for the complete american history tv weekend schedule, go to cspan.org. m ma senator elizabeth warren critical of the head of the s.e.c. for what she said failing to require companies to disclose more information to investors about their political activities. that s.e.c. oversight hearing is next on c-span3. and then the head of the tsa takes questions about airport security screening delays. later, a look at new fda regulations for e cigarettes. c-span's "washington journal" live every day with news and policy issues that impact you. coming up wednesday morning,

homeland security committee ranking democrat congressman thompson of mississippi will discuss threats to the u.s. homeland in light of sunday's mass shooting in orlando, florida. and then congressman wittman on u.s. efforts to combat isis overseas and whether the military is prepared should the current tactics be changed. and california democratic representative jackie spear will discuss the latest on the mass shooting and what lawmakers learned from tuesday's closed door briefing with national security officials. be sure to watch c-span's "washington journal" beginning live 7:00 a.m. eastern wednesday morning. join the discussion. securities & exchange commission chair mary jo white testified at an oversight hearing and was asked about the effectiveness of corporate disclosures and wall street regulations. senator richard shelby chairs the senate banking committee.

>> this morning, we will receive testimony from securities & exchange chair mary jo white. oversight of the commission's an important part of this committee's jurisdiction. the s.e.c. is an independent agency tasked with protecting investors, maintaining fair, orderly and efficient markets, and facilitating capital formation. the s.e.c. is responsible for ensuring transparency so that investors have adequate information to make investment decisions and to mitigate conflicts of interest, fraud and manipulation. this regulatory paradigm is a reason why our capital markets have long been the envy of the

world and the life blood of our economy. excessive and unnecessary regulation, however, may endanger america's status as a world's preferred financial center. first and foremost, i believe the s.e.c. should focus on its core mission. this is become more difficult as the commission has come under increased pressure to expand its mission and cater to special interests. examples of such efforts include attempts to force the s.e.c. to mandate disclosure on climate change and political contributions. these efforts are not new and the s.e.c. has with stood political pressure in the past. it's my expectation that it will continue to do so in the future. chair white, as you pointed out in a 2013 speech, and i'll quote you, we make our decisions based on an impartial assessment of

the law and the facts and what we believe will further our commission and never in response to political pressure, lobbying or even public clamor. the s.e.c. must, i believe, continue to adhere to those principles and uphold its fundamental mission. it should also periodically review the appropriateness of its existing rules. for example, while the commission is undertaken work to review equity market structure, it's not engaged in a comprehensive review of its rules even in light of the so-called flash crash which happened over six years ago. i also hope that the s.e.c. will continue to take very seriously the importance of strong economic analysis when promulgating rules. as we have seen, agencies that fail to undertake such an analysis in their rule makings

are vulnerable to legal challenges as well as they should be. an agency with thousands of employees like the s.e.c. should be able to analyze in detail the impact of its rules on the markets, investors, financial products and the broader economy. this is especially true today given the chum lative impact and unintended consequences of the new rules stemming from the financial crisis. if the cost of a rule outweighs its benefit then the rule should be eliminated. if a rule passes cost benefit muster it should then be implemented by the appropriate agency. the s.e.c. has a primary expertise in capital markets and should be the lead agency in regulating them. specifically, i'm concerned that attempts by other federal agencies to erode, madame chair,

the s.e.c.'s jurisdiction could undermine the integrity and function of these markets. recent example of this include the department of labor's few dish yair duty rule, the fsoc's continued focus on managers and the federal reserve's targeted of a brokered dealers to rein in shadow banking. the s.e.c. has 88 decades of specific expertise in these matters. this should outweigh the desires of other regulators to expand their powers at the expanse of investors in the market. chairwoman white, i look forward to hearing your comments on this issues. senator brown? >> thank you, mr. chairman. welcome, madame chair. good the see you again. over three years you were c confi confirmed. and the job's act. that time the destruction of $13

trg in household wealth from the financial crisis was still fresh in our minds. the s.e.c. and other financial regulators had completed many of the wall street reform rulemakings and evaluated how to finish the implementation of the rest. when you last appeared before the committee in september 2014 you said the staff proceeding on the outstanding rules. we could expect to see additional rules shortly. although several rules have been proposed and some finalized many are still incomplete. in particular, the commission is not finished the derivatives rules of title 7 of the wall street reform act and the path to completion seems unclear. these rules are important because title 7's a key part of reform to the financial markets. by increasing transparency by enhancing oversight, by moving to more resilient and stable trading platforms, congress wanted to make sure future crises could be detected sooner and would do less damage. this isn't entirely on your shoulders, on the s.e.c.'s

