people the idea that it's the starting point for every revolution. america's revolution, cuba, the revelation all around the world. those ideas find their truest expression in the democracy. not because it is perfect but precisely because it is not. and like every country, we need the space that the democracy gives us to change. it gives individuals the capacity to think in new ways and reimagine how the society should be and make them better. there's already an evolution taking place inside of cuba. a generational change. many suggest i come here and ask the people of cuba to tear

something down, but i'm appealing to the young people of cuba who left something out and build something new. [speaking in spanish] [applause] president castro who i appreciate being here today, i want you to know my visit demonstrates you do not need to fear a threat from the united states. given your commitment to the self-determination, i am also confident that you need not fear the different voices of the cuban people and their capacity to speak and assemble and vote for the leaders. i'm hopeful for the future because i trust that the cuban people will make the right decisions. and as you do, i'm also confident that cuba can continue to play an important role in the

hemisphere and around the globe to you and my hope is that you can do so as a partner with the united states. we played very different roles in the world, but no one should deny the service to thousands of doctors have delivered to the poor and suffering. [applause] last year american health care workers and the u.s. military worked side-by-side with cubans to save lives and to stand by. i believe that we should continue that kind of cooperation in other countries. we have been on the different sides of the conflict, but today americans and cubans are sitting together at the negotiating table and we are helping the

colombian people resolve the civil war that has gone on for decades. that is good for everybody. it gives everybody in this hemisphere hope. we took different journeys to our support for the people of south africa ending apartheid. but president castro and i could both be there to pay tribute to the legacy of the great nelson mandela. [applause] in examining his life in sure we both realize we have more work to do to promote equality in our own countries to reduce discrimination based on race in our own countries and in cuba we want or in a to help lift up the

cubans of african descent who've proven there's nothing he couldn't achieve when given the chance. we have been a part of the different blocks and we will have differences to promote peace and security, opportunity and human rights. it can help foster a greater sense of unity in the americas. [speaking in spanish] [applause] from the beginning of my time in office i've urged the people of the americas to leave behind the ideological battles of the past. we are in a new era. i know that many of the issues that i've talked about lack the drama and i know part of cuba is identity is the pride that can stand up for its rights and

shape the world but they also know cuba will also stand out because of the talent, hard work and fight of the american people, that's your strength. [applause] anymore than the united then the united states should be defined against cuba and i'm hopeful for the future because of that reconciliation is taking place among the cuban people i know that for some cubans on the island, there may be the census that those that left somehow supported the old order in cuba. i'm sure there is a narrative that lingers that suggests they ignore the problems of the prerevolutionary cuba and rejected the struggle to the new

future but i can tell you today that so many carry the memory of painful and sometimes violent separation. they love cuba. a part of them still considers this. that's why their passion is so strong. that's why their heartache is so great and for the community that i've come to know and respect this isn't just about politics, it's about family. the desire to rebuild the broken bond, the hope for a better future, the hope for the return and the reconciliation for all of the politics, people are

people and cubans are cubans in the coming year in the trouble of this distance on a bridge was built by both sides of the florida straits. i first got to know the talent and passion of the american people and another suffered more than the pain of exile. they can reach higher than america. the reconciliation of the cuban people, the children and grandchildren of revolution and the children and grandchildren of exile is fundamental to cuba's future. [applause] you see it in gloria who traveled here for the first time

after 61 years of separation and was met by her sister. you recognize me but i didn't recognize you, she said after she increased her sister. imagine that after 61 years. as she was walking the streets in elderly woman recognized her as her mother's daughter and began to cry. they showed a pile of pictures and putting her baby picture that her mother had sent 50 years ago. melinda later said so many of us are getting so much back. you see the young man that became the first in his family to travel without 50 years.

for the first time he said i realized family is family no matter the distance between us. the most important changes start in small places. it can make people in conflict and exile and poverty. it takes time for the circumstances to change area to the recognition of a common humanity, the reconciliation of people bound by blood and a belief they believe in one another, that's where progress begins. understanding and listening and forgiveness. and if the cuban people face the future together, it will be more likely that the young people of today will be able to live with dignity and achieve their dreams in cuba.

the history of the united states in congress conflict, struggle, sacrifice, richard yoo shin and now reconciliation. it's time now for us to leave the past behind. it's time for us to look forward to the future together. [speaking in spanish] it won't be easy and that there will be setbacks and it will take time. when it renews my hope and confidence of what the american people will do we can make this journey as friends and neighbors and family together. [applause]

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♪ ♪ president obama wrapping up the last few hours of his historic trip to cuba to the president will travel to the embassy to have anna where he will meet with dissidents and later

attended baseball game. later he departs cuba and will meet with argentina is elected president. by the way if you maced what he had to say it will re- air tonight on c-span starting at eight eastern. coming up shortly, securities exchange commission testifying for the house appropriations subcommittee about the agency budgets said to start in about five bags here on c-span2. people show you a discussion on the democrats agenda in the house and president obama's trip to cuba joined by the democratic member of congress on this morning's washington journal.hes >> gerry connolly democrat from virginia and cochairs the democratic coalition we will be talking with the congressman about the president trip to cuba

as well as other matters. good morning congressman. before we get to the other legislative issues before us today i just want to give an update about this morning's apparent attacks in brussels. according to the ap the latest i death toll is 26 with more injured at least 136 injured.bl the u.s. embassy is recommending that americans stay where they are and avoid public transportation. and more than 200 flights have been diverted for canceled after the three explosions that rocked the airport and a subway station in belgium's capital. give your initial reaction to these attacks. you are a member of the foreign affairs committee. >> guest: i was >> guest: i was just inas brussels last month for and

elementary meeting. security was pretty tight and it reacts to the terrorist attacks in the fact that at least one was known to be operating out of brussels so this is a terrible tragedy and my heart goes out to the victims and the belgians but it does remind us how important vigilance is it that we have to take the fight to the terrorists. >> host: do you have concerns si on the homeland subway systems in dc or other stations or the airport here? >> i do not have any specific concerns about imminent threats in washington or the united states. with that said, again, brussels reminds us that we have to be vigilant

we can't let up on emergency t preparedness and to turn to track down what the terrorist perpetrators. we have to sustain that. [inaudible conversations]

[inaudible conversations].

>> okay. we'll, hearing will come to order. the rinking member, mr. serrano, tweeted the meeting will start at 11 promptly. i know people are anxiously reading his tweet at this point so we'll start. this is the fining a hearing of our -- final hearing of our subcommittee. want to welcome our witness, securities & exchange commission chair, mary jo white. thank you for being here today. we always enjoy having you before our subcommittee. i know subcommittee members look forward to having a good exchange with you. the sec plays a critical role in protecting investors encouraging capital formation and maintaining fair and efficient markets.

