substantially similar requirements as Section 16(a). The Commission did use that authority about a week after the rulemaking came out and exempted FPIs in jurisdictions such as the EU, Norway, Canada, the UK, Switzerland, Chile, and South Korea. Our estimate is that that exempts about 22% of the reporting FPIs and the officers and directors of those FPIs. I think it's pretty clear why those jurisdictions were considered, because their laws very much mirror Section 16, in some ways almost identically. We have been getting questions as to whether or not that's the final exemptive order, and I will make it clear that we do have pending requests currently. The Commission will obviously make the final decision, but the staff is working with folks to sort of get that process done.
Smooth implementation also requires answers to technical questions for those who are advising their company FPIs, and so we issued two rounds of FAQs which helped answer some of the fairly technical questions, which I will spare you right now. Michael Coco will cover those in the workshop. But one thing I will make clear is, for those who are worried that EDGAR access wouldn't be available by March 18th, the FAQ does provide no-action relief up until April 1st. So for those who are still sort of trying to get those filings into the system, you have a bit of time.
And then the last thing that we did was issue a no-action letter for Israel and other foreign jurisdictions that are directly affected by the current conflict. We heard some concerns, understandably, about the ability to build a compliance system under fairly difficult conditions. So there is a 30-day period for those who are in these jurisdictions to get their Form 3s on file by April 20th.
Yesterday was day one of this transformed landscape for foreign private issuers, and I'm happy to report things worked out fairly well from our perspective. We received about 4,100 Form 3s yesterday, and just by comparison, our EDGAR office has informed us typically we get about 30 to 80 per day. So I'm glad that many are filing, but I'm also glad that the system and the process that we set up worked out well. I have not heard of any massive problems getting those filings into the system, and so it's good news from our perspective. Smooth implementation is so important for those who are trying to get their clients in full compliance.
I will say that this was an agency-wide effort and it was really wonderful. It was a collaborative effort. I want to take this moment to thank not only our Corp Fin colleagues, but our colleagues in the Office of International Affairs, our economists in DERA, our General Counsel's colleagues, as well as our Agribusiness office folks. It was a team effort. It's really rare that we can work so well in such tight timeframes and get everything done without major problems. So that's our effort on that.
I'm going to move on to guidance. Our Office of Mergers and Acquisitions has been very active in providing guidance. Guidance in this space is always fun, and since Jim is here, it provides us with an opportunity to push out a lot of guidance that we wanted to, since he was very supportive in this space. So we saw Jim arrive and we said, "Let's get those things out." We put out a fair amount of guidance. Perry Hindin will go into the more technical ones later in the afternoon session, but I do want to highlight a couple of things that I think really are remarkable.
One of which is the ExxonMobil voting platform no-action letter that we issued in September. That one for me was a really fun one, because the question of how to get retail investors to vote in a system that is frankly a little bit obsolete and difficult to get into is something that the Commission and staff have thought about for years and years. Lo and behold, a company wanted to take the first step in establishing a retail voting platform with standing voting instructions. We worked with that company and we made sure that it had all the investor protection guardrails that we want. It's completely opt-in; no one's forced to do it. And even if you participate, you get all your regulatory disclosure documents. Nothing's changed. And so we were happy to see it launch. We were happy to hear from the company that participation rates among retail investors was very high. We were very happy to hear that other companies were looking to create such platforms. Our Office of Mergers and Acquisitions is very open to engagement in that space. Please do reach out if you have clients who want to build similar platforms. We think this is a good move toward empowering the true holders of a company, the retail investors, to make the decision. If there's any sort of guidance that we need to provide, please reach out. It's wonderful to see some movement in this space.
A couple other things I just want to highlight: Notice of Exempt Solicitation. We put out a C&DI this past January, essentially preventing folks to file these things voluntarily. These are typically filed in recent years by folks who own less than $5 million in securities. It actually is not something that they're supposed to be doing or required to do, but they have been using it sort of for a purpose that the Commission did not intend. We've been tracking this for years and years, and the rate at which these forms are being used by folks who aren't supposed to use it really got to a level we were not comfortable anymore. So we put out guidance in January indicating that we do object if folks who do not own $5 million in securities file these.
I think the word has gone out. Our Office of Mergers and Acquisitions has been closely following the filings on this front. Every one of them gets looked at by the office. We have reached out at least twice to filers who we wonder as to whether or not they actually own $5 million in securities. Generally speaking, I would say folks just didn't know. Folks who file these don't follow C&DIs and staff guidance as closely as people in this room, and they stop. We will exercise our ability to use Rule 15 of Regulation S-T to remove these filings if there are truly egregious situations. That's a power that the Commission has; it's been delegated down to the staff level, and we have processes established so that if you do have a situation where a notice is filed, please do reach out. We will consider it. Doesn't mean that we'll always use it, but certainly the tool is there. So please do reach out.
And the last thing I'll just end on—and I want to make sure the commenters have a chance to sort of weigh in on this—is we're working on the potential shortening of the 20-business-day tender offer rule. It's something that we've always wanted to do. And again, since Jim's here, we're going to really try to push it through. When Jim got here, we were all like, "Oh my goodness, Jim's here, so we can now do some of this stuff." M&A stuff doesn't always get the top billing at the Commission, but he's here. So we've engaged with many firms and investor groups and whatnot. We're looking to shorten that both in equity tender offers as well as debt tender offers. It's something that the staff has done for years. We did the last one in 2015 with an abbreviated debt tender offer letter. But if you go back to letters, the staff have been shortening these periods going back to the '80s. So I think it's just again time to build on the success.
Well, Ted, great work. You, Tiffany Posil, Jeb Burn, Michael Coco—I mean, you got a lot on your plate. I really appreciate it. I know we got some questions that came in, but we do want to cede it to the Commissioners because I know they're chomping at the bit to ask us something.
Well, again, thank you very much. I'll say all the rulemaking sounds amazing. I don't want to sort of gloss over what Christina said about sort of these blockbusters and especially what you said about 14a-8. I think that's exceptional, sort of going back to the roots of the grounding of it. And then Luna, amazing on all that, including super excited about accredited investor. I think that was sort of the contemplation in '20 when people should come and talk about what is a good way to think about being able to invest in these, and money is not a good proxy. And then Ted, I just want to say, even the way you talk about the proxy plumbing and frankly about the retail voting program and the point, which is like they're getting the same rights and opportunities they always had and it's a true evolution in this, I think it is a really exciting time for this.
I have a question I'd like to ask about the great work on S-K and S-X that you talked about. And then quickly on 14a-8 the season, I know the comment period for S-K is coming up in April. Some of the things that folks have been wondering is, is this supposed to be more of a nibble-on-the-edges sort of approach, or are you looking for more wholesale suggestions, even to the point of striking certain things?
Yeah, I'll just say everything's on the table right now. Like I said, we're taking a look even just internally now as we're waiting for comments to come in and looking at: are certain provisions statutorily required, right? It's really just back to basics. We're starting with what the rule on the books is, but I think it's definitely a review in terms of: is this disclosure necessary? Is it providing material information to investors? Is the burden of producing the information greater than the benefit of providing the information? So definitely, definitely not looking to nibble around the edges. I feel we'd be misleading, maybe even materially misleading, if we were calling the rule proposals blockbusters and that's all we were looking to do.
I want to let Commissioner Casey go.
No, you want to start with 14a-8?
Sure. It's been a very fascinating 14a-8 season, to say the least, I think. Have what are sort of anything that the staff has observed from this season that you may have not expected, or is this sort of how you envisioned it given 14a-8 and all that?
So I think this is an unusual season for 14a-8. The Division Director put out a statement in November. Due to circumstances beyond the Division's control, we had to focus on transactional filings, which meant not pulling together the task force of 14a-8 reviewers this season and just kind of let private ordering take its turn here. We did have the 14a-8(j) requirement, "14a-8 Jim letters" as we're calling them: you write in and you have to provide notice to the Commission that you're excluding and on what basis.
So I'll say we had about 180 of those notices submitted. I think we're probably at the tail end of that. They're not coming in like they were. Given timing of the usual annual meeting season for calendar year-end companies, we'd expect that those are pretty much dried up by now. I think it's too soon to really draw conclusions based on that number because we haven't seen all of the proposals that have been presented to shareholders at meetings; we don't know how many were withdrawn. But that's the latest stat that we have available. And I think that likely as we get through April and May, maybe not from us, but others will certainly be able to draw some conclusions based on meeting results and proposals that go up for a vote.
A couple of anecdotal observations in addition to that: I think there was a lot of surprise both from issuers and from proponents when that notice came out. Again, nobody really knew what to expect. I think the lawsuits were inevitable; that's always been a right of proponents and companies to get a binding determination on a 14a-8 interpretation. But we did hear from some that there was sort of increased engagement and maybe willingness to negotiate because the SEC wasn't refereeing this season.
I'll add that we have taken so many meetings—CII, Business Roundtable, Society for Corporate Governance. We've also listened to the proponents, we've listened to the activists, they've all come in. We've taken multiple meetings—ISS, Glass Lewis. So this is an open-door Division and Commission. We are listening. We're not just doing things without taking into account what folks have to say. So we're trying to make informed decisions based on real-time data.
Yeah, just so appreciate that very much. Maybe just kind of put a final point on it. You kind of highlighted already, Christina, is given the unique nature of '26, right, and how that impacted the ability of the Division to provide opinions in the '26 proxy season, how should issuers and shareholders be thinking about the role of the Division in the future?
I think that we're going to, at the end of this proxy season, look at the data. Michael Seaman leads this and he's keeping close track of it with his team—Matt McNair, Emma O'Hagan, Anna Abramson, Jenny Choi. They're still monitoring it when they give these letters out, and I think we're going to see what the data shows us. But if I were a betting person—and maybe this was a Polymarket or Kalshi type of thing—I would say that the stats are going to look pretty much similar to last year, the prior season. There was a lot of fear-mongering that everybody's going to include their proposal or no one's going to include the proposal. And so, despite all the pundits' prognostication, I think at the end of this season we're going to see numbers that are very similar to last year.
Well, I know they wanted us to keep it tight. 10:35 is the time, and we want to end it and thank my fellow panelists. And for those whose questions we didn't get to on the little iPad here, we'll be in the room and we'll be putting out C&DIs/Corp Fin updates. So stay tuned. Thank you everyone.
Okay, I'm going to go ahead and introduce the next speaker as this wonderful panel disembarks from the runway. I will say, if the accredited investor exam does become the rule of law, that we maybe have the possibility of a whole set of Golden Books for the people who will be taking those exams. So stay tuned.
And now I am very excited to introduce our next speaker and announce Hester Peirce. She is on year eight of being an SEC Commissioner. She was designated a little over a year ago to be the crypto task force head, and she has been traveling the states to include every voice possible as she assesses and recommends to the Commission actions on this crypto task force. Prior to coming to the SEC, she conducted research on regulation of the financial markets at the Mercatus Center at George Mason University. She also was a counsel to the Senate Banking Committee, and she was counsel to then-Commissioner Paul Atkins and was a staff attorney at the Division of Investment Management. Hester is a very accomplished and energetic Commissioner. I think she also maybe is a very long-tenured Commissioner, which is amazing, and that continuity has been great. She is known as the "Crypto Mom," probably no surprise to anybody in this room. And I would like to welcome her to the stage. Awesome.
Well, it was an honor to be introduced by Laura Unger. Thank you, Laura. I do not feel energetic this morning, so take that for what it's worth. But anyway, thank you all for being here. And I have to give you my disclaimer, which is that my views are my own views as a Commissioner, not necessarily those of the SEC or my fellow Commissioners. And you all can be happy, and I can be happy, that that is the last time I'm going to have to make this disclaimer at SEC Speaks.
Since we met at this event a year ago, the Commission has been very hard at work. I think you heard about some of that just now from Corp Fin. We've been taking actions large and small to fulfill our mission. Among other things, we've been focused on providing crypto clarity and facilitating capital formation—two areas that I think were in need of Commission attention. But today, I want to discuss a different topic, and that is the limits of our disclosure rulemaking authority.
Authority should be front of mind for regulatory agencies in Washington, particularly in light of Supreme Court cases like Loper Bright and Corner Post. The SEC, though, should pay particular attention to the topic of statutory authority because we have a graveyard of rules that has been vacated or remanded by courts, and that graveyard is filling up fast. Understanding and remaining within our statutory boundaries is an essential element of good regulatory work and part of our constitutional duty.
Before turning to the limits of our authority, however, I want to ask you to humor me by considering a question: If you had to describe the Mona Lisa to someone who'd never seen it, what would you say? "A half-length portrait of a woman"? Wouldn't you need to add that her smile is slight and her eyes seem to follow you wherever you go? But that description really isn't sufficient to convey what Mona Lisa is. What else do you need to say? You might want to reveal the artist's name: Leonardo da Vinci. Perhaps you'd explain that the subject's gaze is off-center and that she stands in a three-quarter profile with her right hand resting on top of her left. You may also need to note her resemblance to contemporary depictions of the Virgin Mary. What about the background? A debatably imaginary landscape that was anomalous for portraits at the time. And perhaps you'd mention the modest dimensions of the portrait, which seems to shock visitors to the Louvre when they look at it. You might also want to reveal that the subject of the painting is probably Lisa del Giocondo, a Florentine woman of the 15th and early 16th centuries.
I could keep going, but I think you get the point. Describing a work of art requires choosing among different things to convey to people. And knowing when you've adequately described something is difficult, and maybe the person you've described it to won't even think that you've described it adequately once you're done.
At the SEC, we don't deal with paintings; we deal with public companies. And we don't deal with brushstrokes, but with financial statements. Nevertheless, we encounter the same problem. We tell public companies to describe themselves. One could say a lot of things about a company to describe it. But what type of description accurately captures a public company's essence? More precisely, what should the Commission as a regulator mandate that companies disclose about themselves?
In assigning you the task of describing the Mona Lisa, I left out an important guidepost for you: I didn't tell you who your audience would be other than saying that it was someone who hadn't seen the painting before. So, you probably assumed that you're describing the painting to an average person with an ordinary interest in art. But your description might have changed if you were speaking instead to an art historian working on a book about cultural context or craquelure, which is a new word I learned; an archivist for whom special elements in need of preservation would have been most interesting; a reader of The Da Vinci Code who's looking more for what's hidden than what's revealed; or a climate protester who needs to figure out how to aim her pot of pumpkin soup. If you're going to succeed at the mission of describing the Mona Lisa, you need to know to whom you will be describing the painting.
