Regulatory Clarity and Modernization

In this episode of the SIFMA Podcast, host Saima Ahmed brings you two conversations from the 2026 SIFMA Compliance & Legal Annual Seminar focused on regulatory clarity and the practical path toward modernization. As firms navigate rapid technological change, evolving market structures, and the growing adoption of digital assets, regulators and market participants alike are reassessing how existing frameworks apply in today’s markets. Featuring SEC Chairman Paul Atkins in conversation with SIFMA President & CEO Kenneth E. Bentsen, Jr., and SEC Commissioner Hester Peirce with Morgan Stanley Chief Legal Officer Eric Grossman, this episode explores the SEC’s evolving approach to rulemaking, enforcement, innovation, and market modernization.

In This Episode

• SEC Chairman Paul Atkins outlines the SEC’s “Advance, Clarify, Transform” regulatory agenda
• Discussion on modernization of legacy SEC rules and regulatory frameworks
• Perspectives on digital assets, tokenization, and the future of crypto regulation
• The SEC and CFTC’s efforts to improve coordination and reduce regulatory overlap
• Commissioner Hester Peirce on innovation, compliance, and regulatory clarity
• How AI is reshaping compliance, surveillance, examinations, and market oversight
• Evolving approaches to enforcement, recordkeeping, and off-channel communications
• The future of market structure, investor protection, and capital markets modernization

Featured Guests

Kenneth E. Bentsen Jr.
President and CEO, SIFMA

Chairman Paul Atkins
SEC

Eric Grossman
Executive Vice President, Chief Legal Officer and Chief Administrative Officer, Morgan Stanley

Commissioner Hester Peirce
SEC

Transcript

(Edited for Clarity)

Saima Ahmed: Welcome to the SIFMA podcast. I’m your host, Saima Ahmed. Today’s episode brings you two conversations from the 2026 SIFMA Compliance and Legal Annual Seminar focused on regulatory clarity and the practical path towards modernization. Across the industry, firms are navigating a period of active transition. New technologies, evolving market structures, and areas like digital assets are challenging how existing regulatory frameworks are applied in practice. At the same time, there is a growing opportunity to modernize by aligning regulatory requirements more closely with how markets operate today and how compliance systems function in reality. In this episode, we hear directly from leaders at the SEC on how that approach is taking shape. We begin with SEC Chairman Paul Atkins in conversation with CIFMA president and CEO Ken Benson. Chairman Atkins outlines the Commission’s approach to regulatory modernization, focused on advanced rulemaking in new areas, clarifying expectations for existing obligations, and updating legacy requirements that may no longer reflect current market practices. Their discussion also touches on coordination with the CFTC, the importance of predictability in enforcement and oversight, and how the SEC is approaching evolving areas such as digital assets. Let’s listen.

Kenneth E. Bentsen Jr.: Thank you, Saima. And Mr. Chairman, thank you for being here. I think it’s been four years since we’ve had the chairman of the Securities and Exchange Commission at the C&L conference, which has been a standard, so it’s great to have you back. And I before we get started, I I I do want to I want to congratulate Mark and the planning committee for all the work they’ve done to put this together and make yet another great event. This is the largest C&L that we’ve had since before the pandemic, so we’re great. It’s great to be back at that level. I want to thank Karen for running the C&L, and I want to thank all of our sponsors and exhibitors and encourage you to please go visit the exhibitors. We can’t put this on without their participation. And then lastly, I just want to thank my staff, our staff at SIFMA, for all the work they do. Sal and Michelle, Cheryl’s marketing team. They spend the whole year planning this. So it’s because of them that this all comes off. So I do want to thank them. That’s great. So we had prepared a number of questions working with your staff, which are which we will get to, but then but then you’ve been doing a lot at the commission over the last well, you’ve been doing a lot over the last year, but in the last couple of weeks you’ve been doing quite a bit. And of course, last week you gave a speech at the SEC Speaks, and I I want to hit on a few things that were consistent with the questions that we had. And maybe I’ll I’ll I’ll frame it in a couple of things. I mean you so you laid out what you called, I don’t know if it’s the ACT, which makes me think of when my kids were going to college, we’re long past that now, or act, but so you you you could I was not at the speech, so I don’t know how you how you how you pronounce it. But maybe in a framing question, and then we can dig into it, in your full of a room full of compliance officials, lawyers, general counsel, and others. How are you, how are you framing, what do you what is that speech trying to frame out, how you’re running the commission?

