Latest / Trillions / An Inside Look at the Trump SEC With Commissioner Hester Peirce

Transcript

An Inside Look at the Trump SEC With Commissioner Hester Peirce · Trillions

• 0:05
  Speaker 1: Welcome at Trillions.
• 0:06
  Speaker 2: I'm Joel Webber and I'm Eric Belchernas.
• 0:11
  Speaker 1: Eric. Today we are at the SEC interviewing a commissioner
• 0:15
  Speaker 1: who's been on the podcast before, Commissioner Hester Purse. I'm
• 0:19
  Speaker 1: really excited to talk to her because she's been a
• 0:21
  Speaker 1: fabulous interview twice already, and now we have a new
• 0:25
  Speaker 1: administration and she's got a role on it. But she's
• 0:28
  Speaker 1: not going to be here for that much longer. So
• 0:29
  Speaker 1: what are you most interested in talking to her about.
• 0:31
  Speaker 3: Yeah, well, for the past several years, she's been the
• 0:34
  Speaker 3: dissenting opinion. Well, now she's kind of in the she's
• 0:38
  Speaker 3: in the majority of the power position, and so I
• 0:40
  Speaker 3: bet she's excited and she's going to be able to
• 0:42
  Speaker 3: have a lot of influence. I think now, especially with
• 0:45
  Speaker 3: the new chairman coming in, it's probably way more aligned.
• 0:47
  Speaker 2: With her views. So it's Paul. It's interesting.
• 0:49
  Speaker 3: Just a lot of patients and now I think a
• 0:52
  Speaker 3: lot of their framework will be influenced by some of
• 0:56
  Speaker 3: the way she saw things that was in the minority
• 0:58
  Speaker 3: for several years. Obviously, crypto is a big one. Private assets,
• 1:02
  Speaker 3: the ETF share class. There's just so much.
• 1:04
  Speaker 2: Going on right now.
• 1:05
  Speaker 1: Regulation in general.
• 1:06
  Speaker 3: Just regulation in general. So yeah, it's it's really cool.
• 1:10
  Speaker 3: And by the way, you forget to mention, we're on
• 1:11
  Speaker 3: the tenth floor.
• 1:12
  Speaker 1: Tenth floor. We did it.
• 1:15
  Speaker 2: The commissioner, So.
• 1:17
  Speaker 3: If it's famous for people industry, you go, it's a
• 1:20
  Speaker 3: tenth tenth floor decision. So we're on the tenth floor
• 1:23
  Speaker 3: and it's pretty cool.
• 1:24
  Speaker 1: Joining us also Stacey Marie Ishmael, who's the head of
• 1:27
  Speaker 1: cross Assets and Crypto at Bloomberg News, this time on trillions.
• 1:35
  Speaker 1: SEC Commissioner Hester Perce Commissioner, Welcome back to Trillians.
• 1:41
  Speaker 4: It's great to be here.
• 1:43
  Speaker 1: Thanks for hosting us at the SEC, which is a
• 1:46
  Speaker 1: real privilege and treat. So we've had the privilege of
• 1:49
  Speaker 1: having you on Trillions. This is the third time, and
• 1:52
  Speaker 1: the first one was in the early days of the
• 1:54
  Speaker 1: pandemic and it has stuck with me that you were
• 1:56
  Speaker 1: baking banana bread with chocolate chip cookies at the time.
• 1:58
  Speaker 1: And then the next time we had on the podcast,
• 2:01
  Speaker 1: I asked a similar question. You said you were doing
• 2:03
  Speaker 1: ginger snaps, which also may have had like an internal
• 2:07
  Speaker 1: currency at the SEC, and I'm curious, what are you
• 2:09
  Speaker 1: baking now?
• 2:12
  Speaker 4: I'm just baking boring bread because we need to get
• 2:14
  Speaker 4: back to the basics.
• 2:16
  Speaker 1: Okay, how are the bread skills going?
• 2:19
  Speaker 4: I mean my bread skills. It's bread I like to eat.
• 2:22
  Speaker 4: Nobody else necessarily likes to eat it, except for my dad.
• 2:26
  Speaker 1: Okay, serve yourself first. Okay, real question on a scale
• 2:30
  Speaker 1: of one to ten, ten being high. How libertarian is
• 2:33
  Speaker 1: the SEC? Right now?
• 2:35
  Speaker 4: Well, I mean the SEC is a regulatory agency, so
• 2:38
  Speaker 4: I think we're governed by our statute as opposed to
• 2:41
  Speaker 4: by a philosophy like libertarian thinking. So I mean I
• 2:48
  Speaker 4: think I can't put it on a scale.
• 2:51
  Speaker 1: Is it a how big of a shift do you
• 2:53
  Speaker 1: feel it is?
• 2:54
  Speaker 4: Well, I mean to get to your question, So first
• 2:56
  Speaker 4: of all, let me give you my disclaimer, because I
• 2:58
  Speaker 4: think it is important here. My views are my my
• 3:00
  Speaker 4: own views as a commissioner, not necessarily those of the
• 3:02
  Speaker 4: SEC or my fellow commissioners. And I mean I think
• 3:06
  Speaker 4: when I approach things, I'm thinking, how can we maximize
• 3:11
  Speaker 4: people's ability to engage in transactions that they want to
• 3:14
  Speaker 4: engage in in a way that's consistent with our statute,
• 3:17
  Speaker 4: which requires us to think about things like investor protection
• 3:20
  Speaker 4: and capital formation and the integrity of the marketplace, right. So,
• 3:25
  Speaker 4: I think we have changed in the sense, you know,
• 3:28
  Speaker 4: in the last one hundred or so days, in the
• 3:31
  Speaker 4: sense that now we're looking at things in terms of
• 3:35
  Speaker 4: not looking for ways in the statute or outside of
• 3:38
  Speaker 4: the statute to block people from doing what they want
• 3:41
  Speaker 4: to do, but we're looking for ways to facilitate people's
• 3:45
  Speaker 4: ability to do things that they want to do again
• 3:48
  Speaker 4: in a way that's consistent with our objectives. So I
• 3:50
  Speaker 4: do think there's been a pretty dramatic shift in approach.