just as buyers and sellers expect u.s. markets to be fair and efficient, the regulator who oversees them is expected to fair and efficient as well. fiscal year 2017 the sec requesting 1.871, or $1.781 billion which is $176 million, or an 11% increase over fiscal year 2016 while the sec is a fee-funded agency, congressional overnight over the commission is essential in holding the sec accountable, fulfilling its mission and making sure it is responsive to the markets and investor as well as congressional concerns. i look forward to discussing your requests and why the commission believes it needs these additional revenues. for the past three years the committee has set aside resources within the overall sec funding amount to fully fund the division of economic and risk analysis, so-called, dera. this committee provided given

dera the ability to grow by almost 50 positions, including 16 h phd economists. i believe the cost benefit analysis to the sec rule making is very important. as well as the micro and economic effects of sec rule makes. so i want to express my support for other dera functions developing risk based models for the commission's inspections and enforcement divisions. in addition to the duties of chair of sec your chair of financial oversight council, called the fsoc. we discussed this last year. the process for systematically important financial institutions sifis is still a concern for me. although fsoc adopted transfair currency measures since we last spoke, i'm not sure they go far enough. i still believe the current designation process is not

flexible enough. entities should be given the opportunity to address systemic risks before being designated fsoc success should be measured how it mitigates systemic risk, not by number about institutions it designates. another issue that we discussed last year was liquidity in the markets, especially fixed income markets. as i'm sure you know the fiscal year 2016 omnibus required dera to report back to the committee within one year of enactment on the combined impact of the stroller rule, basal iii and other financial regulations impact they have on access to cap follow for consumers investors, and businesses and market liquidity. i continue to have concerns cumulative effect of layers of regulations has adversely impacted overall market conditions and market liquidity. i look forward to reading your report and discussing with you today what the sec is doing to address this issue. 2016 omnibus also include ad

provision which prohibits sec from finalizing implementing or any rule or order regarding disclosure of political contributions in the sec filings. i believe congress has been very clear on this issue. however i understand that there are some who believe the sec is still able to work on a potential rule without actually finalizing that rule. let me caution you against this interpretation. i think commission has a lot of work to do, including congressionally mandated work ich is more important than advances policy congress never required. in fact plainly ejected in statute. on a bipartisan note last month the house passed hr-3784. that is called. sec small business advocate act. mr. quigley and i were sponsors of the bill and i hope the senate takes up this legislation soon because small businesses are on the forefront of job creation and technology

innovation. sec small advocate act establish as advocate for small business capital formation and small business capital formation advisory committee to assist small businesses and small businesses investors, with any problems that they may have with the commission. identify difficulties, small businesses have in securing access to capital and concluding unique challenges for minority and women owned businesses, analyzing potential impact of sec regulations on small businesses and proposed changes to sec regulations which would better promote the interests and needs of small businesses and their investors. i'm interested to hear from you, chair white, how the sec is currently making small businesses and small businesses capital formation a priority and any thoughts that you might have on this bipartisan legislation. the sec should be one of the leaders helping further grow our economy while at the same time keeping our markets fair and orderly. i know that is a responsibility

and you take it seriously. thank you you for the work of your staff and work they do and look forward to your testimony today. first of all i will turn to mr. serrano, ranking member for any comments he might make. >> thank you, mr. chairman. crenshaw and quigley, was i out that day? >> yes. >> okay, thank you. thank you, chairman crenshaw. i join you in welcoming chair white back before our subcommittee. it is a pleasure to see you once again as you come to testify about the fiscal year 2017 budget request for the securities & exchange commission. your budget request for this fiscal year is quite reasonable in my opinion given the large and growing oversight role that you are expected to undertake. with some new responsibilities not just from dodd-frank but also the jobs act we could argue that you should be requesting even more funding than you are. your total budget request is dwarfed by most big banks, i.t. investments.

so despite recent increases you are always fighting an uphill battle with fewer resources that are needed to do the job. last year we succeeded in increasing the sec's budget level to the 1.6 billion, which has allowed you to at least not lose ground. your fiscal year 2017 request asks for further increase of more than 100 million to a total of 1.781 billion. this will help increase your enforcement capacity, your ability to conduct oversight and examinations of regulated entities and your ability to protect consumers. although the financial meltdown of 2007 and 08 fades in memories of some people, it remains foremost in my mind. at that time we had regulatory agencies that were negligent in duties to protect consumers and cut back on abusive practices and we all paid dearly for that.

people lost their retirement incomes, lost their savings and the american people were forced to bail out actors who had taken unnecessary and harmful risks that undermine our economic system. that is why a strong and vigilant sec is vital to protecting not just those who invest in the financial markets, but the american people as a whole. as we found out several years ago, guarantying that you have the resource to insure fair and open financial markets is key to every american's economic security. dodd-frank gave you significant new tools and oversight abilities and it is up to this subcommittee to make sure you are able to carry out the intent of that law. i do also want to mention another part of this equation that threatens to undermine the system of safeguards and protections provided by sec and other financial regulators.

as in previous years, last year's house and senate appropriations bills contained numerous riders that are both unnecessary and procedurally flawed. these riders open up loopholes in dodd-frank and undermine the ability of the sec to do its job. before i close, chair white, i just want to thank you for your dedication to this agency and to this nation. you have a tough job to do and hopefully this subcommittee makes it easier rather than more difficult. i know you are a fellow yankees fan and sense baseball season will be underway i am sure i will see you in the bronx soon. thank you, mr. chairman, and thank you chairman white. >> thank you. now we'll turn to chair white for your opening statement. if you could keep it in the range of five minutes that will give us plenty of times to answer questions. so the floor is yours. >> thank you. chairman crenshaw, ranking member serrano, members of the subcommittee.

thank you for allowing to me to testify in support of the president's fiscal year 2017 budget for the securities & exchange commission. i appreciate the opportunity to discuss with you why the funding of the agency at a level of $1.781 billion is critically needed to enable the agency to fulfill its important responsibilities to investors, our markets and companies seeking to raise capital to fuel innovation and economic growth. the sec has made great strides in recent years to strengthen its operations and programs, adopting strong measures and bringing important enforcement actions to protect investors and our markets. we do not want this progress to stall because we fall short in the funding necessary to maintain our positive trajectory and fulfilling our mission. under rule making and policy fronts we finished our jobs act mandates in 2015 with adoption of regulation a-plus and regulation crowd funding and are nearing completion of all of our dodd-frank mandates. we also advanced other key rules

and comprehensive initiatives in mission critical areas. beyond the specific rule makes the sec for example, continued review of equity and fixed income market structure issues, advanced disclosure effectiveness review and to improve the public company disclosure regime for investors and companies. has undertaken modernization an enhancement of our regulatory regime for asset managers. the commission also continued in 2015 to hold securities laws violators accountable with record numbers with record recoveries in all market strata and cutting-edge, first of their kind enforcement cases. systemic enhancements in the sec national examination program including recruised recruitment of industry experts, augmentation of data analytic its and enhanced training led to more effective and efficient program. we are throughout the agency increasingly harnessing technology to better identify risks, uncover frauds, sift

through large volumes of data and inform policy making and streamline operations. while these achievements clearly evidence stronger and more efficient agency, significant work and challenges remain if we are to be successful in executing the sec broad mandates an responsibilities. currently ses is charged with overseeing approximately 27,000 market participants, 18 national security exchanges, pcob, finra, msrb, sipc and fasb. in addition the sec. is responsible for selectively reviewing disclosures and financial statements of over 9100 reporting companies. since 2001 the markets and registrants we've seen have grown in complexity and size and. nearly tripling to $70 trillion and assets of under management of registered advisors more than tripling from approximately $21.5 trillion to about $66.8 trillion. at the same time as e ranking

member alluded to the annual budgets for i.t. alone for some of our largest registrants are reported to be up to $10 billion, more than five times the the sec's entire budget. the sec's responsibilities have also dramatically increased in recent years with new duties or expanded jurisdiction over securities-based derive i was, hedge and other private fund advisors, credit rating agencies and municipal advisors and rating agencies in addition to responsibility to implement and oversee a entirely new crowd funding regime. sec greatly appreciates the confidence that congress and this subcommittee placed in us in recent appropriation cycles. we're seeking that support this year. the requested level for fiscal year 2017 which has been carefully thought through and targeted will permit the agency to hire an additional 250 staff, in critical core areas and continue to improve our information technology. specifically the sec's budget for 2017 seeks to increase examination coverage of

