private security in other ways? and i want to say chairman, i remember when ray kelly was police commissioner, they were behind the eight ball because the corporations were afraid the stock prices would go down if they admitted they lost $7 billion in the cyber attack. i would love to know where you stand on these issues. >> i don't think there is any greater risk the financial sector and beyond the financial sector faces than cyber risks. that is private sector, the government, our spaces as well. in terms of disclosure by public companies, and we are talking about just public companies, the sec did guidance to companies some time ago really alerting them to the range of issues that would require disclosure if there is an attack or simply the risk to their business. if that is material they must disclose it. we look at the disclosures every

year and we are focused with our fellow agencies and the private sector on this much deeper, broader risk than the sec jurisdiction reaches to. we pay a lot of attention with respect to people who register and our examiners are out ahead of the curve, and good for them, in going out and looking for cyber preparedness at investment advi advi advi visors is broker dealers a telling them what to look for and enhance the best practices out. we continue to have that as a priority. in the trading and market division and investment division we meet and talk 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 where the sec can function. it has to be private sector

government, department of homeland security, the treasury department. and we are active in the inner agency groups as well. >> thank you, mr. chair. and i want to say in conclusion, because we saw many of the same conditions, but cyber -- ms. chair -- security is a threat and my discussion with public companies and large private companies they have all their own systems in place so how we coordinate disclosure so we can learn from what happens is important. there are so many issues and appreciate you being in the middle of it. >> mr. yoder. >> madam chair, good to see you again. thank you for your service. there is a pending rule before the commission that would increase the number of firms that would have to register with finra. i am hearing it is overly broad

and would require some firms to register with little regulatory benefit. this committee is responsible for oversight of your budget which is why we are here but who is responsible for the oversight of the fin budget? the rulemaking will increase their budget and oversight. how can this committee be sure they are using the resources effectively and efficiently and not creating undo burdens on certain parts of the market? >> the sec does have oversight responsibilities over finra as an sro and we exercise that authority including examine authority. it is a membership organization basically. i think you are talking about the 15-b9 proposalism -- proposal. we are in the comment period and we will be considering all of those, you know, comments very carefully and including the cost as well.

so, you know, many, if not most, if not nearly all of their rules, has to be approved by the sec. that is a safeguard, too. >> in terms of those dollars you feel like the oversight you are in charge of you can appropriately know if their budget grows that we have the understanding that is being handled appropriately. how can we as congress do our oversight ability? trusting in your leadership, of course but.... >> one thing and since i arrived as chair woman of the sec in 2013 i think we need to enhance the oversight we do at the sec. congress has separate responsibilities. one thing we are trying to do in order to get greater coverage is also very soon to transition some broker-dealer resources to the investment advisor space.

that is because, in part, they do 80% of the examinations but that means we need to up the oversight if that is the move we make. we are looking to enhance our oversight in general as well. >> i appreciate that and you studying the 15-b 9 rule and finding the right balance and not overregulating to where we don't receive benefits but making sure folks that don't need to be registered and do more harm than good. i want to ask you about the 30-e3 rule on printing. it sounds like the structure of the rule is getting a bit complicated. i know that you have been studying this for some time, too. the process is pretty simple today. there is some concerns i hear from market participants replacing with a series of steps might make it more complicated

and sporupporters of the rule a concerned. where are you with the rulemaking process? does it make more sense to start over rather than pushing the rule? >> we have gotten a lot of comments on this aspect of the rule obviously and they are studying them very carefully. it is, you know -- i think we will proceed. we don't hesitate, if it is called for, to repropose something if that makes sense. we are studying the range of the issues that have been brought to our attention and we are aware of from our own work. >> okay. and then the ranking member brought up the topic of cybersecurity and i wanted to associate myself with her remarks and i wanted to talk about your internal control. one thing is external threat.

i had a chance to do -- your counterpart was in the ag committee recently which i serve on as well and we talked about the reg at rules and there are concerns i heard from market participants they might put the source code and nefarious actors within or without could release that and that is their secret spot so to speak. in light of the potential harm for data being released internally what internal controls would help ensure the committee that sensitive data released to the sec wouldn't be released or compromised. >> no more of an important issue. we have to regulate but have to give assurance we can safeguard that information. this particular budget request

