The Hill: Too much, too quickly from the SEC

The following op-ed was originally published in The Hill on April 15.

Judging by the first quarter, Washington’s policymaking center of gravity in 2022 may be the Securities and Exchange Commission (SEC), which issued 16 proposed rules in the first three months of the year. Only once in the 21st century has the SEC produced more first-quarter rules: 17 in 2011, driven by the Dodd-Frank Act following the global financial crisis.

Some proposals address areas in need of immediate action, but many others not necessarily so. Worse, the SEC has broken with precedent by giving the public fewer than 60 days to provide comments and cost-benefit analysis on most new rules. Rushing through multiple proposals simultaneously, without understanding their cumulative effect, increases the possibility of perverse outcomes. This is problematic enough in benign periods; amid persistent inflation, rising interest rates and geopolitical uncertainty, it is potentially risky to well-functioning capital markets.

The U.S. capital markets are critical for helping companies fund innovation and job creation; enabling governments to fund infrastructure and essential services; supporting the beneficiaries of pension funds; maintaining a steady flow of mortgage financing; and allowing all Americans to grow their retirement, educational and personal savings.

The capital markets are also among the most regulated sectors of our economy. As the primary regulator, the SEC’s mission is threefold: to protect investors, facilitate capital formation, and maintain the fair, orderly and efficient markets on which the first two elements depend. This work is too important to rush and not to get right.

According to Bloomberg, the SEC is “laying out one of the most ambitious agendas in [its] 87-year history.” Last fall, the SEC released its list of upcoming new rules with 54 separate items. And in just the past five months, the SEC issued 24 proposals making an array of changes to complicated securities laws and complex financial markets. Just 12 such proposals total roughly 3,500 pages of text and ask 2,200 separate questions.

The organization at which I have the privilege to serve as CEO supports the policy goals behind several of these rules, including shortening the settlement cycle, updating electronic record keeping, and enhancing disclosure of material climate risks. We believe that others are bad policy, unworkable as proposed or diverting resources away from more time-sensitive priorities, such as finalizing pending rules addressing digital assets and protection of customer data collected by the SEC’s Consolidated Audit Trail.

In all cases, we have been — and will remain — highly engaged in the rule-making process, submitting substantive, constructive comment letters. But we are limited in our ability to conduct a robust analysis and provide meaningful feedback by the SEC’s shortened comment periods.