investment advisors, where current funding enables the agency to examine only 10% of the approximately 12,000 registered investment advisors. further leverage cutting-edge technology. protect investors by expanding our enforcement programs, investigative capacities and including a new complex areas and to strengthen our ability to successfully litigate against wrong doesers, further bolster the sec's economic and risk analysis functions and hire market and other experts to enable the sec to fulfill expanded rule making and oversight responsibilities. the funding we are seeking is imperative to protecting investors and meeting challenges of today's markets and sec's expanded responsibilities. as the chairman alluded to the sec's fund something definite neutral so any amount appropriated to agency will be offset by modest transaction fees, an therefore will not impact the deficit for funding available for other agencies. our appropriation also does not

count against the fiscal 2016 or first call year 2017 caps in the bipartisan budget act of 2015. i hope and believe that we have shown ourselves to be good stewards of the funds we have been appropriated and we will continue to be. so i look forward to working with the subcommittee to provide the sec with the resources it needs to fulfill its critical mission and i thank you again for the support you've shown the agency. i will be happy to answer your questions. >> thank you very much. and we'll start the questions now. we'll try to observe the five-minute rule. there will be some members coming and going. there are other hearings going on at this very moment. some are across the hall and right down the hall but let me start by about asking you about your budget this year, $176 million request. i mentioned that is 11% increase over last year. last year you received $105 million of an increase which is $281 million over two

years. but from '15 to '16 there was $51 million carryover. i wonder how, how that happened and what, how was that $51 million -- you also have access to a, i guess reserve fund that was set up under dodd-frank but just talk the funding last two years and that $51 million, how does that occur and what do you planned to do with that $51 million? >> i think it is referring to carryover balances. essentially i think we he can so about this last year. the sec, unlike a number of federal agencies have what are called no-year funds so we're allowed to carry over if we haven't spent during the particular appropriation cycle. it allows for better financial planning, smarter hiring. you don't want to be rushed to hire the wrong experts or let the wrong contracts because you have an artificial deadline. so we have in the last several

years, the carryover balances actually come down, some of those balances are also attributable to deobligates funds on completed contracts. so that is again good financial management. so we take into account those carry over balances when we make our request for the subsequent year. i think, i mean you can't estimate precisely what you will have in given year. depends when we get our appropriation as well. obviously if we get late in the year. that puts more pressure on us to spend by end of that year. fortunately because of the no-year funds we're able to spend it smartly, wisely and be good stewards of the funds that congress appropriates for you. >> gotcha. last year, last year you received $105 million increase. it was less than you requested. i think $117 million less than that. so when you, when you don't get as much as you asked for how do you, how do you prioritize of that $105 million, what were -- i know you have done a lot of

work in enforcement, investigations but when you don't have as much as you had requested tell us a little bit how the priorities were with the money that you did receive with the increase for last year. >> basically what we try to do, obviously it makes a difference what our priority, what our most pressing needs are in a given appropriations cycle. for example, last year and this year, one of our very high priorities is to try to increase the number of examiners to examine that investment adviser space we talked about for, you know, at least in our last two or three hearings. strengthen enforcement. so we really essentially align the priorities we sought funding for and make separate judgments based on reduced amount we received. we essentially allocated through a thorough process those positions to best meet priorities contained in our budget request. a number of them went indeed to

ia, investment adviser examiners. a number went to enforcement. a number went to division of economic risk analysis, a number went to, i wish a bigger number but hiring more market experts as we sort of outlined as well as to the extent money was available to continue the technology projects that are so critical to us. you mentioned the reserve fund. we used at sec the reserve fund set up by dodd-frank as you indicated really for the long-term, mission-critical i-t projects so essential to us. i think we had 25 million of that rescinded last year. so we had to obviously deal with less money than we really needed last year but again we try to do smart budgeting after we get our appropriation as well as before when we make our request. >> gotcha. you mentioned dera and i mentioned in my opening statement we kind of carved out money. we think that is important to understanding the cost benefit analysis. i wanted to get you to comment

on that. how has that worked out? has that been helpful across the board in what you try and do? >> certainly i would say, and i have said before, that deer a is one of the great success stories of the sec. very much appreciate the support we've gotten through the appropriations process for that. it is also our fastest-growing decision. division. in addition think do what i would call substantive rule-makings. they are able to do that now as we've gotten more positions, more economists, but gotten infrastructure for them to do their work. get involved early in the rule makes, you see often their original study and put into the comment file and arena for people to comment on. so that really has come a long way. you can't overstate it is importance to the quality of our rule making. they also are now in the last

couple of years at least, maybe a little longer than that, really increasingly so, integrated into the entire agency. they are the ones who primarily manage our big data, our structured and unstructured not only for themselves and their research but for the other divisions to help them do their job much better. they are also the ones that really designed and conceived of and worked with the other divisions on these data analytics we talked about throughout our budget requests in prior hearings. so enforcement and our exam staff is better able to identify high-risk areas. where do we do to examine? where is the suspicious activity we need to go and look at more deeply. and so they are really doing i think fantastic work at the agency. >> well, thank you. i'm glad to hear that one of the things that we asked last year in the omnibus bill for them to do a study to report back to us. i think there is some concern there is awful lot of regulation.

i mentioned in opening statement you've got basil iii, this, that, lots of regulations there. is some concern among folks that has impacted the liquidity of the markets. and so we asked for a report to see what they would have to say and i wondered, i'm looking forward to reading that report, do you think, do you think some of those regulations, if there is a lack of liquidity, was that a unintended consequence or do you think that was part of the plan in cooling down maybe the economy or heating it up based on your view of what happened in 2008? >> i mean, i don't, unintended consequences, all regulators must be focused on at all times certainly with respect to the enormous amount of rule making that has been done since the crisis that applies. certainly all the rule makings we do at the sec are looked at with that lens. i say two things about this one,

liquidity is enormously important to the functioning of our markets, our economy to grow. so it is an enormously important set of issues that all the regulators at sec are focused on. determining whether you have reduction in liquidity, to what extent and as a result what causes are, many economists tell you whether they're in dera or elsewhere is extraordinarily difficult. we have, for example, with our fellow banking regulators and i think cftc reported quarterly to the house financial services committee whether we can determine whether the volcker rule has had negative impact on liquidity in the corporate bond market. so far the conclusion is we can not say it has had an impact. importantly to study and ferret out looking for for negative consequences and ferreting them out and and fairly recent study that was presented or is to be

presented at one of our dera conferences. i think british columbia study really looked precisely at this question of the combined regulations but more specifically even the impact of the volcker rule on liquidity. that particular study determines that it has not had a negative impact on liquidity and indeed you see liquidity deteriorating right after the crisis but you don't see blips up after regulations have been put into place. obviously there will be more studies coming forth as there should be. enormously important to stay on top of. >> so it's a concern and sounds to me like y'all have looked at that from time to time. i think this study will even by us more information about -- do you ever talk about what is the appropriate liquidity? that is pretty, you can't really pin that down but something you all talk about as you look at orderly and fair markets? >> no question about it. obviously you have other objectives you're trying to achieve as well you're balancing

from time to time with regulations with liquidity but enormously important all the time to look at that. >> gotcha. okay. now let's turn to mr. serrano. >> thank you, mr. chairman. chair white, the president's budget request of 1.78 billion, increase of 6% over fy-16 will support 250 new positions. you're requesting a 2 new positions in enforcement, 127 in compliance, four in corporate finance and seven each in trading and markets. and investment management. police explain what functions these will serve and why they're needed? and also a follow up, what would happen if you didn't get these positions? >> well i think, starting with the exam positions i think we've asked 127. i think 105 or 107 would

