Oversight of the U.S. Securities and Exchange Commission: Wall Street’s Cop Is... (EventID=114113)

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Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Tuesday, October 5, 2021, at 12:00 p.m. (ET) full Committee Chairwoman Waters and Ranking Member McHenry will host a virtual hearing entitled, “Oversight of the U.S. Securities and Exchange Commission: Wall Street’s Cop Is Finally Back on the Beat." - - - - - - - - Witnesses for this one-panel hearing will be: • The Honorable Gary Gensler, Chair, Securities and Exchange Commission The SEC’s Authorities and Functions During the peak of the Great Depression, Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934, which created the Securities Exchange Commission (SEC). The SEC’s stated mission is to: (1) protect investors; (2) maintain fair, orderly, and efficient markets; and (3) facilitate capital formation. The SEC fulfills its mission through rulemaking, supervision, and enforcement. The SEC oversees more than 28,000 market entities, including investment advisers, investment companies, broker-dealers, national securities exchanges, credit rating agencies, clearing agencies, the Financial Industry Regulatory Authority (FINRA), the Public Company Accounting Oversight Board (PCAOB), the Municipal Securities Rulemaking Board (MSRB), and the Financial Accounting Standards Board (FASB). The SEC oversees more than $100 trillion in securities trading annually, and intakes the disclosures of around 7,400 reporting companies, including more than 4,000 exchange-listed public companies. The SEC has an annual budget of around $2 billion that supports approximately 4,500 employees across its headquarters and 11 regional offices. The agency’s largest program divisions are Enforcement, Examinations, Corporation Finance, Trading and Markets, Investment Management, and Economic and Risk Analysis. Smaller program offices include the Investor Education and Advocacy, Investor Advocate, Credit Ratings, the Chief Accountant, and the Office of Minority and Women Inclusion (OMWI), among others. Budget Request for FY 2023 According to the SEC’s FY 2023 budget request, the number of SEC staff decreased by about 4% since FY 2016 when the SEC had 4,650 staff. For FY 2023, the SEC is requesting $2.169 billion in support of 5,268 positions and 4,913 full-time equivalents. The SEC’s funding is deficit-neutral as appropriated funds are fully offset by transaction fees. The SEC’s budget request states that it is requesting an 8.8% increase in the agency’s funding as compared to FY 2022 in order to address key priority areas. The budget request further explains that this funding level is needed to hire additional agency personnel to oversee increasingly complex and growing financial markets that are expanding across borders and asset classes, including digital assets. Market Structure The SEC is statutorily directed to maintain fair and orderly capital markets. Capital market structure issues relate to the “plumbing” behind how a company raises capital from investors in U.S. financial markets. The recent “meme stock” market events have led to a renewed examination of the U.S. market structure to identify potential regulatory gaps. The Committee held three oversight hearings this year, including receiving testimony from SEC Chair Gensler, to examine these events. The SEC is also engaged in a review of these aspects of the market structure. Below are some examples of policy considerations related to these market events. Transparency in short-selling. Volatility surrounding the trading of GameStop and other meme stocks, the resulting “short squeeze” in January 2021, and the collapse of the “family office” Archegos, elicited industry and investor advocate support for increased market transparency, including heightened 13F reporting requirements and short sale reporting. 13F reports are filed by, and contain information regarding, large institutional investors’ holdings of securities and detail the equity holdings of such institutions on a quarterly basis. These reports, however, do not contain information on short or derivatives positions. The collapse of the Archegos fund occurred when it appeared that some market participants were engaged in sophisticated forms of short-selling. Archegos also used highly leveraged derivatives products. In July 2021, as a response to meme stocks volatility and the Archegos collapse, the Committee passed H.R. 4618, the “Short Sale Transparency and Market Fairness Act,” led by Chairwoman Maxine Waters, which authorizes the SEC to revise the reporting period for 13F disclosures from quarterly to monthly; shortens the time period to submit such reports; expands the list of items to be disclosed to include certain... Hearing page: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=408475