Atkins: Well thanks Ken, and it’s great to be here with you all, and there’s a lot to talk about, obviously, and we have a big agenda, of course, at the SEC. It’s not quite a year, I’m about at the 11th month mark now. So this calendar year will be very busy with a lot of proposals. So you all, we’re waiting for your comments and all of that as it comes out. But basically, ACT is meant to be ACT. ACT is meant to, as a verb, be an active sort of symbol, and so it’s advance, clarify, and transform. So everything that we’re doing this year will be falling into those three types of verbs. And so advance means to modernize, we’re trying to update our rule book and of course with crypto and other sorts of things like that. I kind of described the SEC’s approach here over the last several years as first ostrich with the head in the sand, hoping all this would go away, and then finally regulation through enforcement, which is not the way to do it. So anyway, as we all know. So we’re changing that. We are going to forge new rules that will be bespoke and apt for all of these new products. Secondly, clarify. We know that it’s very difficult, especially for you all, when you’re trying to advise your clients how and where things fall, like SEC, CFTC, and all of that. Is it a security, is it a commodity, or whatnot. So we’re out to clarify our rule book to make it clear to people how to act as far as their business goes, and then finally transform. So we’ve allowed our rule book to really get very heavy with all sorts of rules over the last many decades. No one has gone through to do a spring cleaning. So we have an attic, basement, and garage that really needs to be cleaned out, and so that’s what we’re setting out to do. It’s a big agenda. The SEC has never gone through SK to weed things out of there, but our focus is materiality, financial materiality, and have everything centered around that as our North Star.

Bentsen: So so it you in and we’re gonna dig into the rule book in in just a second. I I want to, you know, you mentioned that speech as well. You know, another thing that you did with your counterpart CFTC Chairman Seelig maybe a week before, where the SEC and CFTC entered into a memorandum of understanding, yet another memorandum of understanding. I I was involved with the back end of Shad Johnson a long time ago in a different career. But  and and but you referenced in your speech about you know dual registrants and go through it, but you know, um kind of in a no man’s land or whatever in between the two agencies. Maybe talk about what you’re thinking about, what you and Chairman Seelig are thinking about in terms of this MOU and how the two agencies are going to try and coordinate going forward. Great, yes.

Atkins: Well, this is to me very important because back when I was a commissioner, Walt Lucan, who was commissioner at the CFTC, and I were we were the liaison between the two agencies respectively. And so um it came to our attention that there was a memorandum of understanding, a draft one that had been kind of kicking around between the two agencies regarding examinations and about you know collaborating for examinations so there wouldn’t be duplicative things or or the two agencies asking for you know the same kind of information but with respect to two different time periods or in different formats or whatnot. So it seemed like you know just an evident thing that we ought to be able to coordinate. But it had gotten gummed up in the bureaucracy and the two examination groups at the two agencies just were not really talking to each other. So it took us basically to like force it and to be done. It was signed, but I’m not sure how well that was put into how well it was implemented. So anyway, we’re now at an incomparable time in the history of the two agencies, where you know the president appointed Mike to be chairman of the CFTC, which is wonderful. So he came from my office, obviously, he was the chief counsel for the crypto task force, and Hester Peirce recruited him in um from a law firm. And so Mike is great, and so he’s at the CFTC now, but our goal is to really mesh the two agencies so that there is clarity as to who is looking at what, and and where there’s not, you know, we’re gonna have an open door and try to, because there’ll inevitably be products that come in that will fall through whatever crack is as detailed as we might want to make it. So basically, if we can ultimately have a mutual recognition of the super app is what I’m you know calling it, where you know people are registered with either one, that it shouldn’t matter ultimately, and that um there will be not this no man’s land. I like to describe it historically as two fortresses with a no man’s land in between. And so into the no man’s land come various products that are are you know get basically killed in the crossfire. So portfolio margining from back in the 90s um is just one example, single stock futures and that sort of thing. So there should be no excuse for that. I mean, so as we are approaching a rule book to really try to mesh them together, um our goal is to make it seamless and um with you know mutual recognition and so forth.

Bentsen: I’m gonna segue into digital assets and crypto, but, you know, as you mentioned that no man’s land, and you know, I mentioned Shad Johnson and we went through Commodities Futures Modernization and then Dodd Frank Title VII. Still a little bit of no man’s land in the in the swap space between the between the two agencies and the SEC, well the CFTC has been cleaning out some of their things, the SEC is still promulgating some of theirs. You see some more coordination in this in the Title VII swaps rules between the two agencies as part of this effort?

Atkins: Oh, absolutely, and I just I come with a lot of personal experience with swaps reporting and it’s messed up on both sides. You know, the the agencies um have asked for the kitchen sink to be thrown in with hundreds of fields and whatnot, and so nobody does everything perfectly. And so then it’s no wonder that actually no one really uses the data because they uh don’t think that it has integrity. So, what I’d love to do is get it whittled down so everything is you know very uh buttoned down, and that we get the minimum dose of uh of uh regulation and reporting for what we need and uh no more and no less. And then that may change over time, but let’s get it so that reporting uh of the data uh yields uh a group a reservoir of data that has integrity, and then our economists and and the uh staff, the enforcement folks or whoever can use it uh as uh you know with with confidence.

Bentsen: So, you know, pivoting over to uh uh digital assets, um, which you referenced and you talked about in your speech, and you talk about rather than regulation by enforcement, uh the SEC wants to act, and obviously the CFTC is talking about acting, Congress is talking about acting, although you’ve set up the crypto task force uh which we’ve met with many times. I think we’ve SITMA itself has put in maybe five or six submissions. We have another one coming in soon. Um you’ve been talking about uh innovation exemptions, uh, and we’ve talked about this before. What how do you see that playing out? Uh, and and how are you thinking about balancing exemptions with preserving the you know you know fundamental foundational uh investor protection rules we have in the securities markets? And how are you thinking beyond the task force in terms of you know getting comment from the you know from the public in terms of what you’re thinking of doing?