actually go to the investor advisor space which we talked about before where we have resources only to examine about 10% a year which is obviously creates a very significant investor protection issue. that is what's primarily we use those for. we would also use examiners in other spaces as well. our oversight responsibilities over the exchanges and sros and broker-dealers. enforcement, can't overstate the importance of strong enforcement particularly in these markets as they get faster, more complex. we need market experts and people who know how to use data analytics to apply them smartly. we see more, we're charging more individuals now in our enforcement program which i think is very important to stronger deterrents. that means or at least this would be my theory why that means we've had more trials recently. so a dozen of those positions in enforcement would be devoted to bolstering our litigation unit,

our trial unit in the office. then i think, you know, 24 of the positions really spread over dera, corporation finance, trading and market and investment management would be for market oversight. that covers, you know, just as our responsiblities are diverse and expansive, difficult ones of these hires would be used in order to cover those responsibilities as best we can. so if we weren't to get these positions, you essentially would see a deterioration in every one of those priorities we outlined in our budget request. we would be examining less. therefore subjecting investors to more risk. we wouldn't be enforcing as we should be. wouldn't try cases we need to try to prevail in order to send strong deterrent message. we have new responsibilities under dodd-frank and jobs act you have to oversee with new crowd funding regime. we have examiners devoted to the volcker rule. it is really spread out among,

and think smartly the priorities and responsiblities that we have and if we were not to get it we would clearly be compromising our mission, compromising the markets and investor protection. >> i'm glad to hear you use the word enforcement and i keep telling this story, but it can't be told enough. some years ago, this agency, you weren't there, and actually said, we don't need anymore money we're fine. we later find out why. they were not enforcing anything. only history will tell what role they played in that 2007-if i as could. . .

make sure that investors are looking out for risks they may face, losses they may face that are due to market events. obviously, and sadly what's going on in puerto rico creates those in some situations. it's really a prudent set of guidance for investors. in terms of the sec's role in the underlying crisis beyond attending to investors and holdings in funds which that guidance goes to, we don't have a direct role in that, although as a member of fsoc i clearly am in discussions about that with secretary lew and the fsoc members, particularly secretary lahood version is very, very focused on the core of that crisis but we also coordinate

with our fellow financial regulars just in terms of impacts and possible impacts battled on investors direct investors but in the broader markets. >> thank you. thank you, mr. chairman. >> thank you. i'm going to turn now to mr. graves and mr. quigley but i want to note we've been joined by the ranking member of the full committee, and she will be here to ask a question or two along the way. so welcome. mr. graves. >> chair white, good as you can. i know many of the members of the subcommittee have raised concerns related to the dol and sec fiduciary rule-making. someone to talk about that. it was brought up with director donovan a few weeks ago as we all met and there was an area that we feel like has just been ignored a little bit too much and its implications of the rule we feel like impacts hard-working constituents that we all represent including hard-working georgians that i do. chairman johnson produced a

report on the problems with the department's rule andy published on federal 24th, and mr. chairman, i'd like to but for the record for the committee. 40 page report so don't expect everybody to go through it right now but there was one area i want to focus on and quote the report. it says despite public assurances that the department, the labor department has collaborate with sbc, e-mails between labor department employee, a labor department employee and an sec expert revealed discourse between agencies about the rule-making. the report goes on with a senior sec official stating concerns about reduced pricing options, rising cost and limited access to retirement advice. particularly for retail investors, in other words, our constituency. 26 some of the items of concern raised by your career staff relating to the substantive, substantive content of the rule with labor failing to resolve all of these issues.

i think as we all know many other staff being career step are considered experts in what to do. we hope the appointees noted issues as well. the folks that are dedicated their careers or those that we hope we can trust to take just the facts, positions. chair white, does it concern you as much as it concerns me and others on this panel that labor seemingly ignored the concerns of your own cover professional staff, that they have raised, and have not addressed to them, augusta were of this committee who have raised very similar and same concerns also? >> i think i can't comment on the specific report and exchanges back and forth but i can say, i've said before, which is the step of the sec did provide substantial technical assistance to the department of labor including bringing our perspectives, staffs perspective and expertise on the broker-dealer model, including

on the least their views about possible impacts of various permutations of a rule. the department of labor also in the notice of comic. asked about those issues. obviously, haven't seen the final project but i think what i've also said about my own view for doing a fiduciary duty, uniform producer duty and sec space, is it's not an easy task and if we ended up at the end of the day really depriving particularly retail investors of reliable recently priced advice then i would consider us to have failed in our purpose. at the end of the we are independent agencies and the department of labor does have responsibility for the very import rfs-based. i think perhaps the particular exchange of referring to occur and may be 2012. i can look at what that meant or did nothing goes on the par

proposal. >> thank you. we appreciate what you're staff has provided, expert advice that they provide. i think it's all of our interest to make sure all of our constituents have the most options available to them to invest wisely and affordably, and not options removed or our concern is that this rule will remove many of those options. i did not remove them, make them more expensive over barriers in place in which people will not seek those options. we believe it's just wise to be investing in their future and in their retirement and we want to make sure all those options are available. and can be made with individuaindividua ls in their communities that they trust that might be interesting to main street. thank you chair. >> on that, do you know why, as i understand, dodd-frank specifically said you'l your agy was mandated to study the issue and to propose a rule.

have you got any idea why the administration has supported the wealth moving ahead of you? >> first what dodd-frank it was to say that it mandates a study which the staff did. i think it was a good study, and gave the sec the authority if it decided to to proceed with the uniform producer duty for broker dealers and investment advisers under section 913 of that act. again the initial department of labor proposal i think was in 2010. they do have responsibility for the erisa space and even as we cq today, our broker-dealer a subject to some department of labor regulations and vice versa. so that the overlap -- >> is the sec going to look into developing your own rule? >> without question. i think i said some time ago my own to after billy extensive study, and the agency has been studying this for a lot of years

and i spent a lot of time since i've been chairman. my conclusion is the sec should proceed under 913 to do a uniform producer duty. >> who is going to figure out how to harmonize the two rules? >> it's always, you try to make them at least compatible if you can get the coordination with fellow regulators where we of overlapping jurisdiction is enormously important. we have in the title vii over-the-counter derivatives spaces, not only cftc before and regulars. i want to be clear, i think this is a very hard and not quick to do this well. >> thank you. mr. quigley. >> thanks, mr. chairman. welcome chairwoman like. nice chairman crenshaw to reference the small business advocate act. i'm sure you are aware of it. about the house passed it on a non-bars and judgment -- can you tell us her stance on designating a small business

advocate at the sec? >> again, we haven't taken a position on the particular builder i think we may provide some technical assistance. look, there's no question, if this is true of the sec, throughout the sec, the onboard small businesses are. and that there are different needs and different models the attended to very closely. we have a small and emerging business advisory committee that i reinstated shortly africa to the commission. we have a division of corporation finance and office of small business policy. they advice on all of our rule makings with the lens on small businesses and comment on the. i think to respond to maybe 1700 separate inquiries from small businesses last year. we are extraordinarily focused on that with a lot of expertise. in terms of having a small business advocate, i mean, i think i think i would work about

is the concept where we all agree that we want to do everything we can for small businesses. but it's not to fragment the efforts that really are carried out on behalf of small businesses. certainly the star of the sec. we really have not concentrated in a way where there's a lot of expertise and a lot of work that goes on. however, that might develop. i wouldn't want to lose that. >> that the reference another point. a recent study conducted by researcher at the university of chicago and the university of minnesota, 7% of all active financial advisers have been disciplined for misconduct or fraud. study also found the advisers are engaged in misconduct, of those, 38% are repeat offenders. i'm sure you were aware of the concerns about these things that are you aware of these studies? what is the sec currently doing or to propose to the financial

public is especially for repeat offenders speak as i am aware of the study. i read it quickly. haven't read it as they care i will do next week or two. this is an area that i think is enormously important. because whether it's a broker-dealer or investment advisor, if they are not serving their clients honestly, fairly, and i was in the best interest of the client, that's a big problem. what are the things we've done at the sec in particular, this was long before the study is we have a broker-dealer task force and we have in our exam area a priority to really look for these repeat offenders and private also looked very closely at the firms with attended end up again here in other words, one of the things the study referenced was not only do you have problems in the past with some of these advisers and i think brokers, the study is some brokers really, they show up again at another firm and again at another firm.