shoulders, but there are certain markets such as credit default swaps that depend on s.e.c. until the rules are completed the s.e.c. and other regulators won't have the benefit of a frame work that provides transparency and access to market data. another reform act rule outstanding prohibit incentive compensation and lead to losses at financial firms. we know what happened during the financial crisis in that regard. the multiagency rule was proposed in 2011. and reproposed last month. six years after wall street reform became law this rule still isn't finished. final rule would provide the market and the public with some assurance that senior executives at financial institutions won't be rewarded for taking inappropriate risks that could harm the markets, harm their employees, could harm the economy. i urge you and other regulators to finish that rule as quickly

as possible. during your confirmation hearing you stated that you would make strengthening enforcement a high priority throughout your tenure. you said then and i agree that, quote, investors and market participants need to know that the playing field of our markets is level. and that wrongdoers, individual and institutional of whatever position or size will be aggressively and successfully called to account by the s.e.c. yet time and again we see repeat offenders enter into settlement after settlement that seemed to have no effect on stopping the problem in the first place. as the cop on the beat, the question set-top box what point is the s.e.c. going to stop handing out warnings and start giving tickets? this is evident in the waiver process, s.e.c. routinely granted waivers to banks following a variety of violations that could have resulted in the loss of privileges under security laws. unfortunately, granting the waivers eliminates a significant

consequences that could promote better overall compliance at those institutions. finally i would like to return to an issue discussed many times in this committee. democrats in the senate repeatedly asked you to begin work on a corporate political spending disclosure rule. this is not a plea from a special interest as some on the other side of the aisle might say. this is good government policy. when you were last here you acknowledged the quote intense interest of investors and others unquote on this issue. but you pointed to the low priority of mandatory rulemaking. i realize this year's bill limits the s.e.c.'s work on that rule but it shouldn't prevent you from doing anything at all. i sincerely hope you begin work on a corporate spending disclosure rule. the interest and it's only become more intense. i'm interested in hearing your update, madame chair. thank you. >> madame chair, your written testimony in the entirety will be made part of the hearing

record. you've been here many times. you proceed as you wish. >> thank you, mr. chairman, ranking member brown, other members of the committee. let me before i start just express, i'm sure i speak for everyone, my thoughts and prayers are with the victims of the orlando shootings and their family. thank you for inviting me to testify today. on the current work and initiatives of the s.e.c. which are as the chairman indicated summarized in some detail in my written testimony. as you know, the s.e.c. is a critical agency that is charged with protecting millions of investors and safeguarding the most vibrant markets in the world. and the commission has been very busy since i last testified before the committee in 2014. the last three years has each been marked by a vigorous enforcement and examination program with new tools and methods to protect investors and hold wrong doers accountable. in fiscal year 2015, alone, the commission brought over 800 enforcement actions, unprecedented number.

secured over $4 billion in orders directing the payment of penalties and an all-time high. 2,000 exams, a 4-year high and more importantly, developed cutting edge cases and smarter, more efficient exams. the strength of the enforcement program is seen in the kinds, complexity and importance of the cases we bring that span the securities industry include first of their kind actions and focus heightened attention on market gatekeepers like exchanges, accountants and lawyers. significantly, approximately two thirds of our actions in fiscal year 2015 also involved charges against individuals. and we continue to obtain admissions in certain cases which we have done in over 40 ins instances since changing the protocol. the commission over three years pursued rules and other initiatives to protect investors, strengthen markets and open new avenues for capital

raising. since i last testified, we, for example, advanced major rules addressing key ek tick market structures including controls on the technology used by key market participants. the transparency of alternative trading systems and the consolidated audit trail while moving forward with a broader assessment of other fundamental changes. we issued a series of proposals to address the increasingly complex portfolios and operations of mutual funds and exchange traded funds. we adopted new rules for crowd funding and smaller securities offerings under regulation a and also proposing additional avenues for small business to raise capital. we finalized mayor components of regime for security-based xap swaps and execute a comprehensive review of the effectiveness of the disclosure regime. this work is the efforts by the agency. both before and after i became chair. enlisting all of our policy