Atkins: Well, so the innovation exemption, you know, we haven’t actually publicized, put it out for publication yet for people to look at, but just uh consider it as a kind of a limited time uh frame for people to test run a new product. And it’s basically aimed at some of the uh 34 act uh issues um that uh everybody has with respect to uh new products, particularly in the digital asset space. So it’ll be limited in time and amount of uh you know uh assets or money that’s uh um involved and number of offerees or whatever. And so we’ll come up with that framework. We’re working on that now, and that should be out soon. But it’s not a replacement for everything. It’s uh so we want uh people to be able to uh test and do a proof of concept, and that could be for traditional financial firms, it can be for a guy working in his garage, uh, you know, who has a new idea or whatever, but uh you know there’ll be notice filing and and whatnot, but it needs to have a the framework is you know set, will be set out for people, and then they can and there is a limited time, like I said, an off-ramp for it, so it’s not forever. Um but I think that’s something obviously the SEC has not done uh before, and um and uh you know, so I think as we work and particularly together with the CFTC, I think that’ll be a real benefit for the marketplace and for innovation as well.

Bentsen: How are you thinking? You know, looking down the road, um uh let’s say Congress passes legislation that creates some clarity, let’s say, you know, the SEC, CFTC write rules based upon existing and perhaps future statutes that provides you know clarity as to you know what’s a security, what’s a commodity, what’s something else, who has jurisdiction. How are you thinking, how’s the commission thinking about traditional financial firms, broker dealers, asset managers, um, and their compliance responsibilities with respect to these new products? Um, because that’s something I hear from our members, people in this room, frontline uh you know, uh wealth management managers, et cetera. How are you all thinking about that in terms of providing clarity to uh your regulated entities?

Atkins: Yeah, well, so that’s important, and obviously we’re not gonna throw out the rule book. We have a statute, uh several statutes to uh abide by. Uh but um you know at the same time, you know, if we go back to advance, clarify, and transform, uh, you know, we need to uh look to the future and uh uh different uh more efficient ways of doing things. And maybe that will um not be uh you know music to some uh ears because uh you know there’s a possibility of disintermediation and that sort of thing, depending on how things work out. Um but uh you know that’s I’m agnostic to that, I think one must be. But I mean certain precepts I think are very important. That’s uh you know, the uh MBBO, for example. Um we’re gonna have to, that is really important, liquidity, uh and to have um you know a rule book that is uh predictable and understandable and and people can abide by with clear clear rules. So yeah, we’re not uh gonna throw everything out the door. Um but at the same time, we need to advance, we need to transform our uh current state of regulation to something that’s fit for the 21st century and beyond.

Bentsen: I want to shift gears, I’ll go back to your speech again. I’m gonna go to the T transform. Um uh you talked about uh you know on the rule book and you and uh in one area you talked about um 17A4 and uh uh e-communications. Uh this has been an ongoing issue for many years that the industry’s had to deal with. How are you how are you in the commission thinking about the scope of retention that’s required today? And how can we? I mean again, it’s it goes back to your fit for purpose and in and the and the like of you know rules that were maybe written for a different time before smartphones, before uh email. Uh how are you all thinking about that? How can we how can we get to a better place there?

Atkins: Well, you know, again, so that whole saga, I think, is uh you know uh is an example of how a regulator should not act. I think it was um, you know, basically once you identify a problem, I mean, the first one out of the box, I mean, that’s one thing, um, and I don’t know all the ins and outs of that first um uh enforcement action, of course, other than what was made public. But after that, you do a sweep, and then you find that just about every single um firm uh in the street, particularly with a uh with the perfect storm of COVID having hit, the SEC going to make uh special dispensations for people to trade from home or to do whatever. Um, and then it’s no wonder that uh you know clients who had personal cell phones and cell phone numbers or whatnot, that business would be transacted that way in certain uh uh cases. And particularly since there has there was never any example of untoward behavior that came out of all of these um investigations, and you know, towards the end of it, I think uh there was not much investigation that was done from what you know I personally saw was okay, you know, can you account for all your records? Well, kind of, sort of, maybe. Okay, that’s not good enough. Uh, you know, then uh you know, what are your revenues? Okay, here’s your ticket. Uh so that’s just not the way a real regulator should work. You see that there’s widespread problem in the industry, and by the way, you yourself as a regulator have the exact same problem uh with uh retention of documents under the Federal Records Act and things like that. So um, like the school teacher, you wrap the ruler on the table and say, Class, you’re out of order, sit up straight, feet on the floor, um, you know, you have six months or whatever it is to um to figure this out, and uh we’ll help you, we’ll do roundtables or whatever. But a regulator uh you know should be out there to try to have people comply. And uh as we all know, uh with respect to you know these communications and the devices and track them all, um, it’s easier said than done. So anyway, so I think the industry uh uh really uh turned over like a mountain to try to get things done in the amount of time that uh was allotted them, you know, once these uh uh enforcement actions started to fly. But just suffice it to say, I don’t think that was the SEC’s finest hour. So thanks.