our focus has been, then run tends to do with the registered represent his individual not always but to a great degree. we focus on the firms can wear the same to be recited up with one particular initiative where we are looking at churning by brokers throughout various forms to try to crack down on that. it's enormously important area. >> how much of this is resources? >> some of it is resources. you can't get away from the. you can't get away from that because as i say we obviously in the broker-dealer space we've been taught about the investment advisor space but in a broker-dealer space finra does today about 80% of examinations of broker-dealers. that's really firms and individual brokers but that doesn't take into account all their various offices, branch offices which are not examined with a kind of frequency. they do about 50% a year which is better than 10% a year and investment advisory space.

but i think we can't do enough. i think our techniques are better, our data analytics are better. we identifying the patterns. for the last two or three years at least we've been very focused on this at the sec trying to identify where those rovers were going and getting them out of the industry. >> thank you for your service. thank you, mr. chairman. >> thank you. >> thank you, mr. chairman. madam chair come to the extent the chimp is going to manage my time please don't be offended if i endeavor to manage yours. i will try to be crisp with my question. so with that in mind initially i know that you folks have been working on an update for industry guide seven which provides tags for mining companies to report the valley of mineral resources and research. the president is inconsistent with international reporting requirements. could i have a point of contact in your step just to get an update on where that stands speak with yes, i would call

keith higgins who is the director of our division of corporation finance. >> thank you very much. i want to go back to the department of labor stuff and take a so called this under the heading of intramurals. obviously, you'll be able to tell from my question i think your jurisdiction is unquestioned to understand this issue with erisa and some of that stuff but i'm concerned when you speaker about unintended consequences come at a when you say it's hard, it's not quick i think overly under dodd-frank this section that you mention in your earlier testimony, that there' there isn fact, mandatory language under the standard of context stuff that says it's under other matters but it's under the standard of conduct section which says the commission shall examine, rules prohibiting or restricting certain practices conference of interest, blah, blah, blah. there's also i believe a supreme court case that's not specific to the sec but generally says hey, when congress acts leader

anton and specifically that takes precedence over earlier acts in terms of regulating that sort of stuff. so i guess i'm concerned about unintended consequences. clearly the 800-pound gorilla issue in the room is is dol going up on rule, is as easy-going of another? can you give me any comfort on what you think your jurisdiction is ultimately when you get through this process and how that's going to work if it is in conjunction with dol? >> i think there's no question certainly at least sent section 913 of dodd-frank was passed that the fcc has the authority not the mandate that the authority to impose uniformity sure duty and broker-dealers and investment advisers but also provide certain parameters if the commission decides to go forth and again as i barge to do more often than i do, i am one member of the commission even though the children, so this is

a commission decision. i believe the sec should exercise that authority to go forward but that's, again, not a quick and easy process that it's not up to me alone as to whether a what the parameters of that will make you would be. although 913 sets the parameters. wherwhen we do go forward by consistency, assuming it was a department of labor will that preceded ours that overlap, and we would continue to talk about coordination and making our rules and the regime is compatible as possible. but they are not always lead identically and that's something you try to make them lead identically if you can't but they are separate agencies, separate statutory mandates. >> timeframe? >> i can't say -- >> you've got some decisions. >> i can't give you a time for them other than to say again what i said before, that it's complicated, not fast by any

means. where it stands right now is essentially that the staffs parameters of recommendation are being discussed with my fellow commissioners. >> i guess the final question is, so if dol comes up with a stand before you folks get through your process, are you going to enforce their standard speakers well, i mean, i think again, they have some enforcement authority on their own. i mean, we have come our enforcement authority is under the federal securities laws. we don't enforce the labor department rules per se. obviously, again the conduct can overlap with the jurisdiction. it's not as the situation is not an issue with bonds would imply but it would come we enforce the federal securities laws and our rules. >> i appreciate that. i'm just saying utah can take committee think it's not a seat as you might think that i get

that but the other, if somebody who's now the subject of an investigation based on who's rule isn't and who is interpreting what is even less easy, if you will. i would much rather be the regulator that a person finds out i thought i was in good shape with the sec by now about the dol sweeping enemy and we are compliance folks. >> i think that's why we can't in all other spaces will be overlap it is not just the sifis to be as consistent as we can. i will say didn't know that we've had a parallel roles and do a parallel rules now that are not totally consistent if we do our best to give guidance and clarity but they are not identical and they do overlap. >> thank you. thank you, mr. chairman. >> i think we'll have time for another round of questions but let me turn to ms. lowey for either a statement or a question, or both. >> well thank you very much, mr. chairman. i appreciate your leadership, and to do what is how fortunate we are to have a cheer who is so experienced and your years and years of experience have

contributed to your outstanding management of thi these are difficult agency and we thank you very much. when i look at the numbers come the markets your policing have a lot of new registrants, more than 2300 private funded advisors have registered with the sec since the effective date of dodd-frank, and with 800 municipal advisers are expected to be registered in 2017. in the next two years the number of new registrants are expected to be subject to examination including swot execution facilities, security-based swap data, repository swap views, crowdfunding. how do you mayor dies examinations given how large your existing portfolio is? how much larger will become with all these new registrants? how many do you anticipate being able to examine? how can investors have confidence that everything is being done to prevent another

meltdown when so few of these entities are being examined? and will your budget request help build that confidence? >> the budget request will help. i think there's no question that the sec is a significantly underresourced agency, despite the increases which were very appreciative of that we've got the last futures to do the job we've been given to do. that was really, i would say that unequivocally given before we were given the additional responsibilities under dodd-frank and a jobs act. your reference to the private fund advisors which include hedge fund advisers and municipal advisers at the security-based swap dealers will be registering online, those all add-ons to our responsibilities. that is in our request of this year request for limited positions for those that will come online, but clearly there will be a gap. what do we do about that? we tried to make a smart of use

of the resource we have to i certainly come in and try to be as eloquent as i can for more resources so i can do the job, but we try to do more risk-based identification of where to go. we do desperate use of data when they got a private fund advisors. initially we did presence exams which more limited exams but at least we had our arms around a boot or two on the ground. but order to carry out our investment protection mission we need significantly more resources in all other spaces. >> i think it's important for my colleagues to note that 2015 the work of your division of enforcement resulted in a record amount of sanctions, $4.2 billion. a record 507th stand-alone actions were filed as were an additional 300 follow on proceedings in delinquent filing cases. if you could share with us what trends have you noticed in securities fraud? are they just getting smarter?

how will your budget request help you spot fraud and take action against those who perpetrate it? >> yes, the markets we have to police are getting smarter, more complex, bigger, faster all the time. one of the ways that we try to meet that challenge is through smarter use of the data analytics that we've been talking about. we have a software tool called artemis that was developed in house that basically allows us to identify insider trading suspicious patterns at least among traders but you hav have o wait fo for a bit and look behid that and see who try to pick but it's also a budget factor i'm very proud of the record of enforcement are no not just the notion to think of her impressive but the kind of cases and how complex they are. if you think about where's the value add when you think about how much to find an agency. enforcement alone last year obtained orders for returning