divisions and offices. beyond the discretionary initiatives the commission adopted final rules for dodd-frank act and senator brown, title 7 is a major priority for 2016 which i'm sure we'll get into. we have also now completed the rule makings directed by the jobs act and significant progress on the rule makings required of us last year. whi the imperatives are carried forward each day by the dedicated staff of our decisions and offices. division of corporation finance reviews the annual and periodic reports of thousands of issuers each year helping to ensure that investors receive full and fair disclosure about the public companies in which they invest. last year, the division of trading and markets reviewed more than 2,100 filings from exchanges and other

organizations the preserve a fair and orderly marketplace for all investors. the division of investment management covered more than 12,500 mutual funds and other investment companies where many individuals as you know invest hard-earned money to save for retirement, college and other important goals. our economists produced more than 30 papers and publications in 2015 including two major annual salyses analyses. i will have the privilege to participate in the annual awards ceremony at the commission where we recognize some of the tremendous work of some of our staff. the commission today is a stronger and more effective agency and i'm honored the lead the agency in this time. nevertheless, significant challenges remain if we are to address the growing size and complexity of the securities markets. it is critical gnat s.e.c. has the resources required to discharge our responsibilities. the new ones and the many others we have long held. in the face of a growing and

ever-more sophisticated industry. i deeply appreciate that we must be prudent stewards of the funds appropriated and we strive to demonstrate how seriously we take that obligation by the work we do. at the same time, our resources are insufficient and the cuts and limitations to the s.e.c.'s budget that the house bill proposes would seriously imperil the progress we have made and diminish our ability to fulfill our mission. while more remains to be done and achieved, i'm impressed of the range of responsibilities. i want to again thank first and foremost the exceptional staff of the s.e.c., as well as my foal low commissioners, present and past and i want to thank the chairman, the ranking member and this committee as a whole for your support. your continued support will allow us to better protect investors and facilitate capital formation, more effectively oversee the markets and entity we regulate and build on the

significant work we are doing. thank you very much. i'm happy to take your questions. >> thank you. madame chairman, i understand that the commission can vote to delegate certain of its authorities to the s.e.c. staff. including enforcement proceedings. once the commission has voted to delegate, how are you and your fellow commissioners at the securities & exchange commission made aware of the staff's use of that authority, and if the chair is recused on a specific matter, who's accountable for the staff's use of the delegated authority? >> the exchange act actually is explicit on this, mr. chairman, that the commission as a commission has the authority to delegate many of its certainly day-to-day functions. it doesn't have the power, for example, to delegate rulemaking to the staff. >> set out statutory? >> statutorily done. >> okay. >> and so there are, you know, obviously we have hundreds an

hundreds of delay to day thing that is we must do at the commission, so it's very important that the staff have delegated authority to act. as safeguards, however on that delegated authority, the commission can review any of those actions. the staff itself can decide to refer something to the commission even though it may have delegated authority for the commission to decide. and that -- the review of the commission really can be precipitated by any one commissioner's desire to do so. >> once the commission votes to delegate its authority to the staff, it's my understanding such delegation remains in place under future commissions and new commissioners do not have a chance to approve existing delegation of authority. is that correct? >> yes, it is, mr. chairman. i think essentially the way it works is that if one were to review or change a delegation it would be up to the chairman to put that on the agenda whoever the chairman is.

>> madame chair, would you support an s.e.c. review of existing delegations including an analysis of their appropriateness? in other words, you look back, you do oversight, i hope, in your agency like we do here. is that -- isn't that important? >> well, i mean, it's certainly something i've discussed with various of my commissioners and we all have obviously the list of delegations that exist. and so, what i've urged my commissioners if they have an issue with any particular delegation is to bring that to my attention and we'll certainly look at it. >> you've often stated, madame chair, that the securities & exchange commission is an independent agency, that's the way we want it to be set up that way. and while one can expect some split votes, because of the way the commission is set up, there have been many party line 3-2

and 2-1 votes under your chairmanship. by comparison according to the press, a former chairman richard bredon never had a 3-2 vote and rarely would take a matter to a vote unless he knew he had a 5-0 vote. are there any areas that you can work on cooperatively with the other two commissioners to reach a unanimous decision? and if so, could you give us some examples? >> i certainly and i think we certainly strive for consensus. >> we know everything is not e unanimo unanimous. >> i had a figure and i think 65% to 70% of the votes are actually unanimous. obviously that's still a percentage that have not been unanimous. i think i discussed with you, mr. chairman, and probably senator brown and probably some of the other me believes of the economy tee, as well, what i found as chairman, we strive for