Bentsen: A lot of support for that here. So you should I just I just know of my own experience of talking to executives when they’re dealing with that issue and and they’re not clapping, but they’re they’re they’re not happy and and and and all. I I want to stay on the E. By the way, you made the point about you know, during the pandemic and the you know, when you know all of a sudden you you went from having you know five trading desks to 5,000 trading desks during whatever. That that’s a that was tremendous resiliency of the industry that didn’t miss a beat. And so you know you would hope that you don’t get a speeding ticket in the process of trying to keep the markets moving and the economy going forward. So I appreciate the reference to that. That’s exactly what happened. It’s really really sad. So saying on the E, you you also mentioned in your uh in your speech last week uh the fact that we’re still sending uh you know uh prospectuses, confirms, and all by you know, by mail, which and and and uh um as the default option. Um and if you think about you know, if you think about transition to you know uh DLT tokenization on-chain, that’s gonna be very hard to uh comply with that. What’s the commission thinking about e-delivery?

Atkins: Yeah, well we’ll be tackling that here this year. You’ll soon see uh a proposal that way, but uh anyway, so I won’t front run the commission on that. But uh yeah, it’s it’s long overdue. It uh makes a lot of sense uh to uh uh could people don’t read this stuff, and especially uh I did uh back-to-back hearings on the Hill for uh Oversight House and uh Senate uh committees and so I carried along with me the energy um uh 10K which is it weighs in at 970 some odd pages. So you know I dare anyone to go through that to figure out what’s there. But I mean all these things, I mean that’s just one example 10Ks but other things for mutual funds and whatnot uh you know these things wind up in the garbage can.

Bentsen: But you know for those who want uh at least my view is uh for those who want to have it in paper form uh you know they can opt in on it but uh have you know I’ve seen warehouses stocked full of these things that have to be uh sent out by large uh mutual funds and others um and it’s uh you know it’s a lot of paper that gets uh done and plus postage and everything else great great uh so um let me shift from E to C and uh uh which is uh collateral consequences and waiver reform the commission corporate finance recently put out some guidance around that how is the commission thinking about uh about that issue and and long and particularly is there a way to think about it long term so we don’t sort of ping pong back and forth between the different interpretations well so as with anything yeah uh sustainability in the true sense of the term I won’t use it in the other more modern whatever uh sense of it but to have a rule sustainable so that they don’t you know it’s not it’s like a ping pong is very important.

Atkins: But here on this one uh you know there are uh it has gone back and forth on it but I think it uh it goes as a matter of course if somebody is negotiating uh with um the uh commission uh for you know for whatever uh issue there is uh there ought to be uh you ought to know up front uh exactly what the package looks like. I think that’s only common sense and due process.

Bentsen: So we have changed that and uh you know we now have uh you know if it’s a bad boy uh waiver someone needs or whatever uh it might be we’ll have that considered and presented to the commission by the enforcement staff uh you know when the uh settlement is is decided um we have a couple of minutes left maybe do a quick lightning round uh um uh reg SP implementation I know we’ve talked about that before um SK we won’t talk about it we don’t have enough time to talk about that but I know that that’s in the speech if you haven’t read it but reg SP on on incident response are you all thinking about that and and and and how firms should think about it in terms of compliance obligations.

Chairman Paul Atkins: 24:41
Yeah well so there that’s another example of a lot of complexity and you know we’ll be looking at that and you know uh there’s been a lot of uh discussion of course in the industry about it but uh yeah there ought to be you know a a clear line there that’s we’ll have to be looking at that consolidated audit trail commission approved the funding scheme for two years but you said you all are gonna come in and make big changes on it.

Bentsen: Right.

Atkins: Well here is another example of incredible lack of real project management. Frankly this uh when I came in office the burn rate the annual burn rate for CAT $250 uh million dollars a year so I said right off we have to be uh under um under a hundred million uh and so we have now cut it down it’s ish about 115 uh we still have more to go of course but uh you know it’s we have to secure the funding model we’ve uh gotten with lost in court on that one of course so anyway so it’s it’s been a mission creep over that over the last uh whatever 15 years and so uh you know the former commissioners uh there tell me that we didn’t vote for this we didn’t vote for this but uh anyway uh so we’ll get it pared down uh to where you know we should get uh what we need to have uh we have to replace the blue sheets at least but um you know that uh is there and then um you know get it uh sized uh and have a funding model that makes a lot of sense uh advisors think about complexity advisors act political contributions rule there’s been discussion with the we’ve had discussion with the staff and and and uh with Brian Daly over rethinking that issue is that something that is on the agenda that’s absolutely so yes uh that’s another one that uh is just begging to be uh resolved it’s a trap for the unwary there’s uh no real uh materiality or any other kind of uh limit and so and then we have constitutional questions with that as well free speech and whatnot so um you know we we will be addressing that uh as well this year so we’re we’re at time I just want to again I want to go back to your speech the speech starts with a reference to uh uh Bill Casey uh uh who who spoke at the first SEC speech um you know 50 whatever many years ago um uh not everyone in the room probably recalls this or not Bill Casey went on to become uh the you know head of the CIA is that uh that reference is that something that you’re looking forward to doing your next uh your next okay or or or or was this more of a historical reference yeah it’s more historical I’m not a spook I’m not a wannabe spook either so anyway but uh but uh anyway but we have more than enough to do with the SEC and Bill Casey was he did a lot in his short relatively short time at the SEC Wells Committee and all of that stuff so due process so he’s a really good uh paradigm to follow at least and so we’ll be taking page from his book in in all sorts of ways but that’s another thing to modernize to get things uh ready here for the 21st century I think we have been uh you know dilatory too long and we’ll be uh we’ll be tackling it Mr.