$13.7 million to enhance our internal security system. this is coming up in a number of places but including our proposals in the asset management space where we are ask for additional information. one of the issues we are dealing with there is not only making sure we are enhancing our systems but also how much we can say about how much we are enhancing. it is a balance because you don't want to be too detailed or you are giving a roadmap. we need to get to place where we can say more than we may have in the past about that. ... >>

>> mr. chairman according to a 2013 gao report minorities early in 18% in the financial industry is even worse only 13.5%. so what steps has the sec taken to improve this disparity and the foot of the current statistics and what steps he think congress could take to give you additional tools to increase participation? >> one is within the industry have private sector

with our other financial regulators to focus on the diversity of their staffing. in terms of our own agency will look with our own staffing we also have a certain amount of meaningful that is contracting hours that our office focuses that we have made a lot of progress to make sure that minority and women owned businesses know-how to ask to be a part of the procurement process. and compete for those contract dollars. we have challenges with the sec we're very focused on

that with specific message -- and to remain very much focused is the public and private sector -- set of issues in she is all the tools and our disposal. >> getting we do to help you? >> the budget. [laughter] i don't mean to make light of this. is important to buy right now to be midstream to see how the initiatives are working. >> i was calling to ask you about recruitment. >> this is where we made great progress but it

exceeds 150 and it is in the right places. a light to see how successful those initiatives are. >> and of those registered investment advisers liches increase of nearly 35 percent over the last decade. >> in to see the never before examined initiative for those averages dirt -- registered with us in the last three years that we are at least covering the space.

and then to call up every registrar obviously that it is into boots on the ground but every year we are devoting their resources to make sure we cover as much of that space one way or another. >> last week the sec approved the limited use funds for small businesses. and with the jobs act of 2012 with the plans to offer to the business owners. they could expand those opportunities and what other

steps are they taking for those small businesses? >> where we pass on issues like this to make sure those right disclosures. >> and then it begins in october. and with that data shows for smaller businesses and we continue to look at of venture exchange but of those different variations but the crowd funding mechanism that becomes

effective it may is a way to raise money and to spend a lot of time. >> it is always great to see you. the when it comes to of a glitch or the flash crash which was addressed through the working groups in those suggestions may have been more comprehensive we would like to follow-up to get the list of the changes. >> is possible if we have

the information. and then trying to respond. and i have a sense there might be something else that you had not responded to. >> follow-up. >> absolutely. so that governance in this legislation with broker dealer representation so what is the downside to have broader industry participation in of the market utilities?

>> including the subcommittee i cannot get ahead of that analysis and tell have the full input but it is an issue we're very focused on. >> and with those equity markets have changed but so have other aspects such does moving from not-for-profit but yet to counter the sheen to revolution those governments available for the advisory committee but when they're given little voice in his den in

executive sessions. i believe the sec has ability to affect the structure but if need be they will continue to wage and. thank you for your testimony i yield back. >> we have time for another question. a new agency just created last year and one of my concerns is the transparency and as a reform to say systemically important institutions in initially

the al goal was to designate institutions as to mitigate the risk. wed you agree with me it is more important to mitigate the risk as opposed to the number of designations that is made. >> basically you want to look at the most meaningful measurement that is to identify risk that is found 12 will is the designation to wall. >> but there is some question it seems like the big banks were all designated was that based on their size or activity? >> that was before my time but i think it was largely a size designation but if you

look at the number outside of the banking context your point is very well taken. to be as transparent as one can be and as we discussed before with a business model to not be considered under the analysis but the more they can devise those factors but whatever tools or information fsoc can give is what we should be doing. >> i offer an amendment that

everybody could discuss it didn't preclude fsoc from designated but here is a problem with the business model. how you might cure that? but in a broad sense 56 fell to that didn't mitigate the risk enough's it could still occur in it seems like a common-sense approach but to add some flexibility but the goal isn't to find 81 to designate so what did your

thought about the flexibility? >>, a. >> with that increase the engagement there is a lot of dialogue back and forth. it is quite detailed and companies are free anytime prior touche designation and then be analyzed as they are presenting as they are considering them as change. i would hope that is realistic as we are so intertwined that if he did less of that you would not

be systemically important and more that is occurring is to build dash to determine if it should remain designated even if the company doesn't see that in the process is becoming more transparent.

and i will continue to have that dialogue before the designation occurs amid currency your thoughts. offend to that deal with what has become from the

p.r. investor protection act from the u.s. territory of coverage from the protection act of 2015 but could you please speak to the effect of the bill howard hopes the situation in their? so maybe more involved. >> the commission hasn't taken a formal position but i discussed my views on the aspects of this publicly that the exemption was of another time and situation where the exemption from the investment company act and

in part based on the theory to have those resources to travel to the territories so i think it is a loophole. >> just for the record with the territories and the attitude of whatever is left over. that would make people laugh as they were a sad. so they didn't include the territors harkin there is no satellite in p.r. yet?

i said barolo wine from the cia so now they have it. so let me ask you something this is so many new responsibilities now and none of them that always comes up because it is important to me are you really keeping up as the staff celebrates all the equipment it isn't that good anymore so the banks out

there what can we do about that? >> dash not against pumping money. >> no clearly a significant resources component with the $10 billion of the '90 budget so no question about that. the expertise and a tracking -- attracting the expertise of the government agency. the one of the harding things is particular in the itt area how attractive they

are to find that fascinating because they have access to new data that it doesn't have. see you will see with our request with the market experts and technical experts. it is of real challenge to design them. with that software application in developed in-house. >> one of the things it is so true we have young people in this country they are i

which is when it comes to technology to attract them and bring them in. either sarcastically or very profoundly and why don't you go through a college dorm? and i think we are missing the disconnect with those incredible and vengeance solely but we think we know. fsoc the computer because i know that they know how to.

and i will follow-up with something of bishops said there were questions recently if there was enough information. the letters have been sent asking if the act is required to disclosure of more information. do you think more needs to be dead in this area? said what type of tie line is that sec looking at? >> spoke of this in late kediri where basically i share the concerns to require companies to have a

diversity policy to say that how do they monitor for effectiveness but there is a gao study that shows in the space so one of the things that is urged or included is race and gender with the other skill -- skills sets to figure into diversity so i have directed the corporation to look at the disclosures over time with concerns that we need to provide more information to make useful with information about gender a andrea's ian

ethnicity. for those board members that we should proceed in reaching that conclusion on my part of november is coming soon i want to thank you. i want to ask a personal favor of behalf of everybody. to try to continue but you have done as the watchdog as the cop on the beat that we need from the wall street fiasco does not come back.

and try to get back to the days we didn't care what wall street was doing let's just try to get it in your the person to do that. thank you. talk about the volatility of u.s. markets and this resulted from delays of the markets of the etf was immediately available -- available for trading and the flash crash before it is partially blamed on the application of the automated investment tools without sufficient safeguards.

while the flash crash was nowhere near the turmoil experienced it demonstrates the stock market was still susceptible to be largely unpredictable. and with the artificial and stability we have done quite a bit but first what happened on august 24th was not the animal, and the stress test but i do think it showed the resilience of our infrastructure. so i would take issue to say it was a compounded by the errors. but having said that the

staff actually put out a research note on this late last year that it is very useful data and analytics to request the research and information from the exchanges of what measures should be taken for what did occur. if for under the microscope and those tools that were put into place how did they operate? in those out were certain you do have that phenomenon in terms of the underlying values. there has been some adjustments already made that don't reflect

fundamental values and the measures taken the sci rule in one incident does occur to report that so they can take action. we are constantly dealing with issues like that. with a great deal of seriousness. as to make sure they have that fundamental the u.s. investors. everybody appreciates the of werke were doing it is a lot of responsibility and we know how seriously you take

that. we'll afford to continue working with hugh to have the resources. thank you. this meeting is adjourned. [inaudible conversations]

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