• 3:54
  Speaker 5: And to that point, one of the big big areas,
• 3:59
  Speaker 5: or at least one of the big industries as it were,
• 4:02
  Speaker 5: that's been vocal with how pleased they are about that
• 4:05
  Speaker 5: particular shift. Are folks at the intersection of cryptodigital assets, payments,
• 4:10
  Speaker 5: and fintech to an extent, and what we're increasingly hearing
• 4:13
  Speaker 5: from them is not just we're so glad that there
• 4:17
  Speaker 5: are these pauses in some of the cases or withdrawals
• 4:22
  Speaker 5: and others, but that they're looking forward to kind of
• 4:25
  Speaker 5: proactive rulemaking, you know, to really get to that you know,
• 4:29
  Speaker 5: much vaunted phrase of regulatory clarity. What in the environment
• 4:34
  Speaker 5: that you're describing, where as you say you want to
• 4:36
  Speaker 5: enable and facilitate. Does a proactive rule making process look
• 4:40
  Speaker 5: like as opposed to, you know, regulation by enforcement.
• 4:44
  Speaker 4: Well, I think that what we're trying to do is
• 4:46
  Speaker 4: we're trying to use our regulatory divisions for their intended purpose,
• 4:49
  Speaker 4: which is to help people think through how a pretty
• 4:54
  Speaker 4: complex set of regulations applies in their particular facts and circumstances.
• 5:00
  Speaker 4: And so some of that can be done on a
• 5:03
  Speaker 4: guidance basis, so providing maybe generalized guidance that applies to
• 5:08
  Speaker 4: more than just one person or entity. Some of it
• 5:13
  Speaker 4: is simply saying these activities or things are not within
• 5:18
  Speaker 4: our purview as a securities regulator, and some of it
• 5:22
  Speaker 4: is thinking about very individualized no action letters. And some
• 5:29
  Speaker 4: of it is then thinking longer term about rulemaking. How
• 5:33
  Speaker 4: can we go out for notice and comment rule making,
• 5:37
  Speaker 4: get the public's input, and then how can we develop
• 5:41
  Speaker 4: longer term, more durable rules. And then part of it
• 5:44
  Speaker 4: is working with other regulators and with Congress to think
• 5:47
  Speaker 4: about the technical aspects of the legislative framework. So it's
• 5:55
  Speaker 4: a mix of things, but that's kind of how we're
• 5:58
  Speaker 4: looking at it.
• 5:59
  Speaker 3: We want to be basically divide this into a couple
• 6:01
  Speaker 3: categories privates, crypto, and then we're going to look at
• 6:05
  Speaker 3: some ETF share class questions.
• 6:07
  Speaker 2: But first privates, so private assets.
• 6:10
  Speaker 3: You had said on a podcast recently that you were
• 6:13
  Speaker 3: looking on how to allow access to private markets. You
• 6:16
  Speaker 3: didn't love that you had to be a credited investor.
• 6:19
  Speaker 3: How do you do that? The ETF industry is obviously
• 6:22
  Speaker 3: famous at pushing the envelope. State Street found a way
• 6:26
  Speaker 3: to break that fifteen percent illiquidity barrier by using Apollo
• 6:30
  Speaker 3: to provide a liquidity backstop, and it seemed to me
• 6:33
  Speaker 3: that was a groundbreaking filing in that it does show
• 6:36
  Speaker 3: how you can go beyond fifteen percent iliquid holdings.
• 6:40
  Speaker 2: And where do we go from here?
• 6:42
  Speaker 3: Is r ETF's the right way to get retail investors
• 6:48
  Speaker 3: private investments. What's your take on making this issue you know,
• 6:54
  Speaker 3: something that people can look forward to and what should
• 6:56
  Speaker 3: they expect.
• 6:58
  Speaker 4: Well, I think there's an openness to using the ETF
• 7:03
  Speaker 4: well and using the exemptive process really to allow people
• 7:08
  Speaker 4: to try new things that might be in an ETF
• 7:10
  Speaker 4: we're in some other kind of fund, but that's kind
• 7:15
  Speaker 4: of what we've done historically, is people could come in
• 7:17
  Speaker 4: for exemptive relief and then you've built on that. It's
• 7:20
  Speaker 4: an iterative process. Someone might see what another issuer has
• 7:26
  Speaker 4: done and might iterate on that slightly, and then you know,
• 7:29
  Speaker 4: that's how we got ETFs right. We did a lot
• 7:32
  Speaker 4: of these exemptive applications and then finally we decided to
• 7:35
  Speaker 4: do a rule. We did a rule too long, but still,
• 7:38
  Speaker 4: you know, through that period of years we were able
• 7:41
  Speaker 4: to figure out what kind of conditions were important. And
• 7:44
  Speaker 4: so I expect that process to continue, and I expect
• 7:48
  Speaker 4: and hope that we will be willing to engage very
• 7:52
  Speaker 4: you know, answering questions, hearing from from people what kind
• 7:57
  Speaker 4: of products they'd like to develop, and helping them think
• 8:00
  Speaker 4: through what that looks like. That's a normal function that
• 8:05
  Speaker 4: I think we'll be carrying out. We sometimes impose, or
• 8:09
  Speaker 4: the staff as sometimes I think at the behest of
• 8:12
  Speaker 4: the Commission imposed restrictions that really don't have a statutory basis.
• 8:17
  Speaker 4: If that's happened in the past, I think we should
• 8:19
  Speaker 4: revisit those decisions. And so there's definitely, in my view,
• 8:24
  Speaker 4: there should be an openness. That's just how the statute
• 8:27
  Speaker 4: is meant to work. I don't think that's the only
• 8:29
  Speaker 4: way that retail investors should be able to get access
• 8:33
  Speaker 4: to private investments. I do think that's a way that
• 8:35
  Speaker 4: many of them may want to because it's diversified access,
• 8:41
  Speaker 4: it's access with professional management through vehicles they're comfortable with
• 8:44
  Speaker 4: and used to. But again, as I said before, that
• 8:48
  Speaker 4: accredited investor standard as a barrier is pretty counter to
• 8:55
  Speaker 4: what we as Americans generally believe, which is that if
• 8:59
  Speaker 4: people want to put the hard work in to do
• 9:01
  Speaker 4: their investment research and they want to invest, they shouldn't
• 9:03
  Speaker 4: have to come to the Commission and say, oh, and
• 9:05
  Speaker 4: by the way, I'm wealthy too. That's really not very American.