Similarly, if public companies are making disclosures, they need to know who the intended audience is. And the SEC, as crafter of those disclosure mandates, also needs to know. Only then will the disclosures meet the audience's need. And Congress actually did a much better job than I did when I assigned to you the Mona Lisa exercise. Congress told us to whom securities disclosures should be aimed, and that is investors.
But not only did Congress identify investors as the intended audience for public company disclosures, but Congress also gave us examples of the type of disclosures this economic return-loving and risk-sensitive audience would need. I reiterate that Congress focused its statutory assignment to the SEC better than I did to you. For example, disclosure required by Securities Act Section 7(a) is enumerated in Schedule A, which contains 32 unique items that constitute the information a registration statement should contain. Schedule A focuses on providing investors with the essential facts of the counterparty, management of the issuer, and the price of securities being sold. Similarly, Section 12 of the Exchange Act requires disclosure by companies that, among other things, register securities on a national securities exchange. Those disclosure requirements cover topics such as the fundamental nature of the business, its financial condition, and its securities. Congress sometimes permitted the
Commission to add to the statutorily mandated disclosures, but the authority always had strict limits, and any disclosure under the securities laws should serve a fundamentally economic purpose. Andrew Vollmer explained that the statutes, quote, "limit the SEC's power to issue disclosure rules to specific types of information closely related to the disclosing company's values and prospects for financial success." The statute's emphasis on financial matters focuses the Commission's efforts in a way that is consistent with the needs of its investor audience. But what is an investor? The dictionary tells us that an investor is one that seeks to commit funds for long-term profit with a minimum of risk. An investor then, whether an institutional investor or a member of one of the nearly 60% of American households who invest in our markets, is someone who cares about economic returns and risk. The pursuit of risk-adjusted economic returns is the common thread running through an otherwise diversely motivated population. Knowing that investors, despite the many other things that matter to them, all share an interest in risk-adjusted economic returns guides our disclosure mandates.
The Commission's disclosure work should focus on, as Professor Sean Griffith puts it, investors qua investors. As Griffith explains, quote, "Understanding financial return as the core concern of investors clarifies the limits of the SEC's authority to regulate for the purpose of investor protection." The reasonable investor who shows up in the classic materiality cases from the Supreme Court has her eyes trained in an unwavering Mona Lisa-like stare on risk-based financial returns. Commissioner Roisman put it this way, quote: "While any given shareholder may have bought securities for reasons other than or in addition to making money, it seems clear that a reasonable investor is someone whose interest is in a financial return on an investment. While it's not unreasonable to consider non-economic factors when investing, a person is an investor because she does consider economic returns. She may be thinking about other things too, but the common element of investor status derives from her consideration of economic returns." Fulfilling our foremost policy objective of protecting investors requires us to ensure that investors have access to material financial information. Companies, of course, are free to disclose information to satisfy the non-economic interests of investors and non-investors, but the Commission is not free to mandate such disclosures unless, of course, Congress explicitly tells us to do so. Congress generally keeps the Commission focused on serving investors qua investors, and that limited mandate focuses our discretionary disclosure efforts solely on material information.
Just as some in-person Mona Lisa viewers are shocked by the diminutive size of the portrait, there's some folks who are shocked by the diminutive size of our statutory authority. Advocates of broad disclosure authority point to references in Section 7(a) of the Securities Act and Section 12(b) of the Exchange Act to "necessary or appropriate in the public interest or for the protection of investors." This broad language, they contend, reflects a congressional delegation of, quote, "the difficult task of keeping up with the rapid evolution of financial markets and of regulating those markets to a specialized agency," the Commission. Congress cannot delegate, of course, without bounds, and the Supreme Court has made clear that public interest has to be read in the context of our mission. Public interest and investor protection have specific meanings derived from the statutory context of the Securities Act and the Exchange Act. Divorced from their context and from the textually based purpose of the securities laws, those words would empower the SEC to be the only regulator in town. We could use disclosure mandates to shape corporate behavior in areas like employee and customer rights and environmental and social practices. Hence, no matter how broad the language, it never extends beyond our mandate. The Commission stated as much in 2016 when it said that, quote, "Disclosure relating to environmental and other matters of social concern should not be required of all registrants unless appropriate to further a specific congressional mandate or unless under the particular facts and circumstances such matters are material." In doing so, it echoed the Commission's 1975 view that the discretion vested in the Commission under the Securities Act and the Securities Exchange Act to require disclosure which is necessary or considered appropriate in the public interest does not generally permit the Commission to require disclosure for the sole purpose of promoting social goals unrelated to those underlying these acts.
Bernard Sharfman described the phrase "in the public interest" as, quote, "an empty shell of a policy objective, a non-ascertainable standard when standing alone that does not provide an agency with guidance on its mission or a reviewing court the boundaries of delegated authority that it can use in its review." The ascertainable standards with which the shell must be filled, argues Sharfman, are two policy objectives—investor protection and promoting efficiency, competition, and capital formation—and one what he describes as a soft policy constraint: materiality. Whether one thinks of them as policy objectives or directives, investor protection and promoting efficiency, competition, and capital formation may be in tension at times, but also can work in tandem. The second directive derives from NSMIA, which directed the Commission when making a public interest determination to consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation. Professor J.W. Verret makes the point that an immaterial disclosure requirement would have trouble, quote, "surviving the kind of cost-benefit analysis contemplated by NSMIA." NSMIA makes clear that costs matter, but mandatory cost consideration is baked into the Commission's investor protection objective or directive. Disclosure demanded by a subset of investors hits the pocketbooks of all investors in the company. Costs include not only the time of lawyers and accountants to prepare those disclosures, but also the time and attention of company personnel devoted to tracking, verifying, and reporting information, and then of course the potential litigation costs and competitive costs of making disclosures. Forced disclosures can substantively change how companies behave. They can also empower people who seek to harm a corporation. The Commission needs to be aware that demanders of disclosure may not be acting in the best interests of the reasonable investor. As Professor Griffith notes, quote, "Protecting investors qua investors means protecting them from the concerned citizens and from groups of investors, even majority groups with opposing interests." So even if information is material, mandating disclosure of it may not be consistent with our statutory obligations if the direct and indirect costs—which are borne by investors—of producing it outweigh the benefits to investors of consuming it. If we're taking our statutory obligations seriously, why would the SEC of its own volition mandate disclosure of information that is not material? By definition, immaterial information costs more to produce than it is worth to the investors for whom it's being produced. If information is not material to the reasonable investor, the resultant investor protection benefit is de minimis.
For materiality to be an effective check on impermissible disclosure mandates, we have to treat it with respect. What does that mean? First, materiality determinations require judgment by a company, its lawyers, and its auditors. Investors, regulators, and courts will continue to scrutinize those determinations and at times take issue with them. Regulators should not, however, substitute their judgment for companies making materiality judgments in good faith. We cannot short-circuit that company-specific judgment with one-size-fits-all prescriptions on all manner of topics. Second, materiality modifiers do not cure prescriptive rules. In fact, materiality qualifiers in rules are often definitionally discordant with our statutory understanding of materiality, as we saw in the climate rule. Third, we should guard against what Meredith Cross calls fuzzing up materiality. Materiality is used for reporting in other contexts, but it does not necessarily mean the same thing in those contexts as it does under our securities laws. That definitional slippage complicates materiality analyses under securities law. Fourth, straining or ignoring materiality could turn us from a disclosure regulator to a substantive regulator. Commissioner A.A. Sommer explained 50 years ago, when the Commission was under a lot of pressure from various directions to expand its disclosure mandates, and he said this: "The value of the concept of materiality derives from its very breadth, imprecision, and defiance of exact definition. It reflects the complexity of human affairs, the multitude of situations in which human beings find themselves involved, and the multiplicity of relationships that they create." But he also cautioned and said this: "It's extremely important to keep in perspective what the disclosure documents filed with the Commission and circulated to investors are supposed to be. If the enforcement of the disclosure laws becomes, in effect, a substitute for the enforcement of other substantive laws, then I would suggest that the Commission has been diverted from its true mission, which is to provide information to investors about matters that are likely to impact the future prospects of the corporation, as well as historical information."
A deeper commitment to disclosure rules that enable reasonable investors to obtain the material information they need in pursuit of economic returns will help us stay within the lane that Congress set for us. Limits to authority may seem unwelcome for a regulator, but I actually find them quite useful. They help us to shepherd our resources well. The most valuable of those resources is, of course, our brilliant and talented staff. If the Commission directs the staff to work on things outside of the SEC's authority, the staff have less time to work on the important mission that Congress entrusted to us. Moreover, a successful legal challenge would eliminate the fruits of any of that work. Empowering our staff to write and enforce sensible rules within our authority is the best way to steward their time and to protect investors. So now let me end where I started with a disclaimer. And that disclaimer is that while I certainly did not address all the arguments in this debate, I hope that you, the reasonable audience, are satisfied that I hit a few of the material points. Thank you and enjoy the rest of your day.
We are on a break until 11:15 when we'll resume with Commissioner Uyeda's remarks.
Good morning. At this time, we would kindly ask that you please take your seats and silence all devices as our program is about to begin. Thank you.
Okay, welcome back. Hopefully everybody refueled or refilled their coffee cups so that they can keep cadence with the act count. And I have been told there's another beverage later in the day that will be counted towards the act mentions. So look forward to that and stay tuned. Right now I have the distinct pleasure of introducing a friend and colleague, Mark Uyeda. Mark was sworn in as a commissioner in June of 2022. He looks so young. He was acting chairman of the agency from January through April of 2025. Prior to that, Mark has been all over the capital markets regulations and the government. He spent two decades at the SEC. He was also a detailee to the legislative and executive branches, a policy advisor to senior leadership at the Department of the Treasury, the Department of Labor, and a senior adviser to Chairman Jay Clayton, counsel to Commissioners Paul Atkins and Michael Piwowar, and assistant director and special counsel of the Division of Investment Management. Before all of that, which is a lot, Commissioner Uyeda served as chief adviser to the California Corporations Commissioner, where he was appointed by Arnold Schwarzenegger in 2004. I feel like I should make a comment, but I'm not going to. Please join me in welcoming Mark Uyeda.
Well, good morning and thank you so much for that, Laura. Well, it's great to see so many of you. Now, this is SEC Speaks. If you're looking for the fire engineering conference, that is the floor above. But it would have been appropriate, I think, for me to speak at that conference because at least a year ago, when the new administration took office, there were so many dumpster fires at the agency—I mean, so many to have to put out. And as somebody who's been at the agency for 20 years, I thought I'd seen kind of where things might land between two possible ranges, and a lot of them were well beyond that. So anyway, the good news is now under the leadership of our chairman, Paul Atkins, I think we are back to how the Commission has traditionally thought about the securities laws. And we still have some hot spots we need to put out, but most of the dumpster fires have been extinguished.
So now we can move on to something that is much more forward-looking, such as this year where America will celebrate the 250th anniversary of the Declaration of Independence, a document that came into existence during a period of transformational thinking about the relationship between the people and how they are governed. In an era of European monarchies and the divine right of kings, the idea that those in government derive their power from the consent of the governed was a stark departure from the status quo. The Declaration, as penned by Thomas Jefferson, declared to the world that certain truths were self-evident: people are endowed with certain unalienable rights; among these unalienable rights are life, liberty, and the pursuit of happiness. Jefferson adapted this important phrase from John Locke's Two Treatises of Government, in which Locke identified life, liberty, and property as foundational natural rights. Scholars have long hypothesized on why Jefferson replaced property with the pursuit of happiness. Today, though, I want to reflect on what this small but meaningful adaptation means for us today and specifically what that means for the Commission.
The pursuit of happiness—it is a more elastic and somewhat more amorphous concept than property, but perhaps the most distinctly American idea in a document full of them. It is not a guarantee of happiness. It is not the government's obligation to deliver happiness. It is the right to pursue happiness: to start a business, to choose your occupation, to risk your capital, and to reap the rewards or absorb the losses of your own decisions. Although the SEC did not exist during the earlier parts of American history, the ideals that underpinned America's foundation should continue to guide how we think about opportunity, accountability, and the proper limits of government action. The Declaration reflects a broader American belief that Americans, as individuals, are not bound to the circumstances of their birth or class in society. It is forward-looking and not wedded to the past. The pursuit of happiness—one's chosen vocation, ambition, or enterprise—is not predetermined by lineage. It embodies the notion that each generation can forge its own path through self-determination and agency. Free enterprise, innovation, and entrepreneurship are not afterthoughts to the American experiment. They are woven into America's DNA from the very beginning. 250 years later, the freedom to choose your own direction remains one of America's most powerful promises.
What transformed the pursuit of happiness from an aspiration into actuality was the development of America's capital markets. During the 18th century, the Dutch operated some of the most advanced capital markets for their time. Perhaps it is not surprising, in a city founded as New Amsterdam, that less than a decade after the end of the American Revolution, 24 stockbrokers would sign the historic Buttonwood Agreement that would give rise to the New York Stock Exchange. The ability to raise capital played a pivotal role in facilitating America's evolution from an agrarian society to the world's leading economic power. But capital comes at a cost, and effective regulation can lower the cost of capital. Investors may be willing to take certain risks with a potential investment, particularly if it's part of a diversified portfolio, but investors do not want their money stolen or to be misled about the risks, return, financial condition, or prospects of an investment. If the capital markets are rife with bad actors, investors will either not invest at all or demand higher returns to compensate for the added risk of fraud. Either way, even legitimate and honest companies will face a higher cost of capital because of the presence of bad actors.
Over time, Congress recognized that regulation and oversight of the capital markets could benefit economic growth and enacted the federal securities laws. However, rather than having government bureaucrats engage in merit review of securities offerings, similar to how various state securities laws then operated, Congress created a statutory framework with the Commission serving as a disclosure-oriented regulator. Hence, it is not the SEC's role to decide which ideas are worthy of capital, which business models are viable, or which entrepreneurs deserve a chance. That is the market's job. Our responsibility is to ensure that investors have accurate, honest, and financially material information to make those judgments for themselves. As a result, a company with unproven technology and a long road to profitability can still access America's public markets so long as it tells investors exactly what it is and what are the risks. Some will be successful in executing their business plans, while many others will fail. The risk of failure, however, is an important, integral, and expected part of the process. Markets reward enterprises that create value and take away resources from those that do not, in ways that no regulator or central planner could ever replicate.