unanimous that so many of the rulemakings under particularly the dodd-frank act and the controversy surrounding that at the time i think it was adopted i think has continued into the implementation of those rules, so that we have ended up i think with an extra challenge at reaching consensus because of this. >> madame chair, in 2013, you posted for comment a study on asset management by the office of financial research that was requested by fsoc. this allowed the public a meaningful opportunity to provide feedback on the study and the highlight -- and highlighted significant flaws. given the benefit of public comments on that study, will you commit to posted other fsoc requested studies of s.e.c. regulated entities? if not, why not? >> i think certainly at the s.e.c. and i think our other agencies, as well, i mean the

benefit of the notice and comment process and even just a comment process if you're not in an apa rulemaking is enormous so i think getting that feedback is important. the report that you reference was a report of ofr. they publicized it but we did open a comment window because we thought it was important to get that public input. if we were in another situation like that and ofr or fsoc itself didn't post it, studies to make it easier for the public to comment, certainly we would seriously consider that, again. >> last question is in the area of repeated violations. there have been concerns raised by the public as well as members of this committee about repeated violations by s.e.c. registered entities. two years ago a former s.e.c. commissioner stated with respected to the most repeated violations of our security law and regulations and i'll quote. we need to ask ourselves a fundamental question. should the violating entity

retain the privilege of paptding in our capital markets? a question to you is this. in your opinion, when is it appropriate for the s.e.c. to exercise its ability? if you could give us an example, that would help. >> i think it's enormously important power that we have and should wield it appropriate circumstances, obviously, to protect the markets. >> goes to the integrity of the market. >> absolutely right. absolutely right. i mean, i think you have to look, you know, very carefully at what the violations have been over what period of time, who was involved in them, obviously. you want an aggressive enforcement program to bring cases when they are there to bring i think. but there can come -- certainly can come a point, certainly quite open in the interest of strong protection of our markets that there comes a point where one of our regulated entities should no longer be registered

and i wouldn't hesitate to bring up a proceedings to revoke the license. >> thank you. senator brown. >> thank you, mr. chairman. some of my colleagues, there seems to be a sort of collective amnesia on this panel in some cases and in this body about what happened in the financial crisis and since some of my colleagues as a result in the house and some here continue to push for the repeal of the wall street reform act and insisting it's created more problems in the financial system than it's prevented. a couple of questions. to skart with. are you concerned with efforts to repeal wall street reform? >> i think the reforms under dodd-frank act have been enormously important in strengthening our financial system. i say that as a collectively. i think our financial system is much stronger and resilient now. certainly, in part because of

the actions undertaken by dodd-frank. >> okay. thank you. despite the improvements to date that you have mentioned and that are self evident with stronger, more stable financial system, this reform, of course, is still a work in progress. i mentioned the derivatives rules outstanding. i'm not just concerned it's taking s.e.c. so long to finish its rules, but also, that s.e.c. far behind other agencies. implementing rules in similar issue areas. cftc covers a much larger portion of the derif it is market and made more progress than s.e.c., even accounting for a few hiccups along the way with far fewer resources than you have. department of labor able to to pose and repropose and financial the fiduciary rule and the s.e.c. produced a study called for. neither of the cases was the process perfect, of course.

nor is our final rules perfect but both agencies were able to adapt along the way and move forward. why is the s.e.c. slower than those agencies in what's not working? >> well, i think, again, i think what the s.e.c. was given between the dotd-frank act and the jobs act, plus, obviously, all of our various call them discretionary responsibilities which are vast we have undergone a historic level of regulatory activity of great complexity and about dodd-frank in particular, i have said it from the day i arrived i'm highly, deeply committed to getting the mandates under both of the sta choouts and now the f.a.s.t. act done promptly and well and need to last and need to be adaptable to how our markets change. i think with respect to sort of differences on the two you mentioned, i think on the department of labor rule that is an authority that dodd-frank

gave the commission to decide whether to exercise or not. it's not a statutory mandate. now, i have said myself speaking for myself about a year ago after study i think there should be a fiduciary rule study from the s.e.c. speaking for myself. the staff proceeded to develop outlines of recommendations but it's up to the commission as a whole as whether to advance the rule and what its parameters could be. and to title 7 and the markets, you are right. our share of the market's about less than 5% i think but it's an important part of those markets. again, before i arrived and this is not meant by way of criticism at all. i see how it made sense and s.e.c. did with the title 7 rule makings is a policy statement that set forth a sequence of when the s.e.c. would final