• 9:11
  Speaker 3: So on this issue of private assets, the State Street
• 9:14
  Speaker 3: of Polo ETF, which is a ticker, prev it got
• 9:17
  Speaker 3: approved or it may have just released, there was this
• 9:21
  Speaker 3: a little bit of back and forth with the SEC
• 9:23
  Speaker 3: and State Street.
• 9:25
  Speaker 2: I've been doing this for twenty years. I had never
• 9:26
  Speaker 2: seen anything quite like it.
• 9:27
  Speaker 3: Where it was listed, and the day before it listed,
• 9:32
  Speaker 3: there was a letter from the State SEC saying there's
• 9:35
  Speaker 3: like five things they weren't really comfortable with, and it
• 9:38
  Speaker 3: talked about without resolution of staff comments, and that was
• 9:42
  Speaker 3: a I just wanted to ask about that.
• 9:44
  Speaker 2: Do you have any more information on that or what
• 9:47
  Speaker 2: went down there.
• 9:48
  Speaker 4: Well, I don't want to speak about a particular issuers
• 9:51
  Speaker 4: engagement with the SEC, but I think just generally, the
• 9:55
  Speaker 4: comment process is a very healthy process where you get
• 9:59
  Speaker 4: lots and back, lots of back and forth between staff
• 10:02
  Speaker 4: and someone who's trying to get a product filing through,
• 10:07
  Speaker 4: and those conversations are very important. The idea is to
• 10:10
  Speaker 4: get to a place where the disclosures are clear and
• 10:13
  Speaker 4: they clearly portray for for people who will be buying
• 10:17
  Speaker 4: those products what it is they're getting. And so that's
• 10:21
  Speaker 4: an important process and and you know it needs to
• 10:25
  Speaker 4: be fully carried out before products are are out there.
• 10:29
  Speaker 4: So I think that's just in general. You know, as
• 10:32
  Speaker 4: you mentioned at the outset, this particular product was something
• 10:37
  Speaker 4: new and so you know, it's not surprising that there
• 10:41
  Speaker 4: are a lot of questions. But again, that iterative process
• 10:44
  Speaker 4: is really important.
• 10:52
  Speaker 2: Okay, let's talk crypto.
• 10:54
  Speaker 3: We had to do that first because we thought we
• 10:56
  Speaker 3: would get way down in crypto for a long time,
• 10:58
  Speaker 3: so I can't imagine that we had Okay, so I'm
• 11:02
  Speaker 3: pretty obsessed to I've really it's been a very exciting
• 11:05
  Speaker 3: two years.
• 11:07
  Speaker 2: Okay, Bitcoin ETF huge race.
• 11:11
  Speaker 3: That's over though, and boy were they a huge hit.
• 11:14
  Speaker 3: I mean, biggest launch ever, very exciting. Now we've got
• 11:17
  Speaker 3: the spaghetti cannon, which is what Ben Jonson Morning Star
• 11:20
  Speaker 3: calls it, where there's now over eighty filings sitting on
• 11:25
  Speaker 3: maybe not your desk, but somebody's desk, and they include
• 11:28
  Speaker 3: everything from XRP Solana, which we call me legit all coins.
• 11:32
  Speaker 3: Then it goes right down to you know, things like bonk.
• 11:35
  Speaker 3: Half the stuff I have to google when I see
• 11:37
  Speaker 3: the filing, I don't totally know. And then you've got
• 11:40
  Speaker 3: a trump coin ETF, a Milania ETF, and then a
• 11:43
  Speaker 3: two X Malania ETF. I mean, they're already going so
• 11:47
  Speaker 3: far out there, and this is an interesting question for me.
• 11:50
  Speaker 3: How do you look at approving all those and if
• 11:53
  Speaker 3: you go to maybe what you'd think is the most
• 11:56
  Speaker 3: maybe volatile one, which would be like a mean Coin ETF,
• 11:59
  Speaker 3: like a Trumper Milana ETF. Given that's the president, how
• 12:03
  Speaker 3: does the SEC deal with evaluating like the investment merits
• 12:07
  Speaker 3: and if that one would be okay, with the rest
• 12:10
  Speaker 3: ipso facto be okay. Like you see, I'm trying to
• 12:14
  Speaker 3: I'm trying to develop a logic on how like to handicap,
• 12:16
  Speaker 3: how much and how soon these will be approved.
• 12:20
  Speaker 4: Well, I think first step in your logic should be
• 12:23
  Speaker 4: to remember that the SEC is not a merit regulator,
• 12:25
  Speaker 4: and so when something goes effective, when when something is
• 12:29
  Speaker 4: green lit at the SEC, it does not mean that
• 12:31
  Speaker 4: we're telling people this is a good investment for anyone
• 12:35
  Speaker 4: or for you in particular. People have to make that
• 12:37
  Speaker 4: decision for themselves. I mean that really does go back
• 12:40
  Speaker 4: to I think the first question about how the SEC
• 12:45
  Speaker 4: thinks philosophically, Well, we think philosophically the way Congress told
• 12:49
  Speaker 4: us too, which is not to be a merit regulator.
• 12:51
  Speaker 4: So take that out of the out of the equation.
• 12:55
  Speaker 4: The second thing I'd say is we have gotten lots
• 12:58
  Speaker 4: of filings, and I'm glad you're compiling the list. That's helpful.
• 13:03
  Speaker 4: So all of those filings have to go through folks
• 13:08
  Speaker 4: in our division of Trading and Markets. Most of these
• 13:11
  Speaker 4: are ETPs, I think, not ETFs, some maybe ETFs. Those
• 13:14
  Speaker 4: go through investment management. But we have a limited number
• 13:19
  Speaker 4: of people working on these, and there's just a lot
• 13:21
  Speaker 4: of incoming now. And so this is something that I said,
• 13:24
  Speaker 4: when you know early on in this journey, as I've
• 13:27
  Speaker 4: been calling it, toward more cryptoclarity. People have to be patient.