Capital allocation in the free markets, despite periodic booms and busts, often channels resources to new ventures that can challenge incumbents. Opportunity is available, albeit at times imperfectly and unevenly, to those with the ideas and determination to pursue them. And the results speak for themselves. America's capital markets have powered every chapter of this country's economic ascent, from westward expansion to the modern technological era. The Commission has a responsibility to preserve and strengthen that tradition, and we are working on meaningful steps intended to revitalize the public markets. Post-Enron reforms, although well-intentioned, have had the effect of making initial public offerings less of an avenue where companies can raise capital and broaden ownership among the public, and more of a liquidity event for insiders and early-stage investors. As we seek to incentivize more businesses to IPO and increase the pool of public companies, it is worth assessing whether the current SEC regulatory regime is conducive to going and staying public.
In this spirit, we are working to modernize the shelf registration process to reduce compliance burdens and further facilitate access to capital. Shelf registration provides significant advantages and flexibility for eligible companies to manage capital and liquidity needs. By using shelf registration, companies can offer securities to investors when market conditions become favorable. On the flip side, companies will also have the ability to quickly secure funds in stressed market conditions, essential for maintaining operations or servicing debt. The staff has also been instructed to engage in a comprehensive review of Regulation S-K to assess the effectiveness of current disclosure requirements and to consider permitting companies to change their periodic reporting cycle from quarterly to semiannually. There are a few other examples where we may be able to improve disclosure requirements so that they are relevant and efficient. For example, we should revisit the thresholds for being an emerging growth company and smaller reporting company. For too long, the disclosure framework for public companies was built around a one-size-fits-all model that imposed the same disclosure burdens on smaller companies as on a large seasoned conglomerate. Recalibrating the EGC and SRC thresholds is not a matter of lowering standards. It is a matter of ensuring that regulatory burdens correspond to the size, sophistication, and regulatory risk profile of each company, and that smaller issuers are not driven out of the public markets before they've even had an opportunity to grow into them. Taken together, these reforms reflect a simple conviction that vibrant public markets require on-ramps, not obstacle courses. But public markets do not thrive in isolation. The public and private markets coexist in a symbiotic relationship.
Private markets have always been the seedbed where ideas become businesses from which the public markets draw their most dynamic companies. For much of modern history, private markets have incubated companies that were not yet ready for the public markets, which at some point in the future, when they were at a more mature stage, then went public. The question is not how to choose between them; it is how to allow everyday Americans to have exposure to the opportunities that exist in both markets. Until now, the benefits of private market investing have been reserved for institutional investors: pension funds, endowments, family offices, and sovereign wealth funds, while retail investors saving for retirement have been effectively excluded. The disparity is difficult to ignore. The teacher or firefighter whose retirement is managed by a public pension fund has benefited from meaningful private market exposure for years, if not decades. The private sector worker saving through mutual funds in a 401(k) plan has not. In an environment where public market securities are becoming increasingly correlated and concentrated, exclusive reliance on such securities may no longer provide the diversification that retirement savers need and deserve. Private assets such as private equity, private credit, venture capital, infrastructure, and real estate can enhance overall performance returns and reduce volatility when included as part of a diversified portfolio.
The argument against allowing retail access is familiar: private investments are illiquid, complex, and sometimes unsuitable for retail investors. But this framing gets the analysis backwards. Retirement savers are often long-term investors, and private investments can offer a premium for that illiquidity. For long-term investors saving for retirement, this trade-off can not only be acceptable, but desirable. The notion that a zero allocation to private assets is somehow inherently safer or more desirable than a diversified allocation is not investor protection. It is not the government's role to impose its judgment as to what opportunities investors may pursue, particularly when those choices are often being made by a fiduciary. The Commission is working to change that. We have already taken steps in that direction, including lifting the 15% cap on investments in private funds for closed-end funds. We are also actively engaged on how to expand retail investor exposure to private markets. We are working to ensure that the SEC and the Department of Labor are aligned in providing fiduciaries the regulatory clarity and safe harbors they need to prudently include private assets in defined contribution plans, because access alone is not enough if plan sponsors are deterred by litigation that second-guesses good faith decisions with the benefit of hindsight.
Now, the Declaration of Independence also stated that the unalienable rights of life, liberty, and the pursuit of happiness must be secured. So how should that apply in the context of the SEC and the capital markets? It means that our role is not to stand between Americans and their economic aspirations in the name of protecting them from themselves. Instead, it means that our job is to build and maintain the infrastructure that makes free markets possible: clear rules, honest disclosure, and timely accountability for fraud and manipulation. It means that when we adopt rules, we should ask not only whether they prevent harm, but whether they preserve freedom for investors. Capital markets are not perfect, and the cost of capital can increase dramatically in markets that lack rules and safeguards. A free market without proper oversight lacks the tools to prevent and address fraud, insider trading, market manipulation, and market failure, such as monopolies that stifle competition. Capital markets will fall far short of their potential if there is a significant lack of transparency and information symmetry. Investors, those persons who put their capital at risk, will simply withdraw. However, investor protection does not mean that government ought to engage in paternalistic control. Innovation cannot wait indefinitely for regulators, and we cannot suffocate innovation under the guise of investor protection. When the Commission fails to provide workable regulations, markets do not stand still; they'll move elsewhere. And when they move elsewhere, investors lose, competition suffers, and the Commission's credibility as a forward-looking regulator is diminished.
Nowhere is the Commission's stifling of innovation more apparent than in its recent treatment of crypto assets. The United States had the opportunity to lead the world in building a regulated, transparent, and competitive crypto asset market. However, rather than engaging seriously with the question of how existing securities laws applied to these novel asset classes, the Commission chose enforcement as its primary regulatory tool. Exchanges that sought to register were turned away or left in regulatory limbo. Token issuers who asked for guidance received subpoenas instead. Lenders and custodians who tried to engage with the Commission in good faith were met with litigation. The message was unambiguous: don't bother trying to comply with the SEC rule book. American investors were left with fewer regulated options, not more. And they did not stop participating in crypto asset markets; they simply did so on platforms and in venues abroad and outside the reach of the US securities laws. Regulation should not predetermine outcomes or restrict participation under the assumption that individuals are incapable of making informed choices. Instead, the role of the regulator should be to create conditions in which investors can make informed decisions, entrepreneurs can raise capital honestly, and markets can allocate resources efficiently. Innovation in financial markets has always required regulatory clarity. The development of money market funds, exchange-traded funds, and electronic trading all required the Commission to grapple with novel structures for their time and to adapt our rules accordingly. In each case, the Commission's willingness to engage led to markets that were broader, more liquid, and more accessible to a wider investor base.
The proof of these principles is visible in the work that the Commission has completed during the past year and in the work that lies ahead. We've granted exemptive relief to asset managers to offer mutual funds and ETFs to offer share classes in a single fund. We granted exemptive relief that would allow 24/7 trading and instant settlement for tokenized shares of a money market fund, all within the regulatory perimeter of the Investment Company Act. We have also proposed amendments to the rules that define which funds and advisors qualify as small entities for purposes of the Regulatory Flexibility Act, in an effort to reduce the regulatory burden on smaller market participants. We have forthcoming rulemakings that will be consequential. We are actively exploring how to expand retail investor access to private markets. We are developing an innovation exemption that would facilitate limited trading of certain tokenized securities. And after years in which the Commission's misguided posture towards crypto assets was defined by regulation by enforcement, we are now building a proper regulatory framework for them. We are also thinking about potential changes to the custody rule to accommodate the advent of new asset classes and different types of custodians. Moreover, the staff is conducting an ongoing evaluation of whether legacy rules continue to reflect market realities or simply persist by inertia.
250 years ago, America embarked on an experiment in democracy. The founders had seen what happens when the state appoints itself as the arbiter of which enterprises are worthy, which ideas deserve capital, and which individuals may pursue their ambitions. The founders built something different, based on the principle that government exists to secure the conditions for human flourishing, not to determine its content. It is this liberty that has allowed the United States to move ahead of global competitors and achieve economic prosperity and innovation. The United States remains the land of opportunity, not as a slogan, but as a lived reality for millions who have pursued careers, businesses, and ideas far different from the generation before them. The Commission's tripartite mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Each part of that mission matters. Protecting investors means requiring honest disclosure and accountability for fraud. Maintaining fair markets means setting clear, consistent, and predictable rules. Facilitating capital formation means keeping the pathways to capital open for both established companies and the untested startup alike. When we allow any one of them to crowd out the others, we lose the balance the founders understood intuitively: that freedom and protection go hand in hand. Today, the Commission is working to restore that balance and reinvigorate the spirit of the Declaration of Independence in our markets. Every entrepreneur who raises capital is exercising the freedom America's founders envisioned. Every investor who risks his or her hard-earned dollars on a new company is affirming the principle of self-determination. Every market transaction freely entered into is a small act of independence. What is at stake is larger than any individual rulemaking. The United States has led the world in innovation and capital formation, but that edge is not guaranteed. America's next 250 years will be shaped by ideas we have not yet heard of, building things we cannot yet imagine, and in markets that do not yet exist. The Commission's job is to make sure that an honest, efficient, and open infrastructure is there when they arrive, to ensure that the pursuit of happiness remains exactly what the founders intended it to be: a right that belongs to everyone willing to pursue it. So, thank you very much for the opportunity to speak with you this morning. I'd also like to thank the Commission staff who have put an enormous amount into organizing this event and preparing the presentations for this program. Their dedication to the Commission's mission helps maintain the robust capital markets that afford opportunities for everyone. And don't forget to check your smoke detectors. Thank you.
So, I'm not sure if Mark actually said this, but I think he mentioned the pursuit of happiness and the capital markets, and therefore happiness is money or earnings or profitability, and I would agree with that. So that was an adept tie-in. Right now I am pleased to introduce the next panel, which is the Division of Economic and Risk Analysis. When I did work on the Senate Banking Committee, as most of us have, Senator Phil Gramm was very apoplectic about the fact that there were no economists at the SEC and therefore there was no real risk-benefit analysis of rulemakings. So beginning way back and continuing until today, I think the significance and importance of that division has built up along with the number of economists that are now involved not only in cost-benefit analysis, but also risk analysis. So this is a wonderful development, and I would like to welcome Dr. Joshua White, who became the Chief Economist and Director of DERA just a couple of short months ago. Welcome. Like all of us, he was at the SEC before, between 2012 and 2018, conducting cost-benefit analysis of the rulemakings while in different DERA roles. Prior to that role becoming the SEC Chief Economist, Dr. White also served in the Office of Economic and Risk Analysis at the PCAOB, where he was a senior adviser until he became acting Chief Economist in April of 2025. Joining the panel as a commentator is former Commissioner Cynthia Glassman. She did not come from the Senate Banking Committee, but that's good for diversity of thinking. She and I went through the revolving door: I left, she came, and she served from 2002 to 2006, and as Acting Chairman during the summer of 2005. As the only commissioner with a doctorate in economics at the time, Commissioner Glassman offered a unique perspective that was extremely helpful in her demand for rigor in the regulatory process. She then served as Under Secretary for Economic Affairs at the Department of Commerce from 2006 to 2009. In that role, she served as a principal economic adviser to the Secretary of Commerce. Dr. Glassman is a member of the board of Discover Financial Services, where she chairs the audit committee, and is a member of the Dow Jones Special Committee, which is an independent body charged with safeguarding the editorial independence of The Wall Street Journal and Dow Jones. Is this on?
I retired from the board of Discover a couple of years ago, and now Discover has been bought by Capital One, so I'm not on the board of Discover.
You're not. Okay, so I thought that I checked with ChatGPT, and I'm going to tell you I got bad information. I know. How else am I going to know? 2024 was the last proxy you were in, but it was inconclusive. So here you go: a real-life example of not relying on ChatGPT for your information. So in any event, I still welcome former Commissioner Glassman and the panel. Thank you very much.
Make sure this is on. Okay. Good morning, and thank you for the kind introduction. It is a pleasure to be here today. Before I begin, let me give the standard disclaimer on behalf of all the DERA speakers: today's remarks are provided in the speakers' official capacities as members of the Commission's Division of Economic and Risk Analysis. They do not necessarily reflect those of the Commission, the commissioners, or other members of the staff. Okay. So the SEC is a market regulator, and economics studies how markets function. Thus, DERA is involved in all aspects of the SEC's mission. You can sort of think of it as the SEC in a microcosm. So DERA has a four-part mission: we support economic policy, we support examinations and enforcement analysis, we do data management and analysis, and we do risk analysis. DERA is made up of approximately 170 individuals consisting of economists, data scientists, statisticians, lawyers, and other professionals. Most of DERA are economists, the majority of whom hold PhDs. And this kind of expertise allows us to provide high-quality economic analysis on issues related to all parts of the SEC's mission. So in order to provide that economic analysis, the division relies upon data. It is very important to us, and you'll hear quite a bit about it from the other panelists.
We encourage market participants, in your comments on our upcoming rule proposals, to also provide data. There are times when commenters possess unique data. They can be data, metrics, or surveys that can inform uniquely our rulemaking proposals. This type of evidence from industry participants can reveal information that our public filings do not. It can show us where our rules work, where our rules fall short, or where they may need to be modernized. So we encourage commenters who possess this type of information to submit it to the comment file. Comments supported by evidence help us ensure that our rules are informed by the facts on the ground. So as we look ahead to these proposals in this robust rulemaking agenda that we have, we encourage you to also provide rigor in the comment process. That means if you share data, you share data on both costs and benefits when you have it, you clearly state any assumptions that go into the generation of that data, and that you proactively share survey evidence that can uniquely quantify things that other data cannot. It also means separating one-time implementation costs from ongoing expenses and explaining how a rule may impact—or that data can shed light on—unique firms that operate based on size, industry, business model, or investor base. Now, to the extent you have proprietary concerns, you can aggregate and anonymize data, and that can still provide us with substantial insight without revealing competitively sensitive details.