Ahmed: Chairman thank you very much for being thank you everyone that was SEC Chairman Paul Atkins in conversation with Ken Bentsen, outlining a framework centered on clarity coordination and modernization our second conversation continues that discussion with a closer look at how these themes are being applied, particularly in areas where regulatory frameworks are still evolving. Next SEC Commissioner Hesford joins Morgan Stanley’s chief legal officer Eric Rosman their conversation explores the Commission’s evolving approach to digital asset regulation including efforts to establish clearer jurisdictional boundaries and move towards a more defined rules-based framework for areas such as tokenized securities they also discuss how the SEC is approaching innovation more broadly from the use of AI in examinations surveillance and analysis to the importance of technology neutral oversight and firm accountability in addition the conversation touches on the continued modernization of legacy regulatory frameworks including record keeping and communications oversight as well as how the commission is thinking about enforcement priorities and supervisory tools.

Eric Grossman: Here is Commissioner Hester Peirce in conversation with our prospect I think I I speak for uh the Commissioner and say we’re we’re super surprised and pleased that there’s so many of you here at eight o’clock on the third day. I got here last night at midnight and there were uh still people uh very much very much uh still ordering pizza and uh very alive and engaged so yes happy you’re here um uh here’s where I thought I’d start uh you’re you’re pretty long serving eight years yeah yeah uh third chair I can’t well accounting acting probably more than that okay so more than that um currently uh three of you all Republican appointed uh I was poking around on the SDC’s website yesterday just to see what I could find a little tidbits and I found it let’s see if I can open it up on my phone. I found this um I said well let me go to the commissioner section. And at the commissioner section it says uh Securities and Exchange Commission has five commissioners who are appointed by the President of the United States with the advice and consent of the Senate. You have three now yes terms last five years and are staggered so that one Commissioner’s term ends on June 5th of each year. The chair and commissioners may continue to serve up to approximately 18 months after terms expire if they are not replaced your your your terms expired right you’re serving. And then I saw this line to ensure that the Commission remains nonpartisan no more than three commissioners may belong to the same political party. And then it goes on to say the President also designates one of the commissioners as chair you’ve now eight years uh more than three chairs. We’ve seen uh for those of us who have been in the industry for 30 years like me we’ve seen a clear sort of shift from an outsider’s perspective in terms of how the commission uh carries out its work uh and uh and sort of uh commission votes and regulatory initiatives. I just thought just given your unique perch having having now worked for a bunch of chairs or not work for a bunch of chairs to work for them. Yeah yeah yeah yeah like give me that give me your perspective on that like is this is this the way it’s gonna be going forward um or do you think there’s a time where we we might get back to nonpartisanship or bipartisanship approach to rulemaking and the regulatory framework? I don’t know if you have a view.

Commissioner Hester Peirce: Well so first of all let me tell you that my views are my own views as a commissioner not necessarily those of the SEC or my fellow commissioners and certainly not um not the views of the president so ultimately the the the composition of the commission is up to the president and the Senate and so so there are empty spots now and and mine is is uh is fast on the way to being empty so I’m sure there’ll be some changes in the composition. I think we always benefit from a wide variety of views and and views that are passionately held. So I’ve enjoyed working with the full range of commissioners and and with all of the different chairmen and so I’m looking forward to seeing what the composition will look like a year from now it’ll be different than it is now. The working relationships between the the commissioners and the chair how can you give us a little insight from uh three years ago, four years ago to now is it is it is it well it’s different obviously different because I worked for Chairman Atkins when he was a commissioner and and so did Mark so we know each other well um based on that uh but I’ve I’ve enjoyed working with the different chairmen each has a different style I think the common theme between the the between Chairman Atkins and Chairman Gensler is both had um really un un I mean I they they just have so much energy so it’s just it’s just uh unbelievable how much energy they have and so they they share that now their agendas are a little different um so so that’s where where the where the difference comes and so I’m I think I think I think uh Chair Atkins got cheered by this crowd they heard on Monday.

Grossman: A lot of what he had to say was uh super well received by this crowd.

Peirce: Oh that’s great to hear yeah and so I mean clearly we’re gonna we’re gonna have differences um and and I had many lively debates with with Chair Gensler when he was there and um I you know there are there are lots of of difficult questions so we’re gonna have lots of debates even uh in today’s commission.

Grossman: If you think about and again I know your your your term is up but uh wow time goes quickly when you’re when you’re I assume when you’re at the SDC here we are almost approaching the midterm is painfully slow but yeah but but it feels like you know getting stuff done still takes quite a while um as you think about for for Chair Atkins and uh and and the staff uh is there enough time between now and uh the end of the the the president’s term to accomplish all the things that uh that you all would like to see done in the next uh you know in the next turn here?