$4.2 billion. our request here is $1.7 billion. and think of all the other value add that the sec provides. what we see in terms of trends beyond more and more complex? i mean, i think the complex financial instrument area is one which clearly required market experts. we seek those under budget request, more analytics, pyramid schemes, again a place for market, more market experts and more data analytics. and you will see, as i said we thought out and try to talk a budget request, you will see that is a mom who we have asked for. >> that's very helpful. and lastly in fy '15 this committee asked for an update on the sec's efforts to modernize corporate disclosure requirement including cybersecurity. you informed us that in march 2014 the commission held a roundtable to discuss the

cybersecurity in furtherance of the commission's efforts to better inform it so. the marketplace, though agencies and the private sector. i would be interested to know what lessons you learned from that round table. should companies that filed with sec be required to disclose cyber attacks? do you engage with the private sector in other ways on cybersecurity? and i just want to say, thank you i remember a couple years ago, before when ray kelly was police commissioner they were always behind the eight ball because the corporations, they were afraid the stock prices would go down if they admitted that they lost 7 billion or whatever and a cyber attack. i would love to know where you stand on these issues. >> first of all i don't think there's any greater risk, the financial sector and beyond the financial sector faces and cyber risks. and that's private sector, the government, our spaces as well. in terms of disclosure by public

companies, talking about public companies, the acc did do guidance to companies some time ago, really alerting them to these range of issues that would require disclosure if there is an attack congress and at the risk to their business investment ago, they must disclose the. we look at the disclosures every year in our annual reviews, but we also are focused with our fellow agencies and the private sector are visually much deeper, broader risk than sec's jurisdiction really reaches. we pay a lot of attention and respect to our registrar and and again our examiners have got out really ahead of the curve i think, and good for them come in going out and looking for cyber preparedness at investment advisors and broker-dealers. and then publishing, not by name and chapter, but really publicizing to the population

what to look for, how to enhance what your system is, what other best practices. we continue to have that as a priority. we also it are trading markets division and investment management division meet with our registrar, talk to them about preparedness for the cyber attacks that are going to come and how to report whether to report but a lot of this has to go on broader than even with the sec can function. it's got to be private sector, government, department of homeland security, the treasury department and were very active in those groups as well. >> thank you, mr. chairman. i just want to say in conclusion, because we so many of the same commissions, but cybersecurity is such a huge threat and in my discussions with many of these public companies and some large private companies, they all have their own systems in place. so how we all coordinate, how much disclosure so we can learn from what's happened. there some issues involved and i appreciate you are right in the

middle of it and i think you mr. chair. >> thank you. >> thank you, mr. chairman. madam chair, good to see again. thanks for your service. there's a pending rule before the commission that would increase the number of firms that have to register at finra. i am hearing from market participants that the road as drafted while well intentioned is overly broad and require some firms to register with finra with little regulatory benefit that could be achieved otherwise. i know you are studying that the passion of this committee is responsible for oversight of the budget which is why we here today of course but got me thinking was responsible for oversight of the finra budget. the rulemaking by definition will increase their budget can increase their oversight. how can this committee be sure they're using the resources effectively, efficiently and not creating undue burdens on certain parts of the market >> the sec does have oversight responsibilities over finra as an sro.

we exercise that authority including exam authority but it is membership organization basically. you are talking about the 15 be nine proposal i think. i think that's one where it is a proposal and we're in the comment period now. we will be considering all those comments very carefully, including the costs as well. finra, many if not most if not not all of the rules has to be approved by the sec. that's a safeguard. >> in terms of those dollars if you like the oversight you in charge of that you can appropriately know that their budget goes, that we have a test the understanding that is being handled properly. how can we as congress to our oversight duty? >> i think one of the things, since i've arrived as chairman

of the sec in 2013, i think we do need to enhance the oversight that we did at the sec. congress has its separate responsibilities. one of the things we're trying to do in order to get greater coverage of these investment advisors i keep talking about in terms of examinations is also very soon to actually transition some of our broker-dealer resources to the investment adviser space. and that's because in part finra really does 80% of those examinations buthat means we need to up our oversight over finra if that's the move we're going to make. i think just in general, we are looking to enhance our oversight as well. >> i appreciate your studying the 15bnine will and making sure you're finding that right balance and not overregulating to we don't actually receive the benefit but cause folks i don't need to be registered and what you public more harm than good i appreciate your leadership. want to ask you about the rule

on printing. sounds like the structure of the rule is getting a bit complicated and i know you've been studying this for some time. the process is pretty simple today. there are some concerns i hear from market participants that replacing with a series of steps might make it more complicated. .. we've made a lot of comments on this aspect of the rule obviously and a study very carefully. so i think we will proceed obviously we don't hesitate if it is called for to propose something that makes sense.

we are certainly studying the range of issues brought to our attention that we are aware of in our own work. >> the ranking member brought up the topic of cybersecurity and i want to associate myself with her remarks and talk about your internal controls. one thing is external threats. i had a chance to deal with the counterpart at the cftc which i serve with as well and we talked about the regulation rules and those that i heard from constituents they might put their source codes in the hands of cftc and the actors within and without could somehow release that and that is sort of their secret sauce so to speak. the data being released internally what are your internal controls that would

help assure the committee of the sensitive data that would get into the hands of the ftc wouldn't be released or compromised. we have to give the requisite assurances. i think this particular budget request going back to the budget for a second requests 14.7 million to enhance our internal security systems. this is coming up in the number of places a number of places including the proposals in the asset management space we are asking for. one of the issues that we are dealing with again is making sure we are enhancing the systems that we are very focused on but also how much can we say about how we are enhancing in order to give assurance and confidence level it is a bit of a balance so that's one of the

things that we need to get to a place that we can say more than we have in the past about that. >> i appreciate your leadership and i know that the cftc ultimately crossed paths with a lot of sensitive information that can compromise entities they regulate so the importance that we place on that is critical to maintaining that information. the information. i appreciate it. >> thank you. according to 2013 gao report which was three years ago. only 19% of the management positions in the industry were made worse with only 13.5%. can you tell me which steps have the fcc taken to improve this

disparity, and what are the current stats hopefully improve and tell me what steps you think the congress can take to give additional tools to increase the participation. >> i think there is at least two spaces to talk about. one is within the industry and the private sector and the registrars and together with a member of our other number of our other financial regulators under section 342 dodd frank focused on the registrants and the diversity of the staffing among other things. in terms of our own agency, we basically look at three areas. our own staffing that we have obviously i may register -- measure the registrants. they are contracting dollars, so one of the things that we offer and focus on but has made a lot

of progress is to make sure that minority and women-owned businesses know how to ask to get into the procurement process to be able to at least bid for and compete for those dollars, so we have had a lot of success. we have had challenges with respect to the number of minorities and women in the senior positions, and we are very focused on that in terms of making specific measures. we have seen improvements but remain very much focused on that. it is a public and and private sector set of issues, not easy ones to solve but i think that we have to remain very focused and use all the tools at our disposal. >> anything we can do to help you in that regard? >> budget. [laughter] i don't mean to make light of this because it is enormously important.