Now, some may ask whether data and evidence truly matters to the rulemaking process, and I'm here to say that it does. Economic analysis informs staff recommendations and helps the Commission determine whether adjustments need to be made between the proposed rule and a final rule. And so, to us, the comment letter is not a formality; it is central to the rulemaking process, and it is paramount to have evidence-based policymaking. In our view, better information from commenters leads to better analysis, and better analysis leads to better rules, and better rules promote and enhance the continued strength of the US capital markets. Okay. So in a few minutes, you're going to hear from my colleagues about some interesting work that DERA is conducting. So first, Enrique Lopez is going to give an overview of US capital markets. Next, we will have Wei who will give a demonstration of our new statistics and data visualization page. Following Wei, Vlad Ivanov is going to go over some IPO and exempt offering trends. Julie Marlowe is going to discuss how to get good information out of AI by using structured data. And then finally, Bill Young will talk about the economics of insider trading. So thank you again, and let me turn it over to our first speaker, Enrique Lopez from DERA's Office of Risk Analysis.
Thank you, Josh. That was a very nice introduction. And I hope that we can kind of break up some of the more verbose presentations here with a little bit of data for you guys to look at. So as he mentioned, my name is Enrique Lopez from DERA, the Division of Economic and Risk Analysis. Today I'd like to talk a little bit about capital markets and non-bank financial intermediation, and how those two sort of support each other and are intertwined. So at the Commission, capital markets, as we see them, include any marketplace where participants can buy and sell financial assets such as stocks, bonds, or other securities. Capital markets facilitate the transfer of capital from those who seek a return on their assets to those who need capital in order to grow their enterprises. Capital markets, put simply, are the way we connect providers of capital—investors—with those who seek capital—companies or governments. If we look a little bit at the data here, you can see that the data sort of underscores the dominance that the US has within global finance. Looking at fixed income securities, you can see that the US represents just over 40% of total global fixed income securities outstanding. With respect to global equity market cap, you can see the US is just about 49.1% of that global number at 62.2 trillion US dollars. And lastly, looking at GDP, the US makes up close to 26% of global GDP.
So as you can see, the US is large. But not only is it large, it is also robust. The US has markets that are both deep and highly liquid, and I'd like to talk a little bit today about some of the reasons why we think that is very important. The first is risk transfer: markets allow participants to manage and transfer risks through instruments like insurance policies and derivatives. Capital allocation and growth: markets provide platforms to efficiently raise capital, supporting business expansion, infrastructure, and innovation. Some good examples of those would be AI or data centers. Financial stability: a stable, transparent, and liquid market structure absorbs economic shocks rather than amplifying them, crucial for preventing or limiting the impact of financial crises. Diverse financing options: in the US, 75% of debt financing for non-financial corporations comes from capital markets rather than banks, providing competition, efficiency, and flexibility in pricing risk. Liquidity: liquidity is necessary and critical to capital markets as it ensures quick asset transactions in high volume with minimal price impact to investors. And lastly, asset valuation: US markets provide necessary liquidity and assist in determining accurate asset prices with very high precision.
So now as we think about capital markets, I'd like to think about what role does NBFI play within capital markets. Just a simple definition for everybody here: non-bank financial intermediation, as defined by the Financial Stability Board, can be thought of as a broad measure of all non-bank financial entities composed of all financial institutions that are not central banks, banks, or public financial institutions. So what role do they play? First, NBFI plays a critical role in capital market formation by connecting investors, savers, borrowers, and issuers. NBFI such as investment funds, insurance companies, hedge funds, and pension funds play a critical role in market intermediation by providing alternative financing, enhancing market liquidity, and enabling risk transfer. Second, NBFI provides an important alternative and competition to the banking sector. This competition benefits not only investors, savers, borrowers, and issuers, but it benefits banks themselves as well. And third, when it comes to risk and fragility in finance, it's important to think of NBFI as a diverse set of entities. Not every risk is the same. In fact, we view the financial sector as allocating and pricing risk, not necessarily eliminating it. We also take into consideration the interconnectedness between NBFI entities and the larger financial ecosystem. So I'd like to talk a little bit about how large NBFI is. I think this is maybe a common misconception. The Financial Stability Board produces a global monitoring report, which has been a yearly report published usually in December. This data here that you see is...
from the December 2025 report which publishes year-end 2024 data. The SEC and myself in particular participate in this effort led by the FSB, which is a comprehensive monitoring of global trends, vulnerabilities, and innovations of the NBFI sector and an important part of both the FSB and SEC efforts to enhance financial system resilience. At the end of 2024, US non-bank financial intermediary assets were $94.5 trillion US, 65% of US total financial assets and three times the size of banking assets. Banks made up only 22.6% of US total financial assets and central banks only made up 4% of US total financial assets.
Now, NBFI provides many benefits, but I think it's also important that we talk a little bit about vulnerabilities. In this FSB report, there is what they call the narrow measure, and it is composed of NBFI entities that authorities have assessed as being involved in bank-like activities and pose particular financial stability risks. Once that cohort is defined, there is then a series of risks that we look at to assess all of these entities. Three of these risks are here up on the screen that I would like to talk about today.
The first, credit intermediation. The credit activities of the NBFI sector are of particular importance to financial stability. NBFI entities can be an important source of credit competition and innovation within financial systems. On the other hand, NBFI entities that are not sufficiently resilient to shocks could slow the flow of credit to the wider economy, especially during downturns. Financial leverage, if not properly managed, creates a vulnerability that can propagate strains through the financial system, amplify stress, and lead to systemic disruption. Leverage is a characteristic feature of modern economies and financial markets. It can be used to increase exposure and boost returns. However, if not properly managed, the buildup of leverage can lead to systemic disruption via multiple channels. Some channels include the position liquidation channel and the counterparty channel.
And lastly, interconnectedness. Financial interconnectedness may help share risk across financial sectors, but may also serve as a channel for risk transmission. Banks and NBFI entities are directly connected with funding channels operating in both directions. For instance, banks often extend credit to or invest in pension funds, OFIs, or insurance corporations, while these entities provide funding back to banks or deposit the non-invested part of customer assets with custodian banks. Understanding these linkages is essential for identifying vulnerabilities and assessing emerging risk to financial stability.
And I would like to leave you guys just with three quick thoughts from everything I just said. The first is US capital markets are large and hold a dominance on global finance, providing many benefits to investors. Second, NBFI plays a crucial role in capital markets, and in fact its size is three times that of traditional banking assets, really highlighting its importance. And third, NBFI participation in capital markets provides efficiency, diversification, and credit provision to global financial markets. Thank you. I will go ahead and pass along.
Hi, can I just interrupt and comment? One of my questions is for you or for anybody on the panel. Given all of the changes in capital markets and the related markets, how much does DERA get involved with other divisions in developing new rules or looking at old rules that may be or are irrelevant and ineffective? What is your role in all of those things?
Yeah, so I can take that question, and it's a great one. You know, I think you're referring to sort of retrospective analyses. A core part of any kind of evidence-based policymaking is recognizing that some of the effects of a rule can't be sort of quantified at the time the rulemaking is taking place. And so the economic analysis that we do in support of policy, we think of that as prospective analysis. We're trying to predict the economic effects, the costs, the benefits, potential unintended consequences, and trying to think is there a market failure and how we can compare that to any kind of baseline data we have. Once a rule is in place, looking back with data allows us to say, well, what outcomes did we predict? What can now be quantified that maybe could not be quantified at the time the rule was being adopted, and where did behavior sort of deviate from expectations? And so a lot of that is informed internally.
And so we're consistently engaged in evidence-based retrospective review. And so we look back at those rules where data allows us to measure those types of effects that weren't measurable or to use new methodologies or fresh data, more refined models to quantify it. But I do want to emphasize that sort of our first priority is always ensuring that the economic analyses accompanying new rules are sound and rigorous, even-handed, independent, and grounded in economic theory and evidence. And so it's one reason I was encouraging commenters to send in data that allows us to sort of get it as right as we can the first time. And there have been instances in the past where the rules did not withstand judicial scrutiny, and so that highlights why analysis is really not procedural. It's essential to producing rules that last.
And so our view is that if the rules at the beginning are sort of grounded in economic theory and evidence and we make sure we identify true market failures, then they become harder to unwind. And so if a future effort tries to repeal a rule, they need to show a change in the underlying economics or the market failure, which is one of the things we look at in retrospectives. But we view the economic analysis as a stabilizing force. And so we're focused on that now for prospective. But in terms of retrospective, there are instances where that analysis was limited by data. And so when new datasets become available or when commenters share concerns with us or we see academic studies or our own internal studies, then we can revisit those and shed light on those effects and see if the rules need to be tweaked or adjusted.
That is very good to hear. Thanks. We didn't have the benefit of DERA as it now exists when I was here, and so I'm really pleased to see that you're doing all those things. Thanks.
Great. Thank you.
Okay. Good afternoon, everyone. I'm Wei Yao, Assistant Director in the Office of Economic Statistics. It's my pleasure to present to you statistics and data visualizations web page today. Okay, so first of all, I want to take this opportunity to thank our colleagues in the Division of Corporation Finance, Trading and Markets, Investment Management, Examinations, Office of Municipal Securities, Office of Credit Ratings, Office of the Advocate for Small Business, as well as our colleagues in the Office of Public Affairs. We really appreciate their energetic engagement and fantastic collaboration through this initiative. As you all can see, this is a big team effort in the SEC.
Our goal is to provide greater transparency to serve the public more effectively. As our Chairman Atkins highlighted in the press release when we launched this web page last August, this web page transforms SEC's public reporting of fundamental statistics to the public and to put vital information into the hands of investors, market participants, and the public. We wanted to make our work, especially how we produce statistics, how we conduct our data analysis, more accessible to the public. So this web page provides a centralized location access to all statistics. We cover broadly four major categories: capital formation, market participants, market activity, and investors. And from the landing page, you can browse all the statistics at the same page.
At the same time, we provide comprehensive coverage of the capital markets. As you can see, as an example under capital formation, we offer registered offerings, exempt offerings, as well as asset-backed securities issuances and commercial mortgage-backed securities issuances. After me, my colleague Vlad will also dive into more details on the IPOs and exempt offerings, a lot of interesting statistics to share with you. So we provide regular updates. Most of the statistics we offer quarterly updates. At the same time, we also provide the historical statistics. So this page offers the ability to look at the market information over time so you can see what's happening in the markets.
On each page, we follow this standard structure for easy navigation. It has five sections: data visualizations, statistics guide, statistic download, and related materials. On the top of the page, follow each link and then you will go to each section on the same page. This is the I think more exciting part: the interactive data visuals. Okay. And then we provide interactive data visuals for each statistic page. As you can see here, those six data visuals highlighted what we, among many data visuals we provided, also through the data visualization gallery. For example, for the initial public offerings, you can actually select any time periods you are interested in and then dive into the specific time period. And on the pie chart, you can actually have the flexibility to select the groups you are interested in, and then the pie chart can be automatically updated. And on the map shows there is a geographic distribution of offerings of market participants, and you can zoom in, zoom out and look for specific interesting information. And all the data visuals can be downloaded in various formats. In addition to that, you can also download the underlying statistics so that you can create your own database.
Okay. So on the statistics page, you will see a statistic table which provides you the most recent annual and quarterly statistics. And in addition to that, we also have statistic download, which covers all historical statistics for you to download to use as well. So this is what we want to achieve: greater transparency. It's all about how we do our work. In the statistic guide, we provide detailed information on description of each metric, calculation method, as well as data source, and this will help the analysts to even replicate the numbers using the same data sources we used.
Okay. So lastly, I wanted to thank market participants, analysts from various research groups and organizations, agencies, as well as professors and graduate students who have already sent us suggestions, ideas, which is making our web page better. We really also appreciate your very kind, very encouraging words about our web page. We truly value your feedback. So the web page currently has over 40,000 views by over 28,000 users since it was launched last August. We also offer briefings on this page. When you have a moment, go visit this web page. Take a tour in the data visualization gallery. Just explore all the market information there, past and present, at your fingertips. Thanks.
That was great. I think this website is terrific. Wish we'd had it before. I have one quick question. How do you make sure that the data are accurate and current?
That's a great question. So in my office, also in the entire DERA, we do have a standard procedure to ensure the data quality before we even jump to analyze data. So this is often, I would think like analysis part is important, but pre-analysis assessment of the data quality is extremely critical. And in DERA, we have a standard practice in place, and then we also use other data sources as a cross-reference check to ensure the data we are using are of high quality.
Hello everyone. My name is Vlad Ivanov. I'm a principal economist in the Office of Corporate Finance in DERA, and I'm going to talk about some recent trends in IPOs and exempt markets. I'll start with the IPO market. This chart shows the number of IPOs and the amounts raised from 2000 through 2025. As you can see, the last few years the IPO market has been down. Number of IPOs and especially amounts raised have been well below historical averages, although it appears that the market is on an upturn. Last year was actually a very good year for IPOs. There were 374 IPOs that raised about $70 billion. Compare that to the year before: in 2024, there were only 246 IPOs that raised about $39 billion. So in 2025, we've seen an increase in the number of IPOs by more than 50% compared to the previous year and an increase in the amounts raised more than 70% compared to the previous year.
Obviously, nothing in the last four years approaches even remotely the record IPO market that we had in 2021, right? That year, 2021, would be one of the top IPO years even if you look at the last 50 years of IPO data. As you know, it was a very special IPO market in 2021. Out of almost 1,100 IPOs that were performed and also more than $300 billion raised, more than 60% of those IPOs were SPAC IPOs, so a very unique IPO year. I also want to mention a couple of other interesting trends in the IPO market. So first, we observe a rebound in the number of SPAC IPOs. For example, last year there were 90 SPAC IPOs compared to 58 in 2024 and only 31 in 2023. So it seems like SPAC IPOs are on an upward trend again.
Also, last year was a record year for direct listings: nine direct listings compared to only three in 2024. So again, given that the issue of how do companies go public, how do we encourage companies to go public, can companies use alternative and cheaper ways to go public is very important from policy perspective, research-wise and otherwise. As you can see, both SPACs and direct listing public offerings are up. Still, the numbers are small, especially direct listing numbers, compared to the number of private companies that prefer to go public via the traditional IPO using underwriters, doing road shows, and things like that.
