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The US Securities and Exchange Commission (SEC) is consulting on a draft strategic plan for the next four years, which includes a focus on regulating new technologies, enhancing its fraud prevention tools and building a diverse and skilled staff.
The draft plan lays out three primary goals for the agency between 2022 and 2026.
These include protecting working families against fraud, manipulation and misconduct; developing and implementing a robust regulatory framework that keeps pace with evolving markets, business models and technologies; and supporting a skilled workforce that is diverse, equitable, inclusive and fully equipped to advance agency objectives.
“We can’t take our leadership in capital markets for granted,” said Gary Gensler, chairman of the SEC, which oversees a US sector that accounts for 38 percent of capital markets globally.
“Technology and business models always are changing, and it is important for our agency to evolve in kind. Even gold medalists need to practice and hone their craft, especially to ensure that they stay ahead of the other nations who wish to surpass them,” he said.
Ongoing battle over crypto regulation
Ever since Gensler took over the leadership of the SEC last April, he has maintained that, except for Bitcoin, he sees all cryptocurrencies as securities and it would be his agency’s role to protect Americans against fraud, scams and other abuses in the current “Wild West” state of crypto markets.
The argument for SEC to rein in crypto regulation, however, has been losing in Congress in recent months thanks to the successful lobbying of the crypto industry.
The most comprehensive legislative proposals, such as Wyoming Senator Cynthia Lummis’ landmark bill, would give regulatory authority over digital assets to the Commodity Futures Trading Commission (CFTC), which regulates derivatives on commodities and is considered to be a much more light-handed regulator.
In a Wall Street Journal op-ed last week, Gensler presented a more “layman-friendly” approach that some interpreted as a change in Gensler’s tactics in the crypto regulation row with Congress.
The op-ed, which likened security law disclosures to the seat belt mandate introduced in the motor vehicle safety act in 1966, says: “Despite many innovations in automotive technology … drivers and passengers deserve to be protected.”
“There’s no reason to treat the crypto market differently from the rest of the capital markets just because it uses a different technology,” the SEC chair wrote.
Gensler’s vision for the next four-year period now lays down that the agency plans to continue on this road and intends to update existing SEC rules to reflect evolving technologies. These include crypto-assets, whose rapid growth represents an evolutionary risk to capital markets, according to the document.
The draft shows that the SEC will examine strategies to address this risk and will “pursue new authorities from Congress, where needed, to be better prepared for and more agile in its response to such risk”.
Stepping up enforcement, enhancing data use and more ESG
Another SEC goal set out in the document is to protect American workers from fraud, scams and other misconduct.
To ensure investors are protected, the agency will step up its enforcement activities.
“The SEC must work to ensure the law is enforced aggressively and consistently,” the document says.
“Most importantly, as US markets inevitably change, the SEC should continue to deploy its resources in ways that centre on the interests of working families.”
Among the initiatives to meet these goals, the SEC intends to enhance the use of market and industry data to surveil the markets, promote competition and enforce the law.
As part of the same goal, the SEC plans to modernise disclosures to investors, including those on climate risks, so that they can make informed investment decisions.
The document suggests that the SEC would continue its work to update the disclosure framework, which includes a comprehensive 490-page long proposed rule that aims to enhance and standardise climate-related disclosures.
The proposal, published this March, caused uproar in the industry, with many businesses claiming that it poses heightened legal liability, hefty costs and reporting burdens.
Finally, the SEC’s third goal would support diversity and inclusion efforts by recruiting, training and retaining staff “with the right mix of skills, experience, and expertise”.
According to Gensler, the three goals will enable the SEC to “continue to bring a skilled and steady hand to the capital markets of a changing world”.