right now at least in the fcc we are kind of midstream and seeing how some of our initiatives are working and outreach is working to expand it. >> i was going to ask about recruitment. >> that is one of the areas again that we have made great progress and i forget the number of outreach events that he did this we did this past year but it exceeds 150 or something and it is in the right places and i think i would like to see how successful those initiatives are before i would suggest what might be helpful for congress. >> let me follow on the question according to the budget request they've examined 40% of the registered investment advisers with the number of advisers which you claim has been an increase of 35% in the last decade how did you plan to address the shortfall without impacting the investigation of

that risk advisors? >> we have for the last two years the never examined initiative and that really looks at the registrants in the past three years in an order that we are at least covering this space. we also do something as simple as a bit of a very ends of the exam for the private fund advisors which is to call up every registrants and say here are the rules, here we are, we are present. that isn't a thorough exam, but it's more present and so in every year we are devoting the resources that we think are wise to making sure that we are at least covering as much of the space in one way or another as we can. >> last week the fcc approved for the first time the lender to use funds to the small businesses. the crowd lending is a part of

an establishment and the company approved under the regulation they plan to offer to the small business owners as an alternative to the anticipated lenders allowing it as a positive development for the small business owners and especially to see the veterans. what are they taking to the liquidity for small businesses. >> we pass issues onto that as the more traditional role to make sure the right disclosures are given. we are very focused the small business in the small business liquidity beginning in october. the pilot you may have heard about to see whether we can, what the data shows about that increasing the liquidity for

smaller businesses we can look at the business exchanges as the way to use the venture exchanges before to look at the different venture exchanges to see if we can increase liquidity for small businesses. obviously the crowd funding mechanism that becomes effective in may is a way to raise money. you have to attend to the liquidity that needs to follow for investors but we are spending an awful lot of time for small businesses. >> thank you mr. chairman. it's always great to see you. it was established by both the depository trust and clearing corp. and the new york stock

exchange and if i recall you touched on the regulation but it's my understanding the industry group suggestions and if we can get the list i previously requested noting which of the recommended changes in the stock exchange have been implemented and why or why not if that is possible. >> it is possible if we have that information i will say that after the session last year. we thought that the question was put. we hadn't responded to a. of the market system plan governance you may know there is a discussion draft in the house put house put forward by the colleague from virginia.

this legislation would install the broker-dealer representation on the operating committees of the national market system plan such as the consolidated pilot and so on. what would be the downside of having the broad industry participation in the development and operation of the critical market utilities. >> that is an issue that we have the equity market advisory committee and subcommittees including the nms subcommittees and the staff is looking at are the governance questions. i can't get ahead of that analysis. and just the parting comment in the testimony. the other major aspects such as exchange is moving from the not-for-profit member owned and

publicly traded this would seem to emphasize the need for reform yet countering the exchange evolution is cited that indirect participation in the governance is available through the advisory committee membership and with that said i would note the committee members are given little to actual voice and citing among other things. the advisory members are excluded and i believe they have the ability to positively affect the government structure already separate from broad reforms but it need to be congress of course will continue to weigh in. we have time for another question or two. you and i talked i think last year about fsoc and that was a new agency just being created last year.

one of my concerns has been the transparency involved in the designation. i think as a reform to say if they are systemically important financial institutions and they are designated as such they have additional burdens, etc.. and it seemed initially that the goal was to designate institutions as opposed to mitigate the risk involved in institutions. whether you agree that it would be important to mitigate the risk to the system than simply you are the judge of the success by the mitigation risk as opposed to the number of designations that are made. >> you want to basically look at the meaningful mac trick. the mission of fsoc is to identify and address the risk to the financial stability. one tool is the designation to a

it seems like sometimes the big banks all got designated. is that based on the size or based on the activity. >> it is a size designation for them but if you look at the number of designations certainly outside of the banking context there would be that many but i think that your point is very well taken nevertheless and i think fsoc is sensitive to that the way that im and other members are which is to be as transparent as one can be in the particular factors that may have driven a particular decision to designate and now as we discussed before but is often a business model not considered under the analysis as

systemically important that the more that one can advise is what the factors are not to have the systemic risk in the system, so whatever tools were information fsoc and others can give to bring that about. no one on the committee after discussing some people call it the de- risk to the insurance companies. it doesn't include them designating that it gave them the opportunity to recognize here's the problem and a business model. can you tell us how you might cure it i know it isn't a simple change of the word but in a broad sense, and still if fsoc felt like that doesn't solve the problem, doesn't mitigate the risk enough, the designation could still occur and that seems

like a commonsense common sense reasonable approach, so that would simply add some flexibility because again the goal is not just -- i know there haven't been that many designations that the goal isn't to find people to designate them. it's to keep our financial system safe and secure. so did you see that language, and what is your thought about that flexibility? >> it's been a while since i looked at it. i think that there is increased engagement between the fsoc staff and the company is being looked at so there's a lot of dialogue back and forth and we had a number, not a big number but a number of designations on the banks where the reasoning is quite detailed inlets provided to the companies. companies are clearly free at

any time prior to the designation to change their business model and they would be analyzed as they were presenting to fsoc as they are considering them as changed. i would hope if that was realistic again they are intertwined as they lead to need it to the designation but it's not a simple if you are not doing that or you get less of that, you wouldn't be systemically risky or important but i certainly think that exchange of information off to occur and more of of that is occurring now and we have the off ramp or the review. if there've been changes since the designation that occurs if the company doesn't seek it we've done that for two years now. now it is getting more exact.

the process becomes a little more transparent. and in particular when you get to the question whether it is based on size and activities when you move away from large banks and asset managers for instance they are very large but in terms of activity, you can argue about how much systemic risk occurs when you are managing somebody else's money you may lose it or you may gain it. but i think we will continue to have that dialogue because as you point out at the end to say maybe if we mitigate enough risk they don't need to be designated to a sifi anymore but understanding the activity and the size and before that designation occurs.

do you have a question? >> yes i do. i'm going to bring you back to this issue because in the 26 years i've been here, i've never seen all the leaders focus on something so quickly on both sides of the aisle and in both houses to try to deal with what they know has become a humanitarian issue. with that in mind, i am a cosponsor of the investor protection act which would terminate the exemption of companies located in the u.s. territory from coverage by the investment company protection act of 2015, and we thank you for your technical assistance that you gave us on putting the film together. could you speak to the effect of the bill and how it can help the situation? i know you're not directly involved.

>> the commission hasn't taken a formal position on the bill. but i think i've discussed my views on aspects publicly which is i think that exemption was born in another time and a different situation where basically the exemption from the investment company act and requirements was i think in part based on the theory that the government didn't have the resources or the ability to sort of travel to the territories including in puerto rico to do what he needed to do, so i think it is a loophole and it ought to be plucked. >> for the record, the territories -- you don't see it more clearly and evident in this committee usually the attitude is whatever is left over. i have stories that would make people laugh if they were not

sad. they didn't think they could travel to the territories so they include the territories. i remember in front of me how come there is no satellite radio in puerto rico? it will get better. i put the essence over and i said borrow one from the cia and you will be able to get there and elsewhere, so now they have it and some people like it and some people don't like the. but let me ask you something. you have so many responsible for these now and one of them that keeps coming up i just want to stay on because it's important to me and to a lot of people are you keeping up at this point in the it area?

because it seems to me for me and this will never end. we die it prevented the office as the staff celebrates the fact that we have all of this new equipment and a year later it isn't that good anymore compared to other agencies. so, the banks out of their have much better stuff than you have better equipment so what can we do other than keep pumping money. >> it clearly is a significant resource component. we talked about $10 billion a year on the budget alone of some of the largest registrants. so it is a question of death but also a matter of expertise and attracting the expertise and keeping the expertise at the government agencies. so, you know, whenever you are able to pay those experts as much as the private sector can

pay them. but, one of the things i found since being at the fcc particularly in the it area, this applies to the economists as well have attracted they are, pay them enough, which is a challenge. public service, number one. number two, they have access to data they find and it's fascinating that they don't have outside because we obviously have access to some data about the public doesn't that the public doesn't have. so, and again you will see in the request i see it over and over again how much more you are seeking out in a market experts and other kinds of technical experts, but it is a challenge. you are always playing catch-up even with the other resources. but it's also the talent of the people that they know how to use the systems to design than.