Peirce: Well Chairman Atkins does have a a big agenda and there are just some things that need to get fixed and addressed that he’s really um put his emphasis on and so it’s a matter of priorities right when we try to get done as much as we can um and sometimes things arise that you don’t expect also so I can’t guarantee that the whole agenda will get finished but I can tell you that people are working extremely hard at the SEC the staff has been working very very hard and and so I expect we’ll see a lot of it getting done.

Grossman: So two topic I want to touch on um uh and and uh and it’s interesting it’s against the backdrop of of all that uh you all would like to do um in you know to to to fix things that that sort of need remediation in the what I would describe as the old world we’re now on the cusp of two sort of I think fundamental revolutions in the industry that we all practice. One is artificial intelligence and its introduction both in terms of um how we in in legal and compliance uh groups uh do our job to to fulfill our mission inside firms and then of course also how our firms are going to interact with the market and our clients that’s that’s one whole revolution and then of course there’s the the digital asset tokenization cryptocurrency revolution that it sort of feels like we are on the cusp of you’ve been early on the ladder crypto mom yeah like you’ve been there it sort of feels like we’re at breakout velocity but yet the statutory and regulatory framework for we’ll do crypto first if that’s okay is not yet like it’s not yet ready for that or am I wrong about that and how do you see it since you’ve been on this for so long like evolving over the next sort of two to three years?

Peirce: I think you’re right in the sense that we’re not where we should be because we took so long dithering around for all these years. And that’s why you know I said sometimes it’s painfully slow and I think it has been painfully slow when it comes to crypto because there are things that we could have done from the regulatory side to to create a more orderly environment for this industry to grow up and instead we you know sort of brought random enforcement actions um which is it’s not a great way of regulating it’s not protective of investors at the end of the day and so now we’re trying to write that ship we’re trying to take a more rational approach to how we do it and that’s involved listening to people and and and now we’re starting on the rulemakings as well. We we recently uh within the last week or so put out an interpretation kind of say along with the CFTC saying this is where we we see the different groups of of of crypto assets and now we really are focusing on the ones that are within our jurisdiction which is again something before we were trying to grab stuff that was outside of our jurisdiction. Can I just jump in how would you define the SEC’s jurisdiction in this space obviously when you take a traditional equity or fixed income instrument and you tokenize it that falls squarely within our space and you can also have a non-security and you can take it and you can put it into an investment contract and sell it and that transaction is within our space as well.

Grossman: So we’re trying to provide clarity there of what’s within what’s outside and now with with the stuff within you’re right there’s some things we have to work on on the on the regulatory side um statutory side as well that Congress is working on the Clarity Act and that will provide helpful framework but both we and the CFTC can do a lot using our existing authority which both agencies are trying to do you think we need the Clarity Act I mean it’s been a long obviously there’s a there’s a lot going on on Capitol Hill on this and I know that’s not your bellywick but do you think that sort of the the the regulatory agencies need the Clarity Act to actually deliver something that will allow the industry to really break out or do you think there’s enough right now?

Peirce: I mean I think it will be very helpful to have the Clarity Act it’ll provide the durability for for a lot of the things that that are important. So I think it’s it’ll be great to have it but there is a lot we can do and I think when you a lot of the interest has been in tokenizing traditional securities. And so when you think about that we really do have the authority that we need there. There’s some questions about how it applies and that’s what we’re wrestling with now and I think that’s um what the industry is wrestling with now to try to figure out what’s the best way to tokenize something how how are we going to integrate the non-tokenized side of things with the tokenized side of things we want to make sure that we have a unified market. Obviously the market is very good at arbitraging but we want to have we want to make sure that that it’s possible for people to do that. So these are the kinds of things that we’re we’re thinking about.

Grossman: How do you think about uh and I think you’ve commented on this before uh traditional finance I suspect that most of the not all now most of the people in this room work at firms that have been in the financial services industry for decades. But we got some new entrants in the market and of course uh I think one of the ways we talk about this at Morgan Stanley is it’s a fascinating time because we too have an opportunity to disrupt markets that we traditionally have not played in but we’re also at great risk of disruption ourselves if we’re not watching how this thing is evolving. And you’ve touched on this before. Are you concerned at all about the introduction of you and the other commissioners concerned about the introduction of new entrants into traditional financial services markets that do not have robust compliance frameworks or the culture that of course in many of these organizations has been developed over many decades of seeing both good and bad things happen and of course of having uh in our case in every major financial services firm a a track record of having been the subject of enforcement actions and then built robust compliance programs on the back of that. Are you does that scare you or do you see it as an opportunity? How are you thinking about that?

Peirce: Well I’m concerned about any firm incumbent or new entrant that doesn’t care about compliance. So of course that matters but I think that um you don’t have to be an old firm to care about compliance. And so what we can do as a regulator and what we have failed to do, what we had failed to do for so many years is to say to people who did care about compliance come in and talk to us and we’ll figure out how you can do something that’s commercially viable but that’s also consistent with our statutory mandates. And that’s what we’re trying to do now. And so whether you’re an incumbent firm that wants to do something new or you’re a new firm that wants to come into a new industry, we’re willing to work with you and and think about that. But you don’t get a pass on compliance just because you’re a new firm. You don’t get a pass on compliance just because you’re an old firm either.