Next, I'm going to switch to the exempt offering market. I'll start with probably the most frequently used offering exemption, Regulation D. So the chart here shows the number of Reg D offerings and the amounts raised from 2009 through 2025. You can see a clear upward trend, kind of stepwise, with a slight downward trend in '24 and again rebound last year. The Reg D market is very large. For example, the last five years, capital raised under Reg D is more than $2 trillion per year. As you might know, most of this is capital raised by funds. So hedge funds, private equity funds, venture capital funds account for probably more than 75% of this amount. Operating companies raise on average about $200 billion annually using Reg D.
Also, as you know, Reg D has three rules: Rule 504, which allows an issuer to raise up to $10 million; Rule 506(b), which allows an issuer to raise an unlimited amount of capital, but does not allow solicitation and advertisement; and Rule 506(c), which allows for an unlimited amount of capital to be raised and also allows for general solicitation and advertising. So which one of these rules do issuers prefer? As the graph shows, overwhelmingly 506(b), despite the fact that 506(c) allows general solicitation advertising, right? The amount of capital raised under Rule 506(c) is about 5% of the amount of capital raised under Rule 506(b). So for whatever reason, various factors make issuers rely mostly on 506(b).
Next, I'm going to switch to crowdfunding. The chart on the top left shows you the amount of capital raised by crowdfunding issuers since 2016 when the rule was adopted. As you can see, a clear upward trend peaking in 2022, kind of a downtrend after that, and a slight rebound last year. So at that peak year, 2022, the amount of capital raised under crowdfunding was about $345 million, orders of magnitude less than Reg D, right? What other exempt offerings do crowdfunding issuers use to raise capital? The table on the top right provides some statistics on that. Crowdfunding issuers, about 25% of them also use Reg D to raise capital, about 4% of them use Reg A, and a very small fraction of them, about 1%, do registered offerings.
And lastly, what happens with crowdfunding issuers? A very important question regarding outcomes in this market, again, which is open for retail investors as well, right? So what happens with those companies? Well, the table at the bottom kind of shows us some statistics on that. A small portion of crowdfunding issuers end up being public. Only a quarter of a percent do an IPO, which is, again, not surprising given that these are small and early-stage companies. About 2% of them get acquired, and about 3.5% get venture backing.
And the last exempt offering market I'm going to talk about is Reg A. Again, the chart on the top left shows the capital raised on Reg A offerings from 2015 when Reg A was amended through 2025. We see a similar trend like with crowdfunding: upward trend peaking in year 2022, and then kind of a downtrend with a slight rebound last year. At the peak year 2022, issuers relying on Reg A raised about $1.8 billion, orders of magnitude smaller than Reg D. What other exempt offerings do Reg A issuers use to raise capital? That's what the table on the top right shows. So like crowdfunding issuers, about 32% of Reg A issuers rely on Reg D, 6% of them use crowdfunding to raise capital, and about 20%-ish rely on registered offerings.
Now, Reg A, as you know, is probably the only offering exemption that allows for the issuance of freely tradable shares. So another interesting question is: so what happens with those shares? Do Reg A issuers list their shares on any trading venue? So that's what the table at the bottom shows us. About 4%, that's the last column, 4% of Reg A issuers end up getting listed on national exchanges, NASDAQ or NYSE. About 25% have their shares listed on the OTC market, and you can see the distribution across various informational tiers. And then still the bulk of the Reg A issuers, about 70%, do not have any markets for their shares.
So to recap the evidence on exempt offerings: large market, that's Reg D, right, trillions of dollars raised every year, much larger than the amount of capital raised via registered offerings. And again, when you talk about Reg D, it's 506(b), that's it. Everything else very tiny. Interesting facts about crowdfunding and Reg A: issuers utilizing those two exemptions don't seem to fully utilize the offering limits that these two exemptions offer. For example, the average size of a crowdfunding offering is only $350,000, given the offering limit of $5 million, right? The average amount raised in Reg A is about $11.5 million, given the $75 million limit in Tier 2 of Reg A and the $20 million limit in Tier 1 of Reg A. So for whatever reason, issuers relying on crowdfunding and Reg A do not seem to fully utilize these offering limits. And lastly, a very robust fact: issuers, when they look for raising capital via private offerings, tend to favor Reg D compared to Reg A and crowdfunding. So if an issuer wants to raise $1 million, they can do it with Reg A, Reg D, Reg Crowdfunding—they overwhelmingly prefer, I'm talking 90% of the time, would go with Reg D, again 506(b). With that, if there are questions, then I'll turn it over to my colleague, Julie Marlowe.
To what extent do you use what the findings are from this and all of the other data that you have to prioritize your next steps, the next project, the next question that you want to answer?
Yes. So we use this, as Josh mentioned, when we first do our analysis for rulemakings and also when we review retrospectively rules. So for example, why again, if I go back to Reg D, why isn't 506(c), which allows general solicitation, why isn't it used more frequently compared to Reg D? Well, we look for what are the factors that drive issuers to go towards Reg D, right? What could be—is it because it's costly to verify accredited investor status? Is it because issuers prefer Reg D for various reasons? And so we do analyze, given the patterns that we see, we do analyze the reasons for the factors that drive those patterns.
Great. Thanks.
And if I can, I'll add on to that. So thank you, Vlad, for that presentation and for the question. Really, both the information that we shared and that Vlad shared, you can think of that as informing the baseline for potential regulation because we always want to establish what the status quo is. And if we see a particular rule or a particular area of the market that's not, you know, the capital raising is not happening at the activity or level that we expect, then we look for a potential market failure. And so that type of analysis that we shared, and really we're excited about the data we're sharing on this website because it's essentially a real-time baseline rather than waiting for an actual rulemaking to take place where we can share that analysis. So we're sharing baseline sort of in real time and can also get feedback from market participants on maybe why we're not seeing levels of activity that we might not have expected. So it's a great question. Thank you.
Good afternoon. Thank you again for the opportunity to share a few thoughts today. My name is Julie Marlowe and I'm the Assistant Director for the Office of Structured Disclosure. Today I'd like to discuss a little bit about what our office does. We're unique in a way that our office doesn't have economists, but we do have accountants, attorneys, data analysts, data scientists who work on various projects with the economists and policy divisions and others at the Commission. We'll also get into how machine-readable data enables AI and also discuss staff observations and guidance that our office issues once we had a chance to look at the data quality of the filings we receive. And I'll end the presentation with free datasets that we publish on our website.
In summary, our office, Office of Structured Disclosure, supports the Commission's efforts in making data accessible and easy to use. We aim to conform to current market standards, meaning what is the industry already using for certain disclosures and how are they extracting the data. We design SEC-wide analytic applications for our staff's use to conduct analysis for rulemaking and other purposes to ensure they're using machine-readable data. And once we collect enough data, we publish them on our site so the public can use them for free, and we design taxonomies. In case you're unaware what a taxonomy is, it's a list of tags that filers use to make their disclosures machine readable. You can think of it as a dictionary.
And we also work on validation rules with different divisions and offices so that when the filers give us the data at the intake of the process, we can check the quality of the data. And as we're doing now, we conduct market engagement. We're one of the few offices with a public-facing inbox, so we get questions from investors, filers, tagging vendors, and all types of users who have questions on our data or the taxonomies we publish. And we meet with them to address their concerns or get feedback on the data. We also work with FASB and IASB on their respective standard taxonomies, and we have met with other federal agencies that use our data because the entities that report to them also report to us.
So let's talk about machine-readable data and AI. But before we get into the details of that, let's step back and talk about AI. What is AI? What does it do? AI models are driven by math and statistics and subject to probabilities, and the outcomes are only as good as what the data is trained on. So if you think about what are you feeding your AI tool, the quality of that data matters. I started my career in a Big Four accounting firm, and one of the common phrases was 'garbage in, garbage out,' and the same concept applies here. Is the data complete? Commissioner Glauber raised earlier about how do you ensure data is complete and accurate—that's exactly the point, and the quality of the data matters.
And the AI is better if you give the context, meaning what is the data related to, which machine-readable data provides that context. It tells the AI what it is looking at. If you go to a standard taxonomy like the GAAP taxonomy based on accounting standards or one of our rulemaking taxonomies, each tag comes with a codification accounting standard or a rule requirement, so the filers and data users know exactly what tag to use for common disclosure. So let's say a company has research and development expense. If you go to the GAAP taxonomy and type in research and development expense, you're going to get the tag name. It comes with the definition of the tag, and then it shows you what codification is it related to, so the filers can assess, is this the right tag for my disclosure? On the flip side, data users and investors can also go to that taxonomy because it's public and it's free to everyone, and you can look at it and go, 'I want R&D expense across filers for this particular period or across industries,' and they know exactly what tag to use. The filers get to define the data with the standard taxonomy and machine-readable data so downstream users don't have to guess. We don't know what this data means because the filer already used it based on the common standard taxonomy.
There are already a lot of AI chatbots that are using machine-readable data. One of them particularly pings to the EDGAR API data that's on the Commission's website. And we're not the only one that's working on AI and machine-readable data. Department of Commerce has issued guidance on AI and machine-readable data, and they actually said AI-ready data is not just machine-readable, but it's machine-understandable data that is enriched with contextual metadata. So let's talk about how different stakeholders are using machine-readable data in AI. Tagging vendors: we're aware of a tagging vendor that is using structured data in their AI model to do benchmarking, to do peer review, draft narratives from tabular data, and do historical roll-forward of financial reports. These tools have been very useful when I was working long hours at an audit firm.
Speaking of audit firms, there's an audit firm that's using machine-readable data to identify anomalies as part of their audit cycle. Data aggregators have integrated AI into reporting by using structured data as part of their financial and analytical services. And an executive at a large filer recently talked about AI depends on solid, well-organized data from the start, meaning you begin with digitizing the information and you organize and classify it so the machines can read your data accurately. As for the SEC, as you may know, we do have an AI task force, and that task force has been working with different divisions and offices to find AI solutions enterprise-wide. Also, our division has an office called Office of Data Science that's been working on machine learning for a while. Our office has worked with them on several projects—for example, tonality of narratives and filings, meaning using AI and data, what does a particular narrative say about the company? For example, did the company have a profitable year or did it not?
Now, from an investor's perspective, there are various benefits they can enjoy with structured data and AI. One example would be using a chatbot to get an instant answer to a financial report or a company. So you can ask the chatbot, 'What was Company A's current assets at December 31st, 2025?' and you'll get the answer. Word of caution: you have to make sure that AI model is pinging to the as-reported data by the filer and that data is machine-readable. We are aware of a financial AI tool—if you ask the same question, it's not going to give you an answer, or it's going to give you a wrong answer because it's actually dipping into a source that is not machine readable.
In addition to these efforts, our staff review Forms 10-K, 10-Q, and other filings to ensure the data is of high quality. One of the efforts we work on is called Data Quality Reminders. These are short posts about a particular data quality topic. It starts with: here's an issue we noted, here's how you can fix it, and here's the guidance for it. Some of the issues we keep seeing is scaling errors, either three extra zeros or missing zeros. So for example, we've recently seen a smaller reporting company with a trillion in public float. I think we can all agree that is not possible. We've also seen filers using old tags. So they would adopt a new accounting standard, but they're still using the old tag. Those things really inhibit the use of the data. Or filers are creating custom tags for standard disclosures such as property, plant, and equipment. These are computers, phones—there's tags for those, and there's no reason to create custom tags.
And as you may know, our interactive rules back in 2009 do allow custom tags, but the rules specify exactly when you can use them and you cannot. If it's a unique disclosure and you're unable to find tags in standard taxonomies, maybe; otherwise, you should really review the standard taxonomies so that the public can use the data. And just to give you some context, in the GAAP taxonomy, we have over 15,000 tags. In the IFRS taxonomy, we have over 4,000 tags. And speaking of custom tags, at the bottom of this screen, you're going to see custom tag trend analysis. We do look at the average custom tag rates year-over-year. This one is for GAAP filers. We do one for IFRS as well. In the past couple of years, it's about a little less than 20% depending on the filer size. You will see that for large filers, usually their rates are a little lower. And we also want to encourage everyone to make sure that checking the quality of your XBRL data is part of your financial reporting process.
Doing a little deeper dive into data quality reminders, here are three that we did issue. This is not including all the other data quality checks we did. We try to focus on systematic issues, and the one that I'd like to highlight today is the form disclosure inconsistencies. As Vlad talked about earlier, Form 1-A is the offering statement under Reg A. There is information in XML, extensible markup language, in Part I, such as offering price, total assets, total liabilities. Then in Part II, the same information should show up in HTML. We've seen inconsistencies for the same disclosure in those two parts. There's no reason why they shouldn't agree. So if you could pay attention to quality of the data, we would really appreciate that.
And although our division does not have the delegated authority to contact the filers directly because we're not a policy division, we know the repeat offenders. So although we're not calling you out on the website, we know who you are. And those with lower data quality errors, we do greatly appreciate it. And in addition to our efforts, XBRL US is a third party that works on data quality validation rules. It consists of public companies, data tagging vendors, accounting standard bodies, and they have validation rules that filers can run voluntarily before submitting them to us. And they also publish a list of filers with errors against their validation rules—so things like, 'Hey, you used an old tag,' or 'You have a negative value when you should have a positive value.' And when you see those easy-to-fix errors, one may wonder what does their financial reporting process look like and are they paying attention to the data quality.
We have 15 datasets on our website. These are all free for the public to use. We often get questions and feedback on these datasets from different users. They are either updated monthly or quarterly. And one dataset that I'd like to point out is financial statement notes data. This is one of the most heavily downloaded items on our site. So in the past year, the downloads have doubled. We update this monthly. It goes way back to January 2009. So if you have time, please take a look. If you have technical questions for us on tagging or taxonomies, you can contact us at structureddatasec.gov. Thank you for your time.
You've answered all the questions I could possibly think of.
Right. Thank you, Julie. I recognize I'm the sole barrier to lunchtime, so I'm going to do my best to stay on time. Hi everyone, my name is Bill Young. I'm an Assistant Director in the Office of Litigation Economics, and I will be discussing kind of the economics of insider trading. First, a real quick intro on our office: our office's role is to provide empirical analyses to the Division of Enforcement so that it can help inform their decisions in the course of their investigations and litigation. We work on a very wide range of cases, which obviously includes insider trading. I'm not going to list them here today, though, so we're just going to move on.