• 13:32
  Speaker 4: There's just there's a lot going on. There are a
• 13:34
  Speaker 4: lot of people who want things done. There there's a
• 13:38
  Speaker 4: real need for patients because any filing that comes in,
• 13:41
  Speaker 4: our staff has to check to see whether it meets
• 13:43
  Speaker 4: the technical requirements, and so that's part of what's going on.
• 13:50
  Speaker 4: And then you know, there are a lot of other
• 13:52
  Speaker 4: things that I have said could also complicate things. We
• 13:56
  Speaker 4: have some ongoing litigation we have that we're trying to
• 13:59
  Speaker 4: work through. We have lots of other considerations that we're
• 14:04
  Speaker 4: thinking about, and so you know, just be patient. Then
• 14:10
  Speaker 4: on some of these filings, I would say, we got
• 14:14
  Speaker 4: in a comment letter. We're also taking lots of comments
• 14:17
  Speaker 4: in our written input from the Crypto Task Force, and
• 14:20
  Speaker 4: one comment came in from an exchange saying, hey, you
• 14:22
  Speaker 4: should really think about generic listing standards on the ETP side.
• 14:26
  Speaker 4: And you know, that is a request that really resonates
• 14:30
  Speaker 4: with me too. So I think there there's a lot
• 14:33
  Speaker 4: of work to do and we have to think about
• 14:34
  Speaker 4: how to do it most efficiently.
• 14:36
  Speaker 3: And just one quick follow up on that, remember in
• 14:39
  Speaker 3: the Bitcoin ETF extravaganza.
• 14:42
  Speaker 2: For lack of a better word.
• 14:43
  Speaker 3: You they all launched in the same day. You know, we
• 14:46
  Speaker 3: call it the Kentucky Derby because they normally you file and.
• 14:49
  Speaker 2: You you're out the day.
• 14:51
  Speaker 3: It's staggered depending on when you filed. Are you going
• 14:54
  Speaker 3: to group them together, group them together again, or was
• 14:56
  Speaker 3: that sort of a one off that we probably won't
• 14:58
  Speaker 3: see again.
• 14:59
  Speaker 4: You know, I don't know how these filings will be done.
• 15:01
  Speaker 4: As you said, they're not all the same, right, But
• 15:04
  Speaker 4: I think one thing to remember that whole process was
• 15:07
  Speaker 4: terribly mismanaged, and so we had been going for ten years,
• 15:14
  Speaker 4: We had been getting filings and so thinking about how
• 15:17
  Speaker 4: to do it, and then there was so much build
• 15:19
  Speaker 4: up and then the court case. You know, there was
• 15:21
  Speaker 4: just a lot going on there. So that was a
• 15:24
  Speaker 4: unique set of circumstances. The second thing I'd say is
• 15:27
  Speaker 4: if we just said well, it's first in, first out,
• 15:31
  Speaker 4: then we would encourage people to put in really terrible
• 15:34
  Speaker 4: filings just to get first in the door. And I
• 15:38
  Speaker 4: really want people to know that the better the work
• 15:41
  Speaker 4: that you do and the lead up, the easier it
• 15:44
  Speaker 4: is for us to process these things. Because our staff
• 15:47
  Speaker 4: has to look at everything, and again, if they're technical deficiencies,
• 15:50
  Speaker 4: they have to tell you that. And so it really
• 15:53
  Speaker 4: what we really want to do is encourage people to
• 15:55
  Speaker 4: come in with good filings, to have good conversations with us,
• 15:58
  Speaker 4: and help us think through through how we can prioritize
• 16:03
  Speaker 4: getting through the work that we have.
• 16:06
  Speaker 5: I'm interested in your comment about, you know, embracing the
• 16:10
  Speaker 5: idea of not being a merit based regulator and from everything.
• 16:15
  Speaker 5: One of the things we've been hearing a lot from
• 16:17
  Speaker 5: the administration is, you know, this emphasis on kind of
• 16:20
  Speaker 5: individual research, that people can make informed decisions based on
• 16:25
  Speaker 5: the processes and systems and information that's available to them.
• 16:29
  Speaker 5: How are you thinking about that in the context where
• 16:32
  Speaker 5: there is at the same time, kind of a deprioritization
• 16:36
  Speaker 5: in some agencies of explicit investor protection in the sense
• 16:40
  Speaker 5: of some agencies that were more dedicated to saying, Okay,
• 16:43
  Speaker 5: if a bad thing did happen and you were not
• 16:45
  Speaker 5: at fault, there was fraud, there was something you didn't
• 16:49
  Speaker 5: have control over here with the systems that were able
• 16:51
  Speaker 5: to protect you, or here were mechanisms for whistleblowers. Do
• 16:55
  Speaker 5: you see any tension between these sort of forces that
• 16:58
  Speaker 5: we're seeing at the same time.