adopt a proposal first and then finalize the rules before they became effective and following that road map. i think there couldn't be a higher priority among all of the commissioners there. the three there and then two that left us last year to completing the title 7 rulemakings and in this terms of this regulatory year, this's a very high priority. we finalize add number of those rules since i was last here. but in terms of the reporting and the registration and regulatory mechanisms for dealers i'm hoping we're done with those by the end of this year. >> thank you. we know from during the financial crisis that how important the regulators work is good of shifting the business model to find gaps, areas of weakness in the regulatory structure. congress for whatever reasons chose not to combine any of the financial agencies six years ago. obviously fsoc and beyond that

not really combining the agencies and makes your cooperation that much more important. one more question. democratic members of this committee and others taken a look at the policies and prak tilgss of the waiver applications of the s.e.c. of financial institutions. i thank you and your staff for the information you provided to us, to the banking staff, for -- that so far. i hope we can count on you an your team additional assistance as needed when they make more requests. >> absolutely. i think it's an enormously important area. as you know, senator, it's an area i focused on at the outset of my tenure at chairman. we have made a number of changes i think to enhance the robustness of the process and the transparency of the process. we continue to lock at whether there's other enhancements the make sense particularly in the area i think of when we do not

grant the waivers because, you know, in terms of making certain that the public knows that there are many cases including those involving financial institutions where the waivers are not granted but because of the nature of our process, that isn't as transparent for reasons that are historical and good ones and to encourage people to come in and talk to the staff about whether they qualify or they don't and often what they submit is nonpublic information but i continue to look at that aspect of our process. certainly since i became chair directed the staff to keep track of those instances that do come in to us, assuming they're not anonymous and obviously many people won't apply because they know under the guidelines they would be denied and not granted because of of the go ahead lines specify. >> thank you. we have particular concern of the last of transparency in those waivers that are granted. the public sees an institution violates the law.

asks for a waiver. there's a short notice. what do you do to -- how can you assure us that the public will be and this committee and everybody in our society will be able to understand more when's happened and how you bring more transparency when these waivers are granted? >> on those granted and the ones you're addressing now, not those not granted they're publicized on the website an subject to in the case of so-called wixi waivers and bad actors waivers and some other waivers, as well, to what the criteria are that the staff or the commission considers when reviewing those requests. and then i think what is published on our website really does march through what those criteria are and the facts under each one. i'm open to considering it. >> we'll come to you about that. thank you. >> senator crapo. >> thank you. modernizing the market structure

is complicated but necessary task and i appreciate the work down by the s.e.c. as well as by the market participants, investors and academics on this issue. senator warner and i held a subcommittee hearing on this in march and while there's positive work done in this area. there's concern about the pace. what are the top market structure objectives you want to achieve this year and how will it strengthen our markets and benefit investors? >> it's an enormously important area and as you know very high priority for me personally. both in terms of some specific short term reforms as well as that comprehensive review soup to nuts to the entire regulatory regime. we're building on fortunately, you know, i think the strongest, most reliable markets in the world but that does not mean that they cannot be enhanced an optimized. i think in terms of -- so i've been pleased an want things done sooner.

that's my personality among other things and we certainly are concentrating a lot of resources on it. i've been pleased to date with the work of the msac, equity market structured advisory committee we formed early in 2015. they're tackling those core issues. i think as you know, senator, we've received the committee has received a recommendation from one of its subcommittees about the possibility of doing a make or take pilot. that's a core issue. we are expecting actually a telephonic meeting from the subcommittee the make a specific recommendation on july 8th. so i look forward to that. i think that's a very important area. we also, i've -- we've done a number of things. a lot of things have already been done in the market strauk chur arena. one is obviously in the area of resiliency of the markets. shortly after i testified here in 2014, we adopted sci which is the systems compliance and integrity rulemaking that's aimed right at the critical

market infrastructures and enhancing the resiliency and that rule is really now just recently in the last few months but it's subject to examination for compliance now and enormously important to get that done. that is already done. i expect in this year rather eminently of rule for greater transparency of order routing for institutional orders as well as enhancing the disclosures that are made to -- on the retail side. again, that's very important information to our markets to ensure fairness, to see what your agents are doing as they, you know, execute your order so those are some examples. >> so you referenced the telephonic meeting on july 8th. that's a report from msac that you were referencing there? >> yes. that will be a further discussion by the full committee of their subcommittee's recommendation on the make or taker pie lot and taking up some other issues at this meeting.