Grossman: How are you thinking about uh uh sort of gatekeeping new firms on the way on the way into markets where the SDC traditionally has viewed itself as the the protector of market integrity and participants in the market is well we still view ourselves that way so so don’t fear that um I you know I think it’s we all know that believe me we all know that um I think it’s a a matter of of um you know looking at what is new and and where do people run into something in the existing regulatory structure that doesn’t make sense because the technology or new is new or the product is new and then we can think about that then we can think about how to get to a good place.

Peirce: We’re working on doing things in a way that is is protective and and um allows market people in the marketplace to experiment but also allows us to to have an eye on what they’re doing and to make sure that um that we’re we’re building the protections around it that we need to and so that’s where the tokenization exemption uh the innovation exemption that um that Chairman Atkins has talked about comes in we’re working on designing something that is um you know that is is volume limited that it has conditions around it to make sure that we have protections in place but also that that says hey we want people to experiment with new ways of of trading tokenized securities.

Grossman: So let’s let’s maybe jump to AI um I I can tell you again this uh uh speaking from a Morgan Stanley perspective we and I’m sure this is true for for all uh all the firms in this room we’re kind of on this now right it is it is an extraordinary opportunity I think uh for us to deliver particularly in the and I’ll just focus on the legal and compliance space for a moment to deliver uh uh way greater uh efficiency in terms of the kinds of things we do in surveillance um in uh legal documentation um in um in legal analysis and the like for sure and it’s coming and it’s here and if you spend any time in the Bay Area we no longer have to wait. Like the m for a long time it was like the we wait till the models are better. The models are good enough right now and there’s uh enormous opportunity and of course An appreciation in the Bay Area that this is a space that’s that’s that’s that’s really available for innovation and the like. Um the consequence of that will be, and this is I’m sure a bummer for sort of in a macro sense for folks, I think the the number of humans we’re gonna need to deliver the the the same quality output in the area of legal compliance that we have, no, it’s gonna be fewer. It just is going to be. Don’t know how many. Uh of course we’ll have greater efficiency, we’ll be able to do more, even if we have the existing population. But uh the human touch is gonna be meaningfully impacted on the go forward. And I’m just wondering at the at the commission, does that scare you? Are you are you are you focused on this? Are you is it something that the that we’re gonna be we should expect to be examined for? Introduction of AI into some of these traditional areas. How are you all thinking about that?

Peirce: I mean, I’m optimistic. Now, uh obviously we all look at AI and we’re wondering how is our future gonna be different, how what are the opportunities for the next generation gonna be, what are those gonna look like? And there’s there’s natural concern about that. But I think as a regulator, um, it’s really exciting, both for us as a regulator and in the the possibilities for us to um do more with with less because we use AI. Um, and so that’s something that I’m excited to see. We’ll be able to do more comprehensive exams using AI, we’ll be able to identify problems using AI that would have taken more time and do analysis more quickly. So some of the same things that that you’re talking about, I think those will be very helpful tools for the SEC will make us a better better regulator. On the industry side, um, I think unlike what the past, we we tried to do a rule sort of targeted to AI, and this was not AI and legal and compliance as much as AI and actually you know financial professionals using it, financial firms using it to serve their clients. Um and and that was a big flop. And part of the reason was it was sort of taking a very suspicious view of using any new technology, and that can’t be the right answer. So we want people to use new technology. The the bottom line is, of course, that you’re still responsible. So if your AI agent goes out and rips off one of your clients, um we or if your AI agent creates a bad uh legal template for you to comply with our regulations, you still get to be held responsible. So I guess there’s there’s that. Um but I do think it will make it will make firms better able to detect um bad acts bad actors in their own firms, um, to detect problems in in their own compliance. I think it will help you to to to do that more efficiently. That’s a good thing from my perspective. So, you know, just as I support firms having top-notch compliance personnel, I support them having top-notch technology to help them do those things.

Grossman: Just you touched on inside the SEC. Have the have have uh the tools been rolled out to the SEC staff?

Peirce: I mean, we’re working on it, right. But I think there’s a lot more potential there. And and so we have people who are thinking a lot more about that. You know, that’s their that’s their job to think about those things. So that’s I’m I’m really I think it will really transform the agency.

Grossman: Fantastic. Um uh a lot of the folks here when they got the uh original uh agenda from from uh from uh SIFMA were uh expecting and looking forward to hearing from the the then head of enforcement, Judge Ron. Uh you’re a fabulous consolation prize, yes, fabulous. But I suspect that their appetite, their appetite, this group’s appetite to understand a little bit about the enforcement agenda remains uh robust. Uh I s uh a bunch of people in this room uh make their living, either uh helping uh uh firms uh avoid spending time before the enforcement division, or helping firms navigate the enforcement division uh and deliver uh reasonable outcomes. So uh in the absence of of Judge Ryan, I’m just wondering if, and I I know you spent a lot of time at the at the uh commissioner level talking about this, how do you see the agenda on the on the go for it? You’ve you’ve you’ve had things to say about how the enforcement division has functioned in the past, and I’m just wondering if you can give us a window into that right now.