• 17:00
  Speaker 4: Well, at the start, I said, I can't speak for
• 17:01
  Speaker 4: the SEC. I only speak for myself, and I certainly
• 17:04
  Speaker 4: don't want to speak for other agencies. But what I
• 17:06
  Speaker 4: will say about the SEC is investor protection is one
• 17:08
  Speaker 4: of our core mandates and so that's something that we
• 17:12
  Speaker 4: will continue to emphasize here. And part of investor protection
• 17:16
  Speaker 4: is ensuring that people have the ability to make investment
• 17:20
  Speaker 4: decisions that they want to make and to make those
• 17:23
  Speaker 4: without having the government say no, we think that you
• 17:27
  Speaker 4: can't invest in this thing or you know, so it's
• 17:30
  Speaker 4: investment opportunity is part of investor protection. Part of investor
• 17:34
  Speaker 4: protection is ensuring that where there is fraud, we are
• 17:41
  Speaker 4: there with enforcement if you know. Of course, our role
• 17:44
  Speaker 4: is limited to the statutory constraints that we have and
• 17:48
  Speaker 4: that's where securities regulator. But if there's securities fraud, we're
• 17:52
  Speaker 4: definitely interested in bringing those cases. And we have a
• 17:57
  Speaker 4: very active whistleblower program. You can go on our website
• 18:01
  Speaker 4: and file what's called a TCR and you can select
• 18:05
  Speaker 4: to be elect to be a whistleblower, and that's very
• 18:08
  Speaker 4: important and will continue to be a Third piece of
• 18:11
  Speaker 4: investor protection is disclosure and so a lot of the
• 18:15
  Speaker 4: back and forth that you see with these filings in
• 18:18
  Speaker 4: the investment management area, for example, is ensuring that there's
• 18:21
  Speaker 4: adequate disclosure so that people are aware of the risks,
• 18:25
  Speaker 4: and that will continue to be an important part of
• 18:27
  Speaker 4: what we do. It's you know, it's a big chunk
• 18:31
  Speaker 4: of our staff works on these issues, whether it's with
• 18:35
  Speaker 4: investment companies or whether it's with public companies, and that
• 18:40
  Speaker 4: is going to continue to be an important role that
• 18:43
  Speaker 4: we play. So I would urge you not to look
• 18:47
  Speaker 4: at this from the perspective of at least you know,
• 18:51
  Speaker 4: as we're looking at it, it's investor protection is very central,
• 18:56
  Speaker 4: and I would urge you not to assume that we're
• 19:00
  Speaker 4: just saying no more enforcement. That is absolutely not true,
• 19:03
  Speaker 4: and I think people should be careful to know that
• 19:09
  Speaker 4: it's not anything goes, you know, we want to build
• 19:12
  Speaker 4: a framework that encourages an industry that is healthy and
• 19:16
  Speaker 4: dynamic and competitive and where people can be confident in
• 19:21
  Speaker 4: the disclosures they're getting.
• 19:23
  Speaker 1: I'm curious about the relationship between the SEC and CFTC
• 19:28
  Speaker 1: regarding crypto, because you've got an investor protection there. It's
• 19:31
  Speaker 1: not something that's the same thing between the CFTC and
• 19:34
  Speaker 1: the SECA so, and you have been a go between
• 19:37
  Speaker 1: between the two agencies. So I'm curious, like who takes
• 19:40
  Speaker 1: the lead in crypto and this new administration.
• 19:45
  Speaker 4: Well, I think what we're trying to do with the
• 19:48
  Speaker 4: SEC is identify where our jurisdiction begins. And so that
• 19:54
  Speaker 4: means that some of crypto is not in our jurisdiction,
• 19:59
  Speaker 4: I mean, and what means Congress has laid out a
• 20:03
  Speaker 4: framework and said, here's your jurisdiction, and so some of
• 20:07
  Speaker 4: that stuff is outside. It may be at the CFTC,
• 20:10
  Speaker 4: it may be at another regulator, and that's the way
• 20:13
  Speaker 4: it is now. But of course Congress is working on
• 20:16
  Speaker 4: legislation on market structure, and that would perhaps create some
• 20:21
  Speaker 4: new regulatory authority, maybe for the CFTC at least as
• 20:27
  Speaker 4: they have designed the statute, there'd be a lot of
• 20:31
  Speaker 4: new authority for the CFTC. And so we will be
• 20:36
  Speaker 4: good partners with them and try to work with them.
• 20:39
  Speaker 4: There may be some areas where Congress wants us to
• 20:41
  Speaker 4: work jointly with the CFTC explicitly, but more generally. Our
• 20:46
  Speaker 4: jurisdictions bump up against each other all the time, and
• 20:50
  Speaker 4: so we will have lots of constant contact and communication.
• 20:55
  Speaker 4: The new chairman coming in, Chairman quintends it's someone that
• 20:58
  Speaker 4: I've worked with before, someone Paul knows, Chairman Atkins know
• 21:02
  Speaker 4: as well, and so I think there's going to be
• 21:05
  Speaker 4: continued good work across agency lines.
• 21:10
  Speaker 2: Let's talk about tokenization.
• 21:12
  Speaker 3: So the more you kind of dive into crypto, one
• 21:16
  Speaker 3: of the areas beyond the tokens is the blockchain, right,
• 21:19
  Speaker 3: major technology. It's possible, so much just moves on the blockchain. Right.
• 21:24
  Speaker 3: They're trying to use the blockchain for the back office
• 21:28
  Speaker 3: of a lot of the ETF industry. And then Larry
• 21:32
  Speaker 3: Fink comes out and says, I want the SEC to
• 21:34
  Speaker 3: rapidly approve the tokenization of bonds and stocks, and so
• 21:38
  Speaker 3: I go to these tokenization crypto events and they all
• 21:42
  Speaker 3: think everything's going to be a token someday and that's
• 21:44
  Speaker 3: the quote endgame, and you know it.
• 21:47
  Speaker 2: Is a vision.
• 21:48
  Speaker 3: They're very excited, but they got to have the SEC
• 21:52
  Speaker 3: on board to pull this off.
• 21:54
  Speaker 2: So where do you stand on that.
• 21:56
  Speaker 4: We're having a roundtable next week on the topic of
• 21:58
  Speaker 4: tokenization and we'll see what people have to say there.
• 22:01
  Speaker 4: It's one of the topics that we've gotten a lot
• 22:04
  Speaker 4: of interest in sort of after this, you know, announcement
• 22:09
  Speaker 4: that we're open to thinking about things in new ways.
• 22:13
  Speaker 4: So we'll see what comes out of that roundtable and
• 22:16
  Speaker 4: what comes out of the We've been getting again a
• 22:18
  Speaker 4: lot of written input, and I'm open to trying to
• 22:22
  Speaker 4: facilitate people trying this technology to see where it will fit.
• 22:27
  Speaker 4: I suspect what will happen is that there'll be some
• 22:29
  Speaker 4: places where people had high hopes and it will it
• 22:32
  Speaker 4: will those hopes will not pan out the way they
• 22:35
  Speaker 4: expected in other areas where they will work very well.
• 22:39
  Speaker 4: But that's really up for the industry and the market
• 22:42
  Speaker 4: market participants to figure out. But we'll certainly work with
• 22:45
  Speaker 4: them to facilitate their attempts to use the technology.
• 22:49
  Speaker 5: And building on what Eric said, I feel like when
• 22:51
  Speaker 5: people aren't talking about tokenization, they're talking about stable coins,
• 22:55
  Speaker 5: which you know, some folks will refer to as tokenized
• 22:57
  Speaker 5: money market funds. In a world in which which things
• 23:01
  Speaker 5: that look security adjacent or money adjacent or real world
• 23:06
  Speaker 5: asset adjacent, depending on which conference you're going to, what
• 23:11
  Speaker 5: are some of your priorities? Right, Like, you've just told
• 23:13
  Speaker 5: us that there are a limited number of people working
• 23:15
  Speaker 5: on quite a number of things. If you could spend
• 23:19
  Speaker 5: just you know, one thing a day, like, what does
• 23:21
  Speaker 5: that list look like? Is stable coins the thing that
• 23:24
  Speaker 5: the that you and your fellow commissioners are paying attention to.
• 23:28
  Speaker 5: Is it tokenization, is it ETFs? Is it somehow all
• 23:31
  Speaker 5: of the above? And how does that align with the
• 23:34
  Speaker 5: message to the industry that everyone needs to show a
• 23:36
  Speaker 5: little bit more patience than they might currently be doing.
• 23:39
  Speaker 4: Well. First of all, it's not just crypto. There's a
• 23:41
  Speaker 4: lot of other work on our agenda, so people should
• 23:46
  Speaker 4: remember that as well. But second, i'd say stable coins.
• 23:51
  Speaker 4: The staff put out a statement saying non, ye'll bearing
• 23:55
  Speaker 4: stable coins probably not within the SEC's jurisdiction again facts
• 23:59
  Speaker 4: and circumstances. But tokenized money market funds are something that
• 24:04
  Speaker 4: people have been working on and that's not new to
• 24:06
  Speaker 4: this year. People have been working on that over the
• 24:08
  Speaker 4: past several years, and I expect to see continued interest
• 24:11
  Speaker 4: in trying to think about how to do that. So
• 24:15
  Speaker 4: we're open to those kinds of conversations. In terms of prioritizing,
• 24:22
  Speaker 4: I mean, I think really the goal is just to
• 24:24
  Speaker 4: try to figure out how we can get some clarity.
• 24:27
  Speaker 4: And one of the first things we have to deal
• 24:29
  Speaker 4: with there is helping people understand when the securities laws apply.
• 24:34
  Speaker 4: So this question of security non security, I think is
• 24:38
  Speaker 4: continues to be a big gating factor because if it's
• 24:41
  Speaker 4: not a security, people don't have to think about the
• 24:45
  Speaker 4: whole panoply of securities laws. If it is, then then
• 24:48
  Speaker 4: we need people to come in and really help us
• 24:51
  Speaker 4: as we work through how do the laws apply to
• 24:54
  Speaker 4: this unique asset class, to this unique technology. And that's
• 24:58
  Speaker 4: something that we've done and in lots of other areas,
• 25:01
  Speaker 4: and we can do here. But I think that's kind
• 25:03
  Speaker 4: of how I'm ranking it in terms of, you know,
• 25:05
  Speaker 4: figuring out is it within our jurisdiction and then working
• 25:09
  Speaker 4: with people and figuring that out.
• 25:11
  Speaker 5: And do you think that's about being in more of
• 25:13
  Speaker 5: an affirmative posture, So you know, to your point, you've said,
• 25:16
  Speaker 5: these things we don't, these don't fall into our universe.
• 25:20
  Speaker 5: At what point do you think we'll be moving to
• 25:22
  Speaker 5: and these things explicitly do.
• 25:24
  Speaker 4: Well, I think we're already doing that. We put out
• 25:28
  Speaker 4: again this staff and the Division of Corporation Finance put
• 25:31
  Speaker 4: out some disc some disclosure guidance for companies that are
• 25:36
  Speaker 4: either involved with crypto or are issuing some sort of
• 25:41
  Speaker 4: a crypto asset that is a security uh. And so
• 25:45
  Speaker 4: we in that guidance that the staff gave some help
• 25:50
  Speaker 4: in thinking about how do you how do you apply
• 25:52
  Speaker 4: the traditional securities laws in this space. So I think
• 25:56
  Speaker 4: that's one example, and I think you'll see other examples.
• 25:59
  Speaker 4: We're trying to not just do one thing at a time.
• 26:03
  Speaker 4: We've got a lot of irons in the fire, and
• 26:05
  Speaker 4: so we're working on a lot of different I would
• 26:07
  Speaker 4: say proactive pieces as well.
• 26:18
  Speaker 1: I wanted to bring up another topic, which is just
• 26:20
  Speaker 1: financial regulation, and we're kind of in this moment now
• 26:24
  Speaker 1: where independent agencies are even being reviewed and the FED
• 26:29
  Speaker 1: has come up and sec has come up, and just curious, like,
• 26:32
  Speaker 1: is it independent regulatory agency a misnomer?
• 26:35
  Speaker 4: Now? No? I mean I think if you look at
• 26:40
  Speaker 4: you know, I certainly feel independent and how I think
• 26:42
  Speaker 4: about things. And I think that's the role of Commission
• 26:47
  Speaker 4: is to think independently. But I think one thing that
• 26:51
  Speaker 4: is positive in this environment is there's a real desire
• 26:55
  Speaker 4: to try to have a uniform approach to thinking about
• 27:01
  Speaker 4: new technologies, for example, and that means that we're not
• 27:06
  Speaker 4: you know, we're seeing agencies worked more closely together. We're
• 27:10
  Speaker 4: not seeing one agency do thing do one thing and
• 27:12
  Speaker 4: another agency do something that's contrary. And so I think
• 27:15
  Speaker 4: that kind of unified approach is really helpful. The administration
• 27:21
  Speaker 4: will be looking at our economic analysis as an example.
• 27:26
  Speaker 4: We have a lot of economists here at the SEC.
• 27:29
  Speaker 4: We do a lot of economic analysis. It can be
• 27:32
  Speaker 4: helpful to get an outside perspective from someone who has
• 27:36
  Speaker 4: the opportunity to look across agencies at economic analysis. So
• 27:41
  Speaker 4: I expect that that will be helpful to us. So,
• 27:46
  Speaker 4: you know, I think we've got a lot of work
• 27:47
  Speaker 4: to do, and we're one part of the financial regulatory infrastructure.