>> following that meeting, do you expect that the commission would be in a position to take the next action and move forward or when do you expect it could get to a commission decision? >> next step is for the staff of the commission and the commission, you know, to take in the recommendation from the committee but it will be up to the staff and the commission as to what to do, what the parameters should be. i do think it's an important -- to do this in a well-designed pilot because it really does touch on an important -- >> do you feel a feel for when the commission -- >> i don't -- i can't give you a specific time but this year priority to move that along as soon as we get the recommendation. >> thank you. >> i mean consider it at a staff and commission level. >> thank you. i also want to thank you for the past efforts to improve the transparency of the financial stability oversight council process. by seeking public comment on the

asset management industry. there have been several hearings on the financial stability oversight council focused on ways to improve transparency and communication. excuse me. in the subcommittee hearing that senator warner and i held last year the witnesses agreed that fsoc needed to provide action to important financial institutions. on how they could derisk and ultimately shed the designation label. do you agree it would be appropriate to take steps to increase transparency, accountability and communication in the fsoc process? >> that's something to be committed to going forward. may not be completed any point in time and i think fsoc is committed to look for ways to enhance the transparency of that so sesz. so-called off ramp process is an

existing process under the fsoc rules and guidance. it's an annual process but i also take your point about greater transparency of what the factors are that may be involved in that. >> thank you. >> senator markly? >> thank you, mr. chairman. one of the midwest egregious things in the lead-up to the meltdown for firms that put together securities and then they sold them saying these are the best things since sliced bread and while they were privately taking the failed because of the details they knew about the securities packaged. carl levin championed an end to this type of egregious conflict of interest. it's section 621. here we are now six years later. we don't even have a draft rule. why not? >> this is -- i agree it's an enormously important rule. and i -- i obviously know well the range of transactions that

you are talking about it was intended to address. as i know, you know, senator merkley, there was a proposal issued in i think september of 2011 so -- which is still outstanding where we got tremendous comments, this was actually before the s.e.c. had also adopted its economic guidance so some of the comments that we got are one must really do very and i agree with that, you know, very intense, good economic analysis of this. also got comments that it wasn't tough enough or it was too tough or it swept in too much or didn't sweep in enough. it's proved to be much more complicated than certainly our experts in the agency envisioned. i think we asked in the proposal 100 questions and for us even that's a very large number. i mean, you know, who is covered? what is covered? and all sorts of, you know, various interpretation issues including with respect to what

should the exceptions be which is also provided there. we had a recent issue and a comment come up as late as december 2015 as to whether certain fanny freddy guarantees, you know, would be handled because of the concern that those securitizations could not continue at least under the parameters of the proposal so it is one where the staff is working very hard to get a reproposal done as soon as it can but it's proven to be very, very difficult to draw the right lines. >> this is one of the most direct examples of unacceptable wall street behavior where congress took a very clear stand, wall street desperately wants this to never happen. the s.e.c. has gone year after year after year failing to get it done under the argument it's just too complex. it's just too difficult. i don't think anybody in america buys that this type of conflict of interest is too difficult. instructions have gone to the s.e.c. the s.e.c. has failed the public

on this issue. and allowed this type of conflict of interest practice to continue. and i think it's absolutely unacceptable. and i would have said the same to the former chair back in 2013 but here we are three years later, now the responsibility rests with you. let me turn now to the issue of political spending being disclosed by corporations. a million public comments have been received supporting disclosure. because the owners of the company, the stockholders, feel like if the company's spending their money on political activity they have a right to know. and under the concept of money is speech if you don't get the know how your own money is spent it is really stolen speech. that's bad enough but it's certainly material to what investors understand about the future prospects for that

company. what are they advocating for? what are they lobbying for? who are they lobbying for? who has which philosophies and positions and both from the viewpoint of individuals getting to know how their own money is spent on political speech and from the view of material issue related to the future performance of the company, it is imperative that there be disclosure. there was such a plan on the agenda when you took the chairmanship. but in october of 2013, you took it off the agenda. not even to hold the conversations to prepare the way on this, this is an issue of freedom of speech. it's an issue of knowing how your own money is being spent. it's an issue material to the future of the company and you took it off the agenda. why? why would you do such a thing? >> well, let me say first i

deeply respect and understand the deep interest in this issue on all sides. and i think it's also important to note that if the issue is material in the context of a particular company as we sit here today that would need to be disclosed under the federal securities laws and we also have through our shareholder proposal rule 18a 8 avenues to share it with the particular companies an they make great use of that avenue. the average approval rate for such was 26% approval rate. and some companