- SEC Commissioner Hester Pierce calls out the SEC over the decline of genuine engagement with the public
- Pierce highlighted ways in which the SEC is culpable for the dwindling engagement
- She also preferred solutions to the SEC, Commission staff, and Market Participants
SEC Commissioner Hester Pierce, nicknamed Crypto Mom for her support for the digital assets industry, has slammed the SEC for “the dwindling of genuine Commission and staff engagement with the public.” She made this known in her speech at the SEC Speaks – an annual program that updates the public on the prospects and priorities at the SEC. Pierce categorically said that the SEC is to blame and went ahead to point out how the SEC has contributed to the engagement problem.
Commissioner Pierce began by decrying the “very broad proposals” from the Commission with “unreasonably short comment periods” and narrow final rules consisting of elements that the public did not comment on. She also pointed out poor SEC engagement in implementation discussions as part of the Commission’s failings.
As a practical example, she cited the “recent money-market fund rule” which, according to her, went out with “an unworkable swing-pricing element and emerged with a mandatory liquidity fee.”
“Had the Commission sought robust comment on the fee before adopting it, we would have learned that it is unworkable for many funds,” Pierce said.
She urged the Commission to view each rule as an opportunity to engage the public in a discussion that will develop the best solution to a problem instead of implementing a negotiation strategy that frightens the public into accepting an unworkable final rule.
Pierce also stated that the Commission’s daily operation does not have to follow the conventional notice-and-comment rulemaking process. She admitted that public interactions with the regulator are usually not stress-free, however, the Commission’s “Come in and talk to us” mantra was an invitation to the public to work through difficult issues.
People reach out to the Commission with complex regulatory issues and questions on how the law affects their particular facts and circumstances. But unfortunately, the SEC staff made itself inaccessible even when the public had many opportunities to engage. To address that challenge, Pierce proposed more public events to identify these problems and provide solutions.
“Second, we should use concept releases, public roundtables, and potentially consensus workshops to help us identify problems in need of solving and workable solutions.”
The Commissioner was particularly worried about how the SEC scares people from coming in and having a conversation. She stated that people desperately want to engage the staff in substantive discussions but worry that they may earn themselves a call for enforcement instead of the “concerted effort to work through complex regulatory issues.”
Pierce added that the Commission’s announcement of a large expansion of its cyber- and crypto enforcement unit, the unequivocal statements that the crypto industry is lawless, and its handling of cyber incidents as fertile ground for enforcement actions have exacerbated the public’s fears of engaging the regulator.
The Commissioner provided various solutions to this engagement chasm between the SEC (and its staff) and the public. She suggested that the SEC narrow the rule-making agenda so they and the public can focus appropriately on each rule proposal. She also advised the regulator to propose realistic rules without clickbait.
Pierce also called on the Commission to form an advisory committee consisting of chief compliance officers who she thinks better understand how rules really work. In addition, she urged the Commission to encourage the staff to apply their expertise in tackling difficult regulatory issues, including the application of existing rules to new technologies. She also highlighted the roles of the Commission staff and market participants’ roles in fostering this dwindling engagement.
Commissioner Pierce has been at the forefront of speaking out for the crypto industry which has long been downtrodden by the SEC. She also released a similar statement denouncing the SEC’s decade-long blockage of the spot bitcoin ETFs following their approval.