Before you is kind of a basic insider trading base case. This here is just like a generalization for the purpose of showing how DERA, how our office might be involved in an insider trading investigation. First, an insider learns of some material non-public information, or MNPI. It sounds like a loaded term here; all we kind of mean is: is this information that a reasonable investor would want to know before they would trade a stock? Second step is then the trader then buys or sells on this information. If they know something good's going to happen, they might buy long. And then the third, they ultimately have to capitalize on this information, and then they buy or sell when the news becomes public. So if they bought low, they sell high and they make some money. We've often heard these cases described as difficult, right? Outside of a smoking gun or some kind of cooperator, you need solid circumstantial evidence, which is where our office can kind of come in.
Insider trading really runs the gamut of what we do. This is kind of a broad overview of the kind of value we can add at each step in an investigation, and then I'll run into a couple case examples. Under materiality, we attempt to answer a couple kinds of questions: could or should this information that they got cause a stock price change? And we might review academic literature or look at a cross-sectional event study to see and to assess if this information typically would have an impact on prices—did it historically? We'll evaluate: did it actually have an impact? There's some things that are kind of given, right? You have big earnings announcements or mergers; those are generally just material, but some not so much, right? We might have some kind of interim letter from FDA on drug trials, and in those cases we might run a single-firm event study to make an assessment. We'll look for significant price impacts. We'll consult analyst reports and news articles to make our assessment.
The next part is trading patterns. And for the data nerds, this is kind of the fun part for us. We basically want to ask, what can we show that's anomalous in their trading if it weren't for this information that they weren't supposed to use? Especially useful during early stages of investigations. We can highlight certain trading patterns, visualize data, look for outliers, possibly anticipate defense arguments. We'll review trading records. We're basically trying to look for changes in trading behavior. We'll look at different dimensions such as the amount invested, for example, aggregate long/short positions over time, what type of investments like equities versus options—did they ever trade options before they got this information? And then in terms of profit estimates, we'll calculate realized and unrealized profits related just to this MNPI as of a specific time. And so how does this work in actuality? I've got a couple examples, but for time I'm going to skip this one.
All right. So this is an older case, but it was in the news recently because of a corresponding criminal trial. In this case, a former Capital One data analyst mined the company's own credit card sales databases and then used that information to trade ahead of companies' quarterly sales revenues for a bunch of big companies. Our expert, Steve Graham, had to analyze all this electronic media and assess the importance of that information to investors. The big question, right, is would an investor really care about these credit card transactions? So the defendant queried the database thousands of times, and our expert went through all this data and actually found data that was aggregated by month in a conveniently named folder, 'Done' as in complete, that contained summarized data and predictions of future revenue. So our expert ran various regression analyses and determined, yes, this credit card sales data had a statistically significant relationship to the companies' total revenues and could predict total revenues for companies in a given time period.
Here is an example for Starbucks. This is a chart that our expert created using that data that was found. So the credit card transactions are the bottom line in red that was pulled from the system. The black line at the top is the actual reported sales, and then that little green piece in the upper right is actually kind of the predicted sales for that next quarter. And according to our expert, having information on the revenue from Capital One systems is going to help a reasonable investor make better decisions on whether to buy or sell securities. And you can just see—you don't need a quant background, you don't need math—you can see that the two lines move together. If you know one, you kind of know the other. Ultimately, a jury trial unanimously found him guilty, and he was ordered to disgorge almost $4.5 million in ill-gotten gains.
My next example focuses again kind of digging into trading patterns, and this case was the US v. Klushin, with their friends at the US Attorney's Office. For several years, Klushin and some co-conspirators hacked two of the companies that handled the quarterly SEC filings, which gave them kind of advanced notice of earnings figures. They then traded ahead of earnings announcements on several big companies under different account names across multiple countries. It's a little complex. Our expert, Matt Clark, testified on several points to kind of make sense of this trading, which was a lot. First, he asked, how good are they? Well, Klushin traded in a profitable direction nearly nine times out of 10 trades. Second, how good was he at predicting earning surprises? Well, he was able to track positive earnings surprises correctly by going long 86% of the time, and shorted correctly 85% of the time. But at that point, maybe he's just a really good trader.
But the third point—and I really love this statistic because it's something that shouldn't exist if it weren't for this information that they had access to—about 96% of the companies they traded in used the two hacked companies to file their earnings. But during the same time, those two companies only accounted for 44% of all of the total earnings reports at the time, and there were like 38,000 of them. So to wrap our head around this, our economists equated Klushin's trading pattern to a giant jar of like 38,000 marbles, right? That's the universe of earnings reports at the time. 44% of them are red to kind of indicate the earnings reports that came from these two companies. And so our expert tried to answer the question of what the odds would be of grabbing a red marble 343 times out of 356 attempts representing the companies that they traded in. And the answer to that question is one in a trillion, which is what he told the jury. Economically, the company that standardizes and formats earnings reports for SEC filings should have no bearing on someone's trading strategy, right? The outcome was that after a jury trial with like 10 hours of deliberation, they found them guilty of netting nearly $90 million in profits. So that's my last example. Thank you for your time.
So all I have to say to you, Bill, and the rest of the panel is keep up the good work.
Quick note for anybody who's watching on the livestream, clearly not the folks in the room: we have added the slides from this presentation as a downloadable feature. So please just refresh your screen if you aren't seeing them right away. And for everybody, please enjoy your lunch break and we'll see you back for the next panel.
Good afternoon. At this time, we would kindly ask that you please take your seats and silence all devices as our program is about to begin. Thank you.
So, good afternoon everybody. It's 1:42. You're two minutes late, but we're starting. No? Okay. I'm getting mixed messages.
Here. [laughter] I think we are starting, though. And I will begin by introducing the Investment Management Division Director, Brian Daly. He joined IM as the director in July of 2025. Before that, he was a partner at Akin Gump in the IM practice, and before that, Schulte Roth, where he was an investment management lawyer for about a decade. He's a founding equity partner of Kipos Capital, which I assume you've divested, which was a quant company, and also a board member of MFA. Dan Gallagher almost needs no introduction, but I'll go ahead anyway. He has been all over the SEC. Most recently, he is the Chief Legal, Compliance and Corporate Affairs—there's commas in there—of Robinhood Markets. Before that, he was at WilmerHale as a partner and deputy chair of the securities department. Before that, he was a commissioner. Before that, he was on the SEC staff and he was the chief legal officer of Mylan. I almost forgot about that. [laughter] And he serves as an adviser on several boards. So, I would like to welcome the IM panel. Thank you very much.
Hey, well, thank you so much for that.
Oh, wait. The last one—the magic words. I think you turned my mic off. Okay. [laughter] Please consider the comments of this session's panelists so that you can get CLE credit. Okay.
I like when the magic word is like "hamburger." So why don't we finish our introduction? Christian, why don't you go first?
Okay. My name is Christian Sandoe. I'm an assistant director in the Disclosure Review and Accounting Office. I've been with the SEC for 30 years now, 26 in the Disclosure Review and Accounting Office and 15 years as one of the managers overseeing the disclosure review.
I'm Robert Holowka. I'm the acting assistant director in the Rulemaking Office. I joined the SEC in 2022, and before that, I was at Kirkland & Ellis.
I am Rachel Loko, and I'm a senior special counsel in the Chief Counsel's Office. I've been in IM for 13 years. I have the distinct honor of having been in every office in IM, but here to represent the Chief Counsel's Office today. Before that, I was at Shearman & Sterling and Allen & Overy, which now are the same firms. [laughter] Yes. And before that, one of the most fun things I did in my life was to be the chief legal manager for Africa at the Grameen Foundation.
Great. So thank you, guys. And so before we start, we will do the obligatory disclosure. I will do it for everyone here except Dan. Dan can either do one or not, we don't really care anymore since you left the Commission, you're on your own. So these remarks are provided in our official capacities as our various positions at the Commission, and they do not necessarily reflect the views of the Chairman, the Commission, the Commissioners, the other members of our staff, His Holiness Pope Leo, my mom, or anybody else that you might think of. So it's all on us. And with that, why don't we jump on in?
One of the things that we have focused on a lot during this administration has been access and making sure that we are talking to industry, we are hearing from the industry, and more importantly, that people know how to reach us, right? Like very much across all the divisions, you'll see the same theme, which is we're trying to get rid of the cheat codes. We say this at every conference we go to: If you want to come in, call us. If you want a meeting, you get a meeting. I don't think we've turned away a single meeting request since Chairman Atkins, really since even Acting Chairman Uyeda took over. You don't always get the person, you know, I only have so many hours in a day, but if somebody wants to come into IM, you come in, we talk to you, and we don't require an ask. If people want to come in—and we encourage people, managers especially because we are IM, but fund managers of all stripes—if people want to come in to just tell us what's going on, what they're seeing, what the updates are. We have intermediaries, we've had prime brokers come in, we have administrators come in.
Those interactions, even though there's no actionable request, are really helpful for us because we write rules, we give exemptive relief, we do analysis, and the smarter we are about the business, the better our rulemaking and other decisions are. So we definitely want to do that. Part of that we have really come to understand, particularly once you get out of the small circle of '40 Act lawyers, is that we have very seasoned, experienced, smart counsel, market participants who've never come in, who don't really understand the structures. And so what we thought we'd talk about here a little bit is what each of the offices within the division does and how that relates, so that the listeners here and the people in the audience can understand who to call when they want to come in. Christian, since you're next to me, why don't you start?
Sure. So the Disclosure Office, obviously, unlike some of the other offices within the division, I'm going to say is a volume shop. We have filings that we review for all registered investment companies and BDCs. We're responsible for reviewing the disclosures on registration statements, including post-effective amendments, as well as proxies and financial statements for all of these entities. Obviously, that's no small feat.
Looking at what we did last year for 2025, we reviewed almost 2,500 new funds, including 175 new insurance products; close to 1,900 amendments for existing funds, and that included 165 for existing insurance products; more than 300 filings for business transactions or business combinations on Form N-14, which includes about 562 target funds and 50 mutual funds that converted into ETFs. We reviewed more than 200 proxies and more than 4,600 financial statements, which—I'll give a shout-out to our accountants, which aren't on this panel today, but they're responsible since the Sarbanes-Oxley Act in 2002 for reviewing all the financial statements for RICs and BDCs every three years. With about 14,000 in total, that's between 4,000 and 5,000 a year. So that's just generally what we do.
So in the Rulemaking Office, we do rulemaking. And this is a really exciting time for us because I think folks are starting to see some of our proposals come out. We've got a couple out there already, and I think people can expect there's going to be more. So, you know, the rulemaking process, it's really a three-step process in most cases. First, you're going to put out a proposal, and staff may be working on that for quite a while before you see it, but the proposal will come out. The public will get a chance to look at the proposal. They get a chance to submit comment letters. We spend a long time reading those comment letters, thinking about them, discussing them, really considering them, and then we put together the adoption that reflects those comment letters, that reflects the direction from the Chair and the other Commissioners, as well as our director. So it can be a long process, but it's an important job.
And for the Chief Counsel's Office, I like to describe us a little bit as the law firm for the division. We're the jacks-of-all-trades. We provide guidance on all aspects of the Investment Advisers Act and the '40 Act to various parts of the SEC. We support other offices and other divisions. We've been at the forefront of all these discussions with industry about innovative products, but we also process a fairly large volume of routine work, which includes processing and reviewing routine exemptive applications, reviewing requests for clarifications on our rules—the request can be informal or formal in the form of no-action letter requests. We craft the novel applications for the Commission's consideration, and we also answer general inquiries from the public. We provide support and technical assistance as well to Congress and other agencies.
But in terms of the novel work, which has been more of interest to a lot of people, I will quote the Chair, who said that the Commission's job is to support innovation as much as it is to guard markets, and we have to meet innovation with thoughtfulness. So we're doing just that in the Chief Counsel's Office. And as we engage in novel issues, we engage similarly to sandboxes, and we do that in very specific situations for specific business arrangements. It allows us to experiment alongside the industry and, as Brian mentioned, it allows us to also receive information from how these arrangements are functioning in the market, which makes our rules better.
And speaking of working with us, I wanted to go a little bit over the process of contacting the Chief Counsel's Office. You don't have to have a friend on the staff or you don't have to know someone. If you do, that's great, reach out to them. But if you don't, we have a public mailbox, which is
[email protected]. You can email that mailbox for very simple clarification questions. We will call you back. If it's a more complex question, you can also email there. It's just that if your request is more complicated, we would encourage you to draft an outline describing your business or the arrangement you're thinking about, as well as identifying the rules that are an impediment to your business so we can engage quicker and more efficiently. We also encourage you to engage early in your process and also to make sure that you engage before you file a formal request, whether it's a request for a no-action letter or a formal application, or even when you engage with my colleagues in disclosure. Before you file something, if it's novel, call us first.
Actually, if I can bounce off of that, because that was actually on one of my note cards as well: engage with us. And I think I wrote that in all caps, which means I should have been screaming it. [laughter] But similarly, when we have novel, complex issues, complex strategies, complex structures, or just different asset classes that we haven't seen in a RIC format or in an ETF format, reach out to us early, work with us. I mean, do it before you make a filing. I think that's got plenty of benefits, I think, for us and for you.
In fact, there was a letter that we had issued back in, I think, 2018 specifically—and this was in the context of crypto at the time—but talk to us before you make your filing. We can do more to work with you. If you've got a novel issue, you don't want to share your secret sauce with everybody. Engage with us before you make your filing. Do it early, do it often.
In the context of doing most new funds, mutual funds and ETFs are offered through the post-effective amendment process, which has a 75-day clock on it before folks go effective. If you make that filing, it starts the clock. It starts all of your competitors making their copycat filings. Makes it hard for you; it makes it hard for us. You all end up in the prisoner's dilemma where you want to be the first to market and somebody else has tried to come in right behind you. That is hard for you and it's hard for us. Understand when we do have a novel or complex matter, if you have filed it and the clock is running, the staff will oftentimes ask you to extend effectiveness on those types of filings because when there are novel issues, there are things that we need to be socializing within the building to our principals and they with their principals. You all have seen it before in some previous iterations, whether it be in the crypto times or the single-stock ETF times or the leveraged fund times. There are various times that we've seen this before. So work with us. Understand that when there are novel strategies, structures, etc., that is going to take a little extra time. So work with us.
And I want to put a third emphasis on engagement. Engagement is really the core of the rulemaking process, and it happens at all three stages and sometimes before that. So when we're working on a proposal, we'll often meet with folks, talk with them, understand what the issue is, really try to drill down into what a potential solution might be. Obviously, then we get comment letters, and we read every single comment letter, believe it or not, and we engage with folks after reading those comment letters, too, to try to refine some of our understanding. And even during the adoption phase, we're still meeting with folks, still trying to understand. So it really is kind of the lifeblood of rulemaking is meeting with folks, understanding how things actually work in industry, and trying to provide solutions for that.
Can I ask a question? I don't need a disclaimer. Robinhood's good with this because that decision would come to me anyway, so I'm good with it. And when I was on the Commission, I lost so many votes, it was pretty obvious that I didn't speak for the Commission. [laughter] Little joke, sorry.
On this engagement thing—sorry, this just kind of occurred to me, and it's probably more of a Trading and Markets question, and I will ask them on the next panel—but I'm sensing just recently on this innovation stuff, maybe it's sandbox stuff, there's a lot of folks that come in and meet, which is great. I love the ability to come in or email, making it easier to come in. And I love the point that you don't need a friend, right? You don't need a lobbyist. You can come meet with us, right? I mean, I remember saying that to folks when I was on the Commission.
But recently, it's like I hear a lot—and maybe it's just because of these new and innovative industries, crypto or whatever it is—"I've met with the SEC staff, and I think we're all good." And it's a lot less, I think, directional, these meetings. And maybe you guys are just taking in so much information, but I think sometimes folks who are less familiar with the building, they'll have a meeting with you, they lather out whatever they're saying, and if you don't say, "No, that's the stupidest thing I've ever heard," they kind of feel like they got a stamp of approval even if they didn't get a no-action letter, even if they're not getting exemptive relief or anything. And I'm just wondering, are you sensing that yourself or is that just part of sort of this new engagement process? Again, I applaud it, I just think it's kind of interesting.
I would say we had a discussion very similar to that just this morning in one of our meetings. [clears throat] It was slightly different. The way we were coming at it was we are getting a lot more people coming in, which is great, and people are, you know, "Repeal all this stuff." And it's like, okay, that's great.
Yeah, we had a lot of those. Which one? [laughter] So this is a great venue, so thank you for that setup. But it's a great venue to put this out, which is if people do have something, if they do have an ask, if there is, "I would like to be able to market this kind of product to these kinds of people, here is the problem I have," it's like, okay, that's really helpful. It's helpful to have somebody come in, say, "Here's the problem I have." And that's great, and if you leave after that, we'll think about it and we'll try and put it into our various priorities, and we have only a certain amount of time and resources, but we'll decide where it goes more or less on our own unless somebody else comes in with the same thing, or you come back in a month and you check in. And that can be fine.
But people who come in and say, "Hey, I have this problem. I want to market this product to these people and I have this issue," and they come in with, "And here's the things I think you are going to worry about: The protections in the Act or the rules are to protect against these three things. We recognize those are true dangers. We have a proposal for you to consider how to get through it, and here's how we're addressing danger number one, danger number two, and danger number three. So we think we've got all of these." When somebody does the extra amount of legwork, then all of a sudden it goes from good idea to something that, most of the time, winds up on Rachel's desk in Chief Counsel's Office like, "Hey, here's an actual proposal, and facially, at least, it looks workable, so let's start thinking about it."
And if you do want to move from, "Hey, we had a nice meeting with the staff, they didn't say get lost," to, "Hey, I think they're actually working on this," that's one way to get to the front of the line. And I guess other ways—I mean, you guys meet all the time, what else would you throw on that?
I guess I would add to that, to the extent that folks do come in with an idea and we don't immediately say yes or immediately say no, I think it's because it's sometimes really complicated and there's a lot to think about. In the moment, it's something that we're very happy to hear, but we can't answer in the moment. Perhaps when folks don't hear us say automatically no, they're hearing what they want to hear and they're taking the lack of an answer not as a "we're taking it back and truly considering it," because it's like I was just saying a minute ago: sometimes these are things that we have to socialize not just among the couple of us sitting here, but throughout the division, throughout the agency, and with our principals as well. So it's not always easy to give the immediate yes or no. And I think in the times when it is easy, those are the answers that you do get to the immediate questions: "Yeah, of course, that's fine. Whatever, whatever. I'm not worried about that."
Are there good—I mean, I think with you guys in particular—
What's the follow—that's what I wanted to add. [clears throat] This is what I meant when I said prepare an outline explaining your business arrangement and really identifying the rules that are coming in the way of your arrangement. And that's because we're always balancing innovation with investor protection. Investor protection means guardrails, and we can't really, as much as we would love to be able to do that, we can't just think of the guardrails as is. We also have to be creative in how we come up with that. And as Christian mentioned, there is the thought process of coming up with a workable framework for us, but then there are many stakeholders within the building who also need to buy into what we are proposing. Like I said, in the case of a novel application, for instance, the Chief Counsel's Office will design an application alongside the registrant, but then it needs to be approved by the Commission—first, our director, [laughter] then the Commission.
Dan, to your question, I think there's also a project management 101 aspect to it, which is it's perfectly appropriate to say, "This was a wonderful meeting, we really appreciated it. You guys were so thoughtful, really smart, well-dressed. But would it be okay if I followed up? And if so, who should I follow up with? What is the way for me to follow up on this meeting that is most impactful and least burdensome for you at the Commission?" And somebody will say, "Oh, I guess it'll be me. Why don't you call me," or whoever, and, "Give us like three or four weeks." And then you've got an actual path.
And as the discussions go, sometimes it really is: this is a really interesting, innovative idea, but we just don't have bandwidth for it, or we just don't think it's important to you and we understand that, we'd like to work that in. Do you think there are others in the market? Could you come back and tell us that this is a capital formation issue and there would be some impact? Because those kinds of metrics allow us to rejigger our priorities. And not that any one applicant is more important than others, but 100 applicants can outweigh one sometimes.
And I'll say in the rulemaking process, the impact of these meetings, this engagement we're having, it might not show up immediately next week, but there could be a proposal that comes in a month later and you might say, "Hey, this is the thing I just went to talk to them about, and here it is in this proposal." So, in a lot of cases we're meeting with people, we're working on things, then all of a sudden the proposal comes out, and then that's when we're really able to go public with what our ideas are. So, I would say if you come and meet with us on rulemaking, just be patient, wait for the proposal, wait to see what comes out, and then continue to engage with us.
I think that's a huge point. And I remember from my Trading and Markets days, even though they're a long time ago now, on the rulemaking side, those were the best meetings, right? Even if it was after the comment period or whatever, because so often firms would go into a trade group or whatever, and the trade group generates a letter that has to appeal to Lord knows how many constituents, which basically homogenizes it, right? You're not going to get those idiosyncratic issues that when you meet with a firm, you say, "The rule's going to do this. How does it impact your business?" and they go, "Oh my god, it would kill this line of business," right?
I remember these discussions in the money fund debates in 2012. It was like, "Oh my god, based on the corporate structure of some of these restaurants, the rule would impact them very differently." And you wouldn't know that unless it was either in their letter, which sometimes they didn't put in, or they came in to meet with you. So I think that's a huge call-out to engage through the rulemaking process in person, right?
Maybe talk a little about how sometimes you're constrained because we can't publicly announce rulemakings until they're published in the Reg Flex Agenda or the Chair personally approves it. So sometimes you're sitting in the meeting just being like—
Right. We do. [laughter] Obviously, I'm sitting here right now knowing that we're working on things that—
I was going to say we can do here. Let's make it awkward. [laughter] Put pressure on me.
No, it can be frustrating at times because we're meeting with these people and we're kind of bouncing ideas off of them, trying to understand what their issues are and try to refine the potential rulemaking, but we can't necessarily tell people, "Okay, well, this is what we're going to do," until the proposal comes out. But I think people would be surprised, one, how many meetings we do do and how many repeat meetings: we'll meet with someone, we'll talk about a few issues, and then we'll go back, discuss, like, "Well, we still don't fully understand this one issue, so we're going to do another one just to drill down on this." That's pretty common.
And then I think people will be surprised how much influence those meetings have over time in ways that might be hard to detect if you just had that meeting and then saw the proposal come out six months later. But there might be discussion that came directly out of our conversation with you. So it is frustrating that we can't just tell people what we're doing all the time, and we do have to ask people to be a little bit patient for proposals to come out. But once those proposals come out, we're ready to engage again.
And there is also—we collaborate across offices. So if you speak to one office, don't think that you have to speak to every office. We are aware in Chief Counsel's Office, for instance, of the proposals that our colleagues are working on. So if you are bringing something to us that we know is relevant to some of the work they're doing, we will inform them, so it's never lost whatever you say to us, whatever impediments you present to us. And that's probably why we have the reaction of kind of not really saying yes or no, because no information that comes in is truly lost. Even if we know that there is not one way that we can move, it's always helpful to be able to have this collaboration where we can say, "Okay, I can't solve this right now, but maybe you'll consider that in your rulemaking," or, "I can solve this in this rulemaking, but maybe you and Chief Counsel can think about a way to address that," or even in disclosure. So it's never lost.
I'll add on to that. Like I had mentioned, I've been on the staff for a very long time, and I've been through periods where it's been like this and periods where it has not been like this. At least in IM, for a number of years now, each of the different offices have been involved with each other. The disclosure team or the Disclosure Office has had folks joining onto rulemakings, as has Chief Counsel's Office, to make sure that we're not siloed.
In that regard, as rulemakings are running their course, with folks on our team, for example, in years past, on the Names Test Rule, for example, our team was on there; on the ETF Rule, our team was in there so that we could understand how it's going to impact the actual filers when they make filings: funds with new names, how is that going to play out? So we are very much of a non-siloed division, perhaps in part our size and in part just our culture and the way we do things.
Always say we can't always say what we're doing. [laughter] Why don't we—so Dan, would it help if we talked a little bit about some of the recent initiatives we've undertaken, how that really does reflect where the Chairman's priorities are?
Rachel, why don't you start?
I will, I guess, touch on some of the work that helps technological advancement in our markets, and I will also give examples that illustrate how we support transformation in our markets, for instance, on the distribution aspect. I will start with our work that supported technological advancement.
So at the end of January, for instance, the Commission approved an application from the WisdomTree Money Market Digital Fund to permit investors to trade tokens of money market funds on an intraday basis at a $1 price. Concretely, before that relief, investors could only settle at the end of the day, and now investors can trade tokens on a blockchain with a dealer at that $1 price. The investors can benefit from instant settlement, possibly within minutes, we have been told, instead of settlement at the end of the day. And the relief also allows for trading around the clock. So it illustrates how the Commission is enabling tokenization in our capital markets while preserving investor protection, because the money market fund rules are still applying.
Another example is a no-action letter published by the division in the fall clarifying that investment advisers and investment companies can custody digital assets with state-chartered trusts, subject to certain conditions.
So now I'd like to move on to the work from Chief Counsel's Office that's been supporting transformation in areas like distribution and investment strategies. One example is the line of applications that allow ETF share class between ETFs and mutual funds. Under this relief, it permits an ETF to offer one class of mutual funds, and mutual funds can offer one class of ETFs. It allows investors to first select their investment strategy and then determine whether the ETF wrapper or a mutual fund is the most appropriate investment for them. It opens new distribution channels for funds, and some of the benefits identified by the industry are obviously a better investor experience, economies of scale with regard to service providers, and lower portfolio transaction costs, efficiencies in portfolio management as well. The key regulatory concern the staff had to address was the fact that one class could subsidize another, but the exemptive application includes conditions such as board oversight to mitigate the risks.
So this has been a major line of no-action letters. In terms of the interest showed by the industry, we've received over 100 applications that we've been processing. We've processed so far over half, and we're working to continue processing these as quickly as possible. As we mentioned, issuing the relief is not the end of the conversation. We continue having conversations with the industry to implement it, including with bringing in other divisions. TM just issued a follow-up letter allowing brokers this week to help with the trading in ETFs. So we are looking forward to continuing engagement. Again, it's not just issuing the application and letting it live in the ether. We are observing how it's behaving and responding as necessary.
So Dan, is that coming through to the industry, do you think? Rachel mentioned three initiatives: one is a tokenization/money market initiative, crypto custody—so new technology, new technology—and the ETF share class is really old technology, but a new application letting the ETF and the mutual fund coexist together. We're very proud of that, what everybody's done, and I think that's pretty innovative across the board. Is that coming through, do you think? Do we need a better PR agent? [snorts]
I think IM always needs a better PR agent, and I'm a TM guy, so... I do think it's just coming through generally across the board, right? The first and biggest thing is not having Enforcement breathing down your neck for trying to innovate with respect to digital assets is huge. The work you guys are doing—for my business, it's a little more around the edges, whereas the Trading and Markets stuff is right down the middle for us, but it's certainly recognized because it kind of feels like it's part of an overall package which is consistent with the Chairman's remarks from this morning, right? It does feel holistic, and it feels like you're all rowing together, which is great.
So yeah, these innovations—four years ago, it just wouldn't have been even entertained. So they're revolutionary in that way, and certainly for those market participants that are in the space. But yeah, I think just the general sense is this is a time to get things done. And that's why I was asking you that first question, because I think you have folks coming to you with both kind of down-the-middle innovation, recognizing that you can interact with digital assets, and then you have fringe players with, quite frankly, nutty ideas that meet with you and think, "Oh my god, I've got my seal of approval," and they're going to go launch something. So you might get into some whack-a-mole. But yeah, overall kudos, and those are really important innovations, and it's just kind of a breath of fresh air.
What are we seeing on the rulemaking side that you can talk about?
Yeah. [clears throat] So we do have two proposals out out of IM: one on small entities and one on amendments to N-PORT. But I actually want to talk about something else which got a shout-out in the Chairman's statement today about e-delivery, which is something we don't have anything out yet, so I can't say too much, but I can note that this is an area we've gotten a lot of advocacy, and the Chairman has obviously directed us to look at it.
For those who don't know, e-delivery is something that has been around for a while, but is in large part, at least in the IM space, mostly based on guidance, and some of that guidance is 30 years old. So we talk a lot about innovation, but there are also some 20-year problems, is something I've heard before, that we're trying to solve. And e-delivery is certainly one of them. And we've heard from a lot of folks that now is the time to really try to do something to modernize e-delivery, to advance it, to use one of the words from the Chairman's statement earlier. And so we're really focused in an interdivisional task force across the Commission trying to find solutions and think about how can we modernize the current requirements for e-delivery. And we're excited to have something we can share about that soon.
This is where I can make it awkward for you.
Now, look, kudos. When I left the Commission, we were, gosh, we were doing Norm Champ's suite of rules back in 2014, '15, right? '14. And I think we teed up 33 there. But we were talking about paper versus a PDF email, and that was controversial, right? And I think today, you hear the Chairman talk about a financial super app, which is music to my ears, as you might imagine. Today's younger investing generation, which we have a lot of at Robinhood, they don't want a PDF in an email, right? They want to go to one place and get everything. So I just encourage you—and I know it's kind of like a hostage video where you can't show emotion to me right now—but I want to encourage you to think about not just e-delivery, but the form of 'e,' right? To be really innovative, to really give rise to this notion of a financial super app.
And I think that's one thing that people have stressed to us when we've met with them is this theme that innovation is happening so rapidly, every year it goes faster and faster, technology is evolving so rapidly. So we've got a lot of advocacy on tech neutrality and like, how can you design these rules principally based so that it can evolve with the technology, as opposed to fixing you in a place and then in 10 years it's like, "Well, we don't use that anymore." So that's certainly something we've heard a lot and we've taken into consideration.
You know, it's funny, Dan, because I've ranted a little bit about that, and I usually hold up the phone and I go, "Look, the 4-inch screen, this is your interface to your investor. It's not a big 8.5-by-11 PDF." And you should be thinking about this—this is to people who are sending these, the issuers at the fund side and the public company side—you should be thinking about how to get that out. Maybe AI agents are the answer. I think I'm very big on AI agents and being an interface between the ultimate investor and shareholder for our corporate friends, but the investor and the investment company or the sponsor or whatever. And I think there's so much we can do with that.
It could solve the problem of having older Americans, older investors who don't want to have it, because I know I use my mom all the time, and my mom throws away everything that comes in a blue envelope—just goes out. But if she gets an email, she'll flip it to me. And my mother, like I think every grandmother in America, probably around the world, is on Facebook because that's where the kids' pictures are. And she figured that out in about 10 seconds. And if you lean way into the new technology, you jump over the adoption issues, right? So I talk about that.
The first time I did that, I actually got some very concerned calls, though, and people said, "Oh my god, I see what's happening. You're going to make the same mistake every other division director did, which is you're going to ignore this to get to the next step, and you're going to get nothing done because you're never going to be perfect." So what Robert said, this technology-neutral platform is something we're very much interested in. We don't want to be making the mistakes of legislating—we don't really legislate, but regulating for today's technology. Like this 4-inch interface is not going to be what we use in five years. It'll be something else, I don't know, those glasses or some Neuralink in 10 years or whatever. And I'm really hoping some division director 10 years from now or 20 years from now is not looking back and cursing me the way we're cursing the people who put write-once-read-many technology requirements into recordkeeping. It's like, oh gosh. Like that's Macchiaroli, he's on the next panel. We're going to get him on that.
Well, I'm going to highlight that one of our former IM colleagues one time referred to IM senior leaders as a wax museum, [laughter] which now that I'm reaching wax status, I guess... But everything that we're discussing here would have to transform literally everything that we do in our office, but hopefully for the better.
And one thing I'd just call out to you that—I mean, it's how we run our business—is listen to the investors, too, more than the players, right, than the market participants. Like, how do they take in information? We study this very carefully, right? And that's why you get accused of things like gamification when you're actually speaking to folks in the language they prefer. You know, you're teaching them in a way that they actually learn. And in some ways, is it a more common way of speaking than the legal, usually? Yes, of course. But are they able to take it in that way? Yeah, and that's the way they want it, too. So maybe that helps you when you try to make something that's technology-agnostic. At a minimum, it'll give you guidelines as to what the people want, not necessarily what the firms want to give them.
Sounds like a good comment letter.
I can have one of my agentic AIs write one for you.
Yeah. So looking ahead a little bit, I know we've done a lot of looking ahead on this panel, but for each of your offices—and this will go into your performance review—let's talk a little bit about what we should be expecting in the future. Where do you think we're going, and then Dan can punch holes in it and tell us how to do a better job.
We have done a lot of clarification work on rules such as the fund of fund investments, the CLOs, the Names Rule, the marketing rules, those newer rules, and we are hearing that there are still questions out there in the market for those. And again, like I mentioned earlier, it's not that we issue applications, then we're done. There are a lot of operational questions we're hearing from the industry about both share class and, for instance, the new streamlined co-investment relief. We're engaging on those and trying to see where we can provide clarity and what form that clarity should take. So that's kind of where we are next.
I guess I'll jump in with disclosure. I think that our office is necessarily reactive to what the industry is going to bring in and file with us. But one of the things that I was thinking about in this regard—we made a bit of press last year at SEC Speaks with an announcement regarding funds investing in private funds or in private assets generally, just sort of reporting out on what's kind of happened since then.
If you recall, in last year's SEC Speaks, it was announced that we would not be giving the comments for funds of private funds that they must have an accredited investor standard or limit their investments to 15%. Since then, we've seen a number of funds come in and make those changes, so the staff has had to consider the issues that revolve around those. And if you recall, following that announcement, the staff, in order to help folks as they were making filings and making disclosures, we issued an ADI, which stands for Accounting and Disclosure Information. And it was highlighting the filing processes and the disclosures that we would expect to see for funds that were making these changes following that announcement.
I guess I'm happy to say that it sort of went exactly the way we would have expected it would have gone in terms of the disclosures that we've seen. I don't think that was ever going to be a hard issue. As we've had '33 Act-registered funds investing in private funds for more than 20 years, I think that if those hadn't been getting it right, I wouldn't have been doing my job for the last 20 years. In terms of the types of filings that we would have expected, it was pretty much exactly as we expected it would be. For funds that were taking away the accredited investor standard, that was simple: supplements, 424s, and 486B amendments to just remove the accredited investor standard. For funds that wanted to remove the 15% limits, it was more likely—and I think anecdotally it was primarily—486A filings that folks would make to make the changes.
Again, I should say that those also weren't monolithic, as the disclosures that we would have expected for a fund that was making a nominal increase in their holdings in private funds would have been way different from a fund that was changing to become a fund of funds. So I'll stop there.
So in addition to e-delivery, I'll talk about two other kind of areas that there's public knowledge we've got direct from the Chair on or there's focus there. The first one I'd talk about is retail access to alternative investments. So I think as most people are aware, there's an executive order directing the DOL to work on 401(k)s and providing access to alternative investments, and it also directs the Commission to collaborate with them, and we've been doing that. We're also responsible for post-tax, pre-retirement dollars. There is a lot of pressure, a lot of energy around retail access, and so we're also talking a lot about that internally and engaging with folks and trying to find ways to provide greater access. So I can't share anything specific today, but I'm hoping to have some announcements soon on that.
[cough and clears throat] The other thing I wanted to talk about was crypto. And as a lot of people probably saw, there's been some recent announcements by the SEC on crypto. In the IM world, where a lot of attention has been focused, there was a bunch of crypto roundtables that were put on last year that have been really helpful, but a lot of attention and energy that we received in those roundtables was on custody in the IM space for investment advisers and investment companies. So we've been meeting with a lot of folks, particularly on questions, issues related to custody of crypto assets by those entities, and they flagged a number of things. But I'd say the biggest themes, if you read the roundtable letters, are what to do with crypto assets where there might not be a qualified custodian available, how to think about state trusts who are providing custodial services, and then how to think about trading and DeFi activities. So I think that's all areas where there's been a lot of attention, a lot of public letters, that we're really looking forward to hopefully having some things to share more on soon.
I didn't write a letter, so we can put this in the file, but on that point for crypto custody, and I think it's relevant to the Trading and Markets panel, too: the notion that you can't use state banks or state trusts is really a tough one to swallow for the industry and for legit players like us, for everybody, right? Being driven into national banks isn't exactly ideal given that history with banking over the last several years and how the political winds change and impact bank regulatory issues, too. So it's a huge issue. You already called—
it out. I know it's going to be a tough one to consider, but I'll just say that is just a massive issue for folks, and it portends to crimp innovation too if you don't have the ability to select state-regulated entities.
Yeah. I don't want one piece to go unnoticed because Robert put it out there, but this responsible retailization effort that we're engaged in, it really affects all of your offices. And I suspect you guys have a vested interest in us getting that right.
Yeah, I think we're super interested in it. You guys saw we launched a closed-end fund trying to bring access. I think that's about as responsible as you could get by way of vehicles, but there are other ways to do that also. In this day and age of AI, I think this is the most vexing thing, and I think about this a lot: the whole notion of accreditation, what standards you have to have access to privates. It should be about savvy, it should be about understanding of the product, risk tolerance; it shouldn't be nanny state, you know, "you're rich and you're not," which it has been forever, the millionaires' rule.
Just think broadly as you think through these things, right? Personally, I've raised this through the building, the SROs, and other agencies. In a world where you can queue up AI and get really sophisticated analyses that used to require a financial professional, think about other ways to get access without divorcing it from any sort of control. I'm not suggesting it should be like the over-the-counter markets or anything.
Without addressing anybody's specific filing, because there are a few that have come out relating to the retailization of private assets, whether it be private credit or the equity of private companies, including the one you mentioned, the things that we in disclosure think about in that regard is obviously lining up the liquidity with the type of vehicle that you're investing in. Obviously, for most of these assets, it makes a whole lot more sense to put them into BDCs or into closed-end funds. BDCs for the last 25 years that I've been doing this have been the primary vehicle for private credit. But again, there are also some vehicles that are looking to put private equity into their closed-end funds, which has been interesting.
The things that we're thinking about there: obviously valuation is always an important thing that we're always thinking about, and I think that the other thing is how you're structuring how you're getting access to the private assets. Whether you're holding something directly, whether you're holding it through an SPV, or whether you're holding it through an SPV where you get indirect interest or a contract to get some interest. It's very important to us that that information be laid out transparently for investors to understand. So an investor would understand: do you hold Company X, or do you hold an SPV that holds another SPV that holds a contract to possibly in the future get Company X? The differences matter. So in financial statement disclosure, we ask folks to make it clear what the unit of account is for the asset that they are in fact holding, with an allowance to allow them to say this is a vehicle that holds X—
Not specifically the company.
Oh gosh, I didn't accomplish that really quick. We'll save you from that. But just two or three weeks ago, we had a roundtable on this which wound up being somewhat prescient about the challenges of fair value, liquidity, and retailization. That's actually now up. It's fairly short—two panels, 45 minutes each, all-star cast of outside experts. If you ever want to spin through that, that's worthwhile.
We're definitely attuned to this tension out there between retail access, liquidity, and valuation. It's all one continuum or one interlocked web, or whatever metaphor you want to use. Not to just throw out another catchy term, but tokenization, as it rolls out, will actually impact the private space, or could impact the private space, in a much more dramatic way. On the listed equity side, it's just going to make the plumbing better. But on the private side—and I've now gotten into the depths of the private side—the transparency, the ability for smart contracts, all this other stuff should help, I would hope, as far as investor understanding of the things that they're owning, liquidity issues, being able to measure what's out there, fungibility, and everything else. So, just a wait-and-see on that. I think you're going to see some leaps and bounds improvements.
Rachel, why don't we close with you, but what's ahead for us in the Chief Counsel world?
Like I mentioned earlier, we can't talk about everything we're working on. That's a problem. But the engagement is there, and like I said, we're following up a lot on some of the questions we've been presented with on the retailization that you were talking about. We are looking at valuation questions and so forth that would follow up from, for instance, the streamlined co-investment relief that we issued earlier last year, which is going to bring more opportunities for BDCs and closed-end funds to enter into different kinds of assets. As they invest alongside their affiliated private funds, they have access to different assets. So more retailization of certain assets, which is good, but we again always have that tension with investor protection. The next step is clarification of existing rules so that our registrants can continue to function through FAQs, no-action letters, and if there's something novel, probably exemptive apps.
So, Dan, I know this is called SEC Speaks, but it's also SEC Listens. You want to close out? What should we listen to?
Wow, this is awesome. Is it my 30th time doing this? It's SEC Speaks, and I usually try to get a word in edgewise and don't get it. Thank you. Look, I think I've spoken my mind on things you guys have brought up. I think the e-delivery thing is just massive, and I know it's a huge rulemaking literally. So please, any progress there I think is huge. I do think the retailization thing obviously—approach it, I know you're coordinating with the other divisions. But it is kind of fascinating how it all links together, like this private valuation issue. You're going to need Trading and Markets to think through some of the market structure issues there, which they're doing already I think, and also for the listed markets.
Valuation: at the end of the day, and Rachel I think hit it perfectly, the investor protection side of valuation is so massive, and the investor confidence. I was on the Commission when Chair White gave a speech, I think it was at Stanford, and she—I don't know, maybe one of you wrote it—it was about just thrashed valuations for private securities held through some investment companies. The run on some of these asset managers, the impact was just like a nuclear bomb went off. In a way, it's a third rail; it's so sensitive, it has to be right. If folks question that valuation, they don't come, and they leave, which we saw—gosh, it must have been like 2015 or something when she gave that speech.
So I think the valuation issue is massive. Any refinements to existing guidance would be appreciated. Recognition of the new technology and how that impacts valuation I think would be huge. Other than that, again, I'm a Trading and Markets person by nature, but have had the occasion over the last year to work with the staff, and I can't say enough. Kudos to all of you. It's been a bit of a tumultuous time, and I know you've lost some staff, government shutdowns, and all this stuff, but the work continues. I think that's something that you can say about the whole agency, right? At the end of the day, the agency's been through some rough times, but the work continues, and I think you guys are doing a great job. I stole one of your staffers, Aaron Elias, and he's amazing. It's so nice to have an IM—
You're not bitter about that at all.
Yeah, sorry, I stole one of your best ones. But it's so great to have a real—I can play IM sometimes, but I'm not a real IM practitioner. When you have one in-house, it's kind of an amazing thing. So kudos to the division and keep up the good work.
Well, we have this way of thanking people now who give a service in IM, and we have these challenge coins that we had minted. They're using Director dollars, not taxpayer dollars, just to be clear. So we'll just pass this down. Maybe you can take a look at it. Thank you so much for coming today and working with us. We have a snazzy little slogan on the back:
"Best regs for your nest eggs."
