Wall Street's chief securities regulators are set to all testify together on Capitol Hill for the first time in more than a decade.
On Sept. 24, the House Financial Services Committee will hold a hearing on SEC oversight featuring the agency's chairman, Jay Clayton, and its four commissioners: Robert Jackson Jr., Hester Peirce, Elad Roisman and Allison Herren Lee. As the full commission's first joint appearance before the committee since 2007, the hearing will likely draw close attention from much of Washington and Wall Street as lawmakers, fellow regulators and market participants.
"As Chairwoman of the House Financial Services Committee, I take our responsibility to conduct oversight over the [SEC] very seriously," Rep. Maxine Waters, D-Calif., said in a statement. "In recent years, the committee convened hearings to receive testimony from the SEC chairman about the work of the agency, but the chairman has only one of five votes necessary to pass regulation and take enforcement actions to protect investors."
The hearing will cover a myriad of topics raised by lawmakers. But a Sept. 19 House Financial Services Committee memorandum from the Democratic majority staff names several issues — including cryptocurrencies, brokerage industry rules and environmental, social and governance disclosures — that have previously divided the SEC's top panel and are set to play a prominent role at what could be a lengthy and heated event.
There has been disagreement at the SEC over how to approach the still largely unregulated digital asset realm for some time now. Peirce, one of the commission's two Republicans, has been a vocal proponent for opening up investor access to the cryptocurrencies markets. To do that, Peirce has called for the SEC to develop a clear regulatory framework in the U.S. that market participants could follow when developing cryptocurrency-related businesses.
"The U.S. securities markets have historically been the envy of the world; I do not want heel-dragging by the SEC in crypto to mar that well-deserved reputation," Peirce said in a May speech.
But Clayton has been more cautious about the digital asset business, particularly given the fraud that still runs rampant in some cryptocurrency markets.
The SEC chief has notably directed many of his Enforcement Division's resources toward weeding out bad actors in the cryptocurrency markets, particularly as it relates to initial coin offerings. Clayton has also staunchly opposed Wall Street's attempts to introduce a bitcoin exchange-traded fund in the marketplace, an investment product widely considered the key to opening up retail investor participation in the world's largest cryptocurrency.
Members of the SEC's commission have more recently been at odds over a series of standard-of-care obligations for the brokerage industry, which has already garnered lawmaker attention in other settings.
Known as Regulation Best Interest, the rule package cleared the SEC's commission in June. But it remains a point of contention across the industry.
The reforms were designed to begin requiring brokers to act in their client's best interest when advising them on where to invest their money, which Clayton has said is a higher standard of care than the current requirement that mandates brokers recommend investments that are at least suitable to their clients.
But critics of the rule package express concern that it does not go far enough to protect everyday investors. Eight attorneys general from around the U.S. recently filed a lawsuit against the SEC over Regulation Best Interest, saying that it failed "to meet basic investor protections that were laid out in the historic 2010 Dodd-Frank Act." Commissioner Jackson, one of the agency's two Democrats, was one of Regulation Best Interest's earliest detractors. At a June meeting, Jackson said Regulation Best Interest represents a "muddled standard that exposes millions of Americans to the costs of conflicted advice."
Yet, while the distinctions between each commissioner's comments will be on display, some experts believe the hearing's impacts on regulatory reforms will likely be minimal.
"This may have significant implications on relationships between commissioners or between commissioners and the Hill, but I do not believe it is likely to have profound long-term ramifications on any particular policy," Healthy Markets Association Executive Director Tyler Gellasch said in an interview.