• 27:53
  Speaker 4: The US has always had a complicated landscape there with
• 27:57
  Speaker 4: federal regulators and state regulators. But it's good to work
• 28:02
  Speaker 4: together and have coordination.
• 28:03
  Speaker 1: I'm curious about DOGE, the Department of Government Efficiency maybe
• 28:09
  Speaker 1: more than a coin. What changes my DOGE bring to
• 28:14
  Speaker 1: the SEC now that they've sort of, you know, worked
• 28:17
  Speaker 1: through many many agencies and seem like they're coming to
• 28:21
  Speaker 1: talk with SEC next. What kind of changes my DOGE instigate?
• 28:26
  Speaker 4: Oh? I don't know. I mean I expect that they
• 28:28
  Speaker 4: will give us some thoughts around how we can gain
• 28:32
  Speaker 4: some more efficiencies and in some of the ways that
• 28:36
  Speaker 4: we do things. So I you know, I think they
• 28:39
  Speaker 4: could serve a sort of an external consultant kind of role.
• 28:43
  Speaker 3: All right, let's talk about something that's wonky but huge, okay,
• 28:47
  Speaker 3: which is the ETF share class situation.
• 28:50
  Speaker 2: So just let me sell this to people listening so
• 28:54
  Speaker 2: they don't fall asleep.
• 28:55
  Speaker 3: ETF mutual fund companies have long figured out trial been
• 29:01
  Speaker 3: had a problem getting into the ETF market. Now, Vanguard
• 29:05
  Speaker 3: had a patent that added an ETF share class to
• 29:07
  Speaker 3: their mutual fund share classes. That patent expired. Now there's
• 29:10
  Speaker 3: fifty three big fund companies. Well not of them are big,
• 29:13
  Speaker 3: but as a group, they're like ten trillion in assets.
• 29:15
  Speaker 3: They are filing to bolt on an ETF share class
• 29:18
  Speaker 3: to the mutual fund if that happens, and according to
• 29:23
  Speaker 3: a commissioner I unit this, this is a higher priority. Eleven
• 29:26
  Speaker 3: of them have already responded to comments and refiled, so
• 29:29
  Speaker 3: we're expecting this to sort of be approved this summer.
• 29:32
  Speaker 3: And if that happens, I mean you could be looking
• 29:34
  Speaker 3: at thousands of ETF share classes and potentially a whole
• 29:38
  Speaker 3: other tributary of flows coming into the ETF.
• 29:40
  Speaker 2: That's sort of where I see it.
• 29:42
  Speaker 3: The only snag would be how does a mutual fund
• 29:46
  Speaker 3: company deal with an ETF when you need a brokerage platform?
• 29:49
  Speaker 3: And I think that's I don't think that's your problem,
• 29:52
  Speaker 3: but that's something that the industry I think will have
• 29:54
  Speaker 3: to figure out as well if these get approved. So
• 29:57
  Speaker 3: where does that stand and what might we look out
• 29:59
  Speaker 3: for there?
• 30:00
  Speaker 4: Well, I think you've really outlined the issue. Well, I mean,
• 30:02
  Speaker 4: we have a lot of applicants. I think it's a
• 30:04
  Speaker 4: very interesting issue. It's something that people have been asking
• 30:08
  Speaker 4: us to work on for quite some time, and I'm
• 30:10
  Speaker 4: glad that we're really getting down to the technical details
• 30:14
  Speaker 4: of it now. And as you point out, there's some
• 30:16
  Speaker 4: operational questions that have to be answered, and so I'm
• 30:21
  Speaker 4: sure that industry will be working through those as we're
• 30:23
  Speaker 4: working through their applications.
• 30:26
  Speaker 5: Just as a kind of a closing thought, going into
• 30:31
  Speaker 5: a very interesting time in markets, a very interesting time
• 30:34
  Speaker 5: in crypto, very interesting time in digital assets. One of
• 30:36
  Speaker 5: the big criticisms that was levied at, you know, the
• 30:40
  Speaker 5: previous regime, was that the US was a less attractive
• 30:45
  Speaker 5: place for investors who were looking for certain types of environments.
• 30:50
  Speaker 5: And you know, at the Milligan conference we heard from
• 30:54
  Speaker 5: Scott Bessett saying like the US should be the top
• 30:56
  Speaker 5: investment destination for capital How do you see the SEC's
• 31:00
  Speaker 5: rule in either enabling that, supplementing it, complementing it in
• 31:05
  Speaker 5: one way? Like you know, if you were to give
• 31:08
  Speaker 5: a sort of a theory of the case of what
• 31:11
  Speaker 5: really is going to be different this time, what would
• 31:13
  Speaker 5: you say that would be well?
• 31:15
  Speaker 4: As an initial matter, I'd say our capital markets have
• 31:18
  Speaker 4: been the strongest and best, I think in the world
• 31:21
  Speaker 4: for a long time, and it's the US is the
• 31:25
  Speaker 4: place people want to come to invest, It's the place
• 31:28
  Speaker 4: they want to come to build their companies. And that's
• 31:32
  Speaker 4: one of the reasons that I was excited about being
• 31:36
  Speaker 4: at the Commission as a commissioner, because I think it's
• 31:38
  Speaker 4: such a treasure that the United States has, and it's
• 31:41
  Speaker 4: a treasure that we have to shepherd and continue to
• 31:44
  Speaker 4: care for. And that means we have to always be
• 31:47
  Speaker 4: thinking about modernizing our rules, making sure that they're working
• 31:50
  Speaker 4: the way they should, and also be thinking of ways
• 31:53
  Speaker 4: to encourage more people to participate in the capital markets.