i mentioned the software application which has been tremendous and produced a number of trading cases actually developed in-house switch wasn't a big so that wasn't a big resource issue coming up with a brain issue. >> one of the things i noticed, mr. chairman, is that what she is talking about is so true. we have young people in this country, not that i'm knocking the experts that have been around for a while, but people that are really wizards when it comes to technology. we haven't found a way to attract a van to bring them in. the government isn't something they understand. either sarcastically or very profoundly during the obamacare rollout that created some problems why don't you go to the college dorm and get some of those kids in here, and i think that we are missing a disconnect in the country between the fact that we have a younger generation that understands

technology well and comes up with incredible inventions that they would rather sell for a billion dollars, and we rely only on what we think we know. i have no problems in my office. i know they know how to and that might sound simplistic but it's something we are missing so i'm glad to hear you say what you said. last let me follow up on something mr. bishop said. there've been some questions about whether investors having enough information on the conversation of the boards of publicly traded companies numerous letters have been sent asking that we act to require him to disclose the disclosure of more information pertaining to the university boards. do you think that more needs to be done in this area and if so, what sort of timeline is the fcc

looking at? >> i spoke about this in late january where basically i share the concerns that have been expressed. we have a role for a number of years requiring companies if they have a diversity and if they are nominating committees and have a diversity policy to say that to say what it is and how they use it and how do they monitor it for effectiveness but there is a fairly recent study. the current rule doesn't define diversity as one of the things that is urged is that we include in the definition of the diversity. the gender and the ethnicity along with the other kinds of skill sets and experience that they figure into diversity when the nominating committee is deciding how to optimize their

board. so i've directed the division of the corporate finance to both look at the disclosure that occurred in time to my concerns for the investors to make it useful in terms of information about gender and race and ethnicity. what do you do, for example, with the board members that do not wish to have disclosed. we should proceed, and i basically am not quite focused on it in terms of reaching that conclusion on my part and then to moving along. >> i don't know where we will all be after november.

to try to continue to do what you've done to put the sec as that watchdog for the wall street fiasco if you put it on its road it may be difficult for some people to undo it in the future. although some will try to get back to the days when we don't care what wall street is doing. thank you very much. the china arctic prompted the volatility in the u.s. markets. they are trading at much lower prices than they are underlining in the investment on the morning

of august 24. partially this resulted from the lays in the stocks and markets while they were immediately available for trading. it's been partially blamed on the application of automated investment tools without a sufficient safeguard against the panics. while the crash of august 24, 2015 was nowhere near the turmoil or experience in the flash crash of 2010, it demonstrates the stock markets are still susceptible to the human and computer errors and largely unpredictable. what is the sec doing to prevent the crashes and the artificial instability in the u.s. stock markets? >> quite a bit. i would first say what happened

wasn't a mini stress test but it showed the resilience of the critical market infrastructure. so i would take issue with saying it was a flash crash compounded by various kinds of errors. however, having said that, it was a significant set of phenomena. the staff actually put out a research note on this late last year that it's very useful data and analytics and we have requested certain information from the exchanges and other participants on that day to see what measures should be taken to deal with some of the phenomena that did occur and among the issues obviously they are under the microscope to speak are the limit up and limited down rules that were put after the flash crash in 2010. how did the opry, do they operate, the market circuit breakers were not triggered but

it is you do have the phenomenon that you note in terms of undermining the value is departing from the income share value and so there've been some suggestions already made in terms of the price scholars but there's other issues under consideration to try to make sure that the issues that did occur that didn't reflect fundamental values at least fast enough are dealt with so you will see some measures taken in response to that. we look at this all the time in the rule that we talked about earlier is meant to increase the resiliency of the critical market infrastructure when an incident does ocher reported sooner report it sooner rather than later so that we can take actions. we are constantly dealing with issues like that with a great deal of seriousness. you want to optimize the markets in terms of the functioning as well as making sure they are

reflecting the fundamental value for investors and also serving the companies that seek to raise capital. >> we want to thank you for your service. i think everyone on the subcommittee appreciates the work that we were doing. it's a big job with lots of responsibilities. we continue to looking forward to working with you and this meeting is adjourned.

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as this hearing comes to a close on capitol hill today house speaker paul ryan offered his condolences for the victims of the terrorist attacks this morning in brussels belgium. isis has taken response ability for those attacks that killed at least 34 people and has injured 230.

speaker ryan talked about the attacks in the news conference this and his conference this morning if president obama spoke briefly at the speech this morning in cuba first off i want to express the condolences of the u.s. house of representatives to the belgian people. i know we are all watching right now, and this scene is just so horrific. one minute people are going about their day and the next minute, people are running for their lives. this is a tourist attack in the heart of europe. as our countries have always done, we must confront this threat together. we must defend democracy and defeat terror. our prayers are with brussels as it is our solidarity. thank you. >> before i begin, please indulge me. i want to comment on the terrorist attacks that have taken place in brussels. the thoughts and prayers to the american people are with the

people of belgium. we stand in solidarity with them in condemning these outrageous attacks innocent people. we will do whatever is necessary to spot or friends and allies in bringing to justice those that are responsible, and this is yet another reminder that the world must unite. we must be together regardless of nationality or race or faith fighting against the scourge of terrorism. we can and we will address those people all around the world. >> a portion of what the president had to say today. most of the speech today focused on the u.s. cuba relations. he said he visited that country to bury the last remnant of the cold war in the americas and you can see the president's speech tonight in its entirety starting at 8:00 eastern. three states hold contests today

with a primary in arizona. there were caucuses in idaho and utah and the coverage will bring results and candidate speeches from the contest as they come in. live coverage tonight on c-span. it is the best television for serious readers. >> booktv weekends they bring you author after author spotlight the work that spotlight the work of fascinating people. >> i love booktv and i am a c-span fan. the senate is in recess this week so we are showing new book tv in prime time and tonight it is on george washington beginning at eight eastern on his book the return of george washington in 1783 to 1789 and

the washington's george and martha are joined by friendship crowned by love and 10 p.m. the author of george washington's journey the president forges a new nation and 10:55 the book first entrepreneur how george washington built his end of the nation's prosperity. booktv primetime tonight starting at 8:00 eastern. yesterday here in washington leon fox spoke at the center for strategic and international studies saying that he favors. welcome to the center for strategic and international studies. i'm the senior vice president

here. what a delight to welcome the honorable leon fox with us today to discuss a very important upcoming referendum in the united kingdom about its continued membership in a reformed eu loaded words but i'm sure he is going to help us more clearly understand. including the chairman of the conservative party in 2003 but perhaps we know him best when he served as the secretary of state for defense from 2010 to 2011. doctor fox to help us understand british politics, the implication of the potential exit. i have to say one word before i invite you forward.

we are privileged to have you here. all of the polls showed a very tight race. we were not sure. it looked like labor could be gaining and he said with clarity know, the conservatives are going to win and it's going to be a majority. we all looked at you and we went right. we know what happened. so at the end of the conversation, i am going to ask doctor fox to put his crystal ball on the table to tell us how the referendum will work out and the predictions are as accurate as last year, we may have some among us that will be placing some money on the best. with that, please join me in welcoming doctor fox. [applause] heather, good morning.

it always seems that when we do we get the coldest window in the washington whether that is available in the last three visits there is no and ice storms in a cold snap at the present time. no one should understand the arguments that we are making better than the americans. those of us that wants to leave the european union wants to regain control of our own wall making. we want to control our own borders and our own money. and those arguments for sovereignty off to resignation after here than anywhere else. but instead, we seem to be getting into an argument about none of those things, simply asking what is europe's phone number. we have to get the debate going for reasons i will come to in a moment. no one in the united