Washington, D.C., November 2, 2023 – In testimony delivered today, SIFMA president and CEO Kenneth E. Bentsen, Jr. discussed the impact of the Securities and Exchange Commission’s (SEC) aggressive rulemaking agenda, noting “regulators should ensure their rules keep pace with markets, but transformative changes must be thoughtfully crafted and fully vetted for indirect costs and cumulative effects.  It is critical that any changes to the rules governing our capital markets are thoughtfully considered, or we risk damaging our markets’ preeminent global status and harming investors.”

The testimony was delivered before the U.S. House of Representatives Financial Services Committee Subcommittee on Capital Markets at a hearing entitled “Examining the SEC’s Agenda: Unintended Consequences for U.S. Capital Markets and Investors.”

The testimony notes: “It is critical that regulators tailor regulatory policies to address legitimate market failures without unnecessarily harming or disrupting markets, especially when our economy faces serious headwinds. However, the high volume and speed of regulatory change proposed by the Securities and Exchange Commission could result in negative consequences for the real economy in terms of output, employment, investment, and prices.

“Throughout the last two years, stakeholders, academics and members of Congress from both sides of the aisle have expressed concerns with the volume and pace of new rule proposals from the SEC. The data demonstrates that these concerns are well-founded. According to the Agency Rule List published by the Office of Management and Budget, the SEC is on track to propose and finalize 63 new rules by the end of Chair Gensler’s first four years in office. This represents a dramatic increase in the pace of rulemaking from the previous two Chairs, Mary Jo White and Jay Clayton, who finalized 22 rules and 43 rules, respectively, that they had proposed during their terms. Of the number of rules proposed over the last two years, only eight have a specific Congressional mandate.

“As of November 1, 2023, of the 63 rules on the Commission’s docket, 21 have been proposed and finalized, 31 have been proposed but not yet finalized, and 11 have not yet been proposed. In addition, the average public comment period for these SEC rule proposals has been only 47 days (measured from the date a proposal is published in the Federal Register). That is significantly fewer days than the average comment period during previous Commissions. In addition to concerns regarding the unprecedented volume of major rule proposals, commenters, including SIFMA, have expressed concern that truncated timelines for multiple overlapping rule proposals limit stakeholder’s ability to analyze the collective impact of the proposals and impede their ability to sufficiently comment. The inability of the public to adequately analyze the cumulative effects of interconnected proposals, and the SEC staff’s failure to do so, can result in conflicting and poorly drafted rules with the potential for negative impacts on capital markets and, importantly, investors and issuers.”

The testimony further notes “that the SEC has not sufficiently prioritized its agenda, and in several cases is acting without clear evidence of market failure or direction from Congress. Lack of prioritization and pursuit of novel proposals has crowded other important mandates” and highlights SIFMA’s concerns with several SEC proposals regarding:

• Equity Market Structure
• Securities-Based Swaps Large Position Reporting (10B-1)
• Rule 192 – Conflicts of Interest in Securitizations
• Custody Rule
• Treasury Market Clearing
• Swing Pricing and Open-End Fund Liquidity Risk Management Programs
• Predictive Data Analytics
• Reg SCI
• Reg ATS
• Dealer Definition
• SPAC

The testimony concludes: “While we support some of the Commission’s proposals, we believe others fail to identify a market failure and lack clear direction from Congress. The agenda also lacks prioritization and sufficient cost benefit analysis, particularly the cumulative impact. Just as the Commission has a duty to ensure fair, orderly and efficient markets, rushing to do too much too quickly could result in poor policy outcomes and overwhelm market infrastructure.”

-30-

SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development.  SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).