• 31:57
  Speaker 4: In the US, both as consumers of capital and as
• 32:01
  Speaker 4: investors in capital, And so that's really the driving thing
• 32:06
  Speaker 4: that we're thinking of. How can we make our capital
• 32:09
  Speaker 4: markets more robust, How can we make sure that they're
• 32:12
  Speaker 4: more attractive for people, And that means getting the balance
• 32:16
  Speaker 4: right of having regulations that give people the confidence to
• 32:21
  Speaker 4: enter into those markets, knowing that they're going to get
• 32:23
  Speaker 4: the disclosure that they that they need to understand what
• 32:26
  Speaker 4: they're investing in, but also knowing that there'll be the
• 32:30
  Speaker 4: freedom that they have to invest and that the barriers
• 32:34
  Speaker 4: to entry aren't so high that we're stuck with the
• 32:36
  Speaker 4: same incumbents fifty years from now that we have today.
• 32:40
  Speaker 4: So making sure that there's a vibrancy and dynamic entry
• 32:44
  Speaker 4: and exit from the markets. So that's something that we're
• 32:49
  Speaker 4: thinking about all the time. And I think if the
• 32:52
  Speaker 4: SEC doesn't have that at the forefront of our minds, preserving, protecting,
• 32:58
  Speaker 4: and fostering the capital markets, then we're not doing our job.
• 33:03
  Speaker 4: And so I expect we'll just double down on that
• 33:06
  Speaker 4: in coming years. Part of that means that we can't
• 33:10
  Speaker 4: do what we did in recent years, which is just
• 33:14
  Speaker 4: throw bunches of rules out there and sort of suggests
• 33:19
  Speaker 4: that there are going to be massive changes across the board.
• 33:22
  Speaker 4: We have to do things without adequate notice and comment.
• 33:25
  Speaker 4: We have to do things in a way that's deliberate
• 33:28
  Speaker 4: and careful and invites participation. We have to think about
• 33:32
  Speaker 4: some fundamental rules that maybe haven't been modernized and need
• 33:37
  Speaker 4: to be so it'll be a difficult job, but again
• 33:43
  Speaker 4: worth very worthwhile to protect these capital markets, which I
• 33:47
  Speaker 4: really do think are the end view of the world.
• 33:49
  Speaker 1: What's an example of something that needs to be modernized.
• 33:53
  Speaker 4: Well, I mean I think about rules like transfer agent rules.
• 33:57
  Speaker 4: I think those could be modernized. And I think we
• 34:01
  Speaker 4: should be continuously looking at rules around paper delivery versus
• 34:06
  Speaker 4: electronic delivery. And that may seem trivial, but I think
• 34:11
  Speaker 4: we need to be on top of how investors want
• 34:15
  Speaker 4: communications to come to them, and it's not a matter
• 34:18
  Speaker 4: of just getting an email versus getting something in the mail.
• 34:23
  Speaker 4: They should be getting information in an interactive format so
• 34:26
  Speaker 4: that if they want to dive deeper, it's easy for
• 34:29
  Speaker 4: them to do that. And I think a lot of
• 34:31
  Speaker 4: financial firms are thinking about disclosure that way. But because
• 34:34
  Speaker 4: our rules are sort of centered around everything being in paper,
• 34:39
  Speaker 4: it hasn't allowed for that dynamic innovation in the way
• 34:43
  Speaker 4: investors receive and process information. So that's talk about boring.
• 34:49
  Speaker 4: That may sound a little bit boring, but I think
• 34:51
  Speaker 4: that's a really exciting avenue for potential positive change.
• 34:54
  Speaker 1: You're about a month away from the end of your term.
• 34:57
  Speaker 1: What do you want your legacy at the SEC to be?
• 35:01
  Speaker 4: Well, you know, this is an agency that I think
• 35:04
  Speaker 4: is a wonderful agency. And the thing that makes it
• 35:06
  Speaker 4: wonderful is it's not about one person. It's about an
• 35:10
  Speaker 4: amazing set of employees who are very dedicated to fostering
• 35:16
  Speaker 4: capital markets, protecting investors, facilitating capital formation. And so I
• 35:23
  Speaker 4: hope that the legacy of me as a commissioner is
• 35:27
  Speaker 4: just that I've helped to shepherd that agency and that
• 35:30
  Speaker 4: it's not you know, people are able to look at
• 35:34
  Speaker 4: the SEC and see it as a regulator that does
• 35:37
  Speaker 4: get that balance right that we were just talking about.
• 35:40
  Speaker 1: Can I ask you've seen so many tickers? Yeah, and
• 35:44
  Speaker 1: this is a question we often ask if like people
• 35:46
  Speaker 1: have a favorite ticker. I'm assuming that you're not going
• 35:48
  Speaker 1: to be able to answer any answer that, So can
• 35:51
  Speaker 1: I ask, do you ever has there ever been a
• 35:53
  Speaker 1: ticker ETF ticker that made you chuckle.
• 35:57
  Speaker 4: Yes, but I cannot answer which one is my favorite.
• 36:00
  Speaker 2: Actually, let me ask you this.
• 36:02
  Speaker 3: Tickers aren't you don't control those?
• 36:04
  Speaker 2: Correct?
• 36:05
  Speaker 3: Like tickers are basically you follow with the exchange. But
• 36:09
  Speaker 3: that's like you just deal the fund.
• 36:12
  Speaker 4: If we controlled the tickers, they would all be like
• 36:15
  Speaker 4: fund four seven five three.
• 36:17
  Speaker 2: Like in China, just numbers. Yeah, yeah, so no, we.
• 36:20
  Speaker 4: Do not control the tickers.
• 36:23
  Speaker 1: All right, Commissioner, thank you so much for your time.
• 36:25
  Speaker 4: It's been fun to be with you all.
• 36:26
  Speaker 1: Thank you, thank you. Thanks for listening to Trillions. Until
• 36:33
  Speaker 1: next time. You can find us on the Bloomberg terminal,
• 36:35
  Speaker 1: Bloomberg dot com, Apple Podcasts, Spotify, or wherever else you'd
• 36:40
  Speaker 1: like to listen. We'd love to hear from you. Hit
• 36:42
  Speaker 1: us up on social I'm at Joel Webber Show, He's
• 36:44
  Speaker 1: at Eric Paulchina's Trillions is produced by Magnus Hendrickson Special
• 36:48
  Speaker 1: thanks to Rachel Lewis Christy for protection help on this episode.
• 36:52
  Speaker 1: Brendan Newman is our executive producer. Sage Bowman is the
• 36:55
  Speaker 1: head of Bloomberg Podcasts.