Peirce: Well, I think the top line message is that our enforcement division is still very much open for business, so um we are I suspect they know that. So so so um no, you should know that. Um you know we have a lot to do, and there’s there’s there are more violations that we can go after than time that we have. So again, this is probably another area where AI will be helpful to us, but but I think um we are the chairman has made it very clear that enforcement, good enforcement, enforcement where there has been real investor harm is a priority. I think there will be differences in the way that we pursue things from the way that it was before. I mean, one example is the off-channel communications cases, which I think were were really an example of what the agency should not be doing on the enforcement side, it’s that was not the right tool to use to address that problem. And so I think trying to figure out when it’s appropriate to use the enforcement tool, when it makes sense to resolve something through an exam, for example, if if if someone on the other side of an exam is working with the staff to try to resolve an issue, does it make sense to kick that over to enforcement? In many instances, probably not. Um and so just trying to figure out that right balance is is um what we’re working on, and I’m looking forward to uh to working continuing to work with the division under its new leadership.

Grossman: So just you you I couldn’t help my I can’t help myself. You you brought up the off-channel communication uh cases. Uh I suspect everyone here in the room uh shares my pain uh in that particular area. I will say um this is something uh that that that I personally know. I’ve been raising with the SEC for well over a decade that the rules have not kept up with the way people communicate. My hope had been on the back of those cases and with a a new chair and a new approach, we might uh we might get some sensible record-keeping rules that are consistent with the way business is currently done. Uh and and and I think the intention of the original rule was which is to make sure that you could capture the essence of the transaction, but that you didn’t need to keep the details of I was running late for the meeting, and uh so can you tell us, is there anything we can hope for here, like in in the in the foreseeable future? And do you have a can you give us a window into what that might look like?

Peirce: Well, I mean I think the record keeping rules do need to be looked at again in light of new technology, in light of the fact that a lot of conversations that were happening um orally are now happening in writing, and so that does make sense. And then trying to, you know, think about the investment advisor rules are slightly different than they are on the broker dealer side, so trying to trying to figure that out. And I think record keeping rules are not really a um you know a showstopper kind of uh agenda item, but I think they’re really important because they’re fundamental to your ability um to do your jobs, but also our ability to do ours. And so I think we will get to a better place on record keeping.

Grossman: Another area I think that’s that that has been a real source of um unhappiness is probably the right word, is the the tension between waivers and and case resolution. Um we ourselves here at Morgan Stanley, we resolved the case a couple of years ago where we actually couldn’t resolve it because we s we we really needed to condition the resolution on getting a waiver, but we couldn’t get the waiver before we settled, and then we had this sort of you know dance for a very, very extended period of time. What’s your view on that?

Commissioner Hester Peirce: 52:21
I mean that’s been extremely frustrating to me because obviously, if you’re a good lawyer, you need to know what the consequences of the settlement are gonna be, and part of the consequences depend on whether or not you’re gonna get a waiver. And um, so I think absolutely we should be making it clear to firms that so they know when they’re settling with us, what are the collateral consequences gonna be, am I gonna get a waiver? And so I think there’s um a desire to make sure that lawyers on the other side can do their job and can know what the outcome is and in appropriate instances can get waivers.

Grossman: So also on the agenda, you think for the the near term?

Peirce: Yeah, I mean I think there are different that I don’t that doesn’t require a rulemaking, right? Um but but yes, I think that that’s something that that we’re we’re keenly paying attention to.

Grossman: Not a lot of time left. Um I I what I thought I’d do is just give you an opportunity here in the last minute. Any message you want to share to this group to carry back to our firms, uh to our to our bosses ultimately, uh to our boards of directors, what the floor is yours for missing.

Peirce: First of all, thank you for for having me here. And and I will say, you know, this industry serves a lot of people, so if you keep as your as your North Star the need to help your fellow Americans um build their financial futures, I think you’ll be in a good place. I am excited about the new technologies coming online. Um I’m excited about tokenization, I’m excited about AI. And my my message really is this is not about pitting the incumbents against new entrants. This is about saying to everyone who’s interested in experimenting with these new things, come in and work with us. We want you to be able to do the things that you think will best serve your clients, and we want to work with you to enable that to happen in a way that’s sensible and rational and achieves your commercial objectives, but also is in line with our statutory objectives, which we continue to uh hold strong. So my doors open. As long as I’m still here, I would welcome the opportunity to speak with you.

Grossman: Well, let me let me just say on behalf of the folks uh in the group, uh thank you for today, uh, but thank you for your service to the nation and the industry. We really, really appreciate it. So thank you very much. Uh Commissioner Peirce.

Ahmed: You’ve been listening to two conversations from the 2026 SIFMA C&L Annual Seminar, featuring SEC Chairman Paul Atkins and Commissioner Hester Peirce. Together, these discussions reflect a regulatory environment focused on practical modernization, bringing greater clarity and coherence to existing frameworks while adapting to new technologies and market developments, including digital assets. For more insights from this seminar, visit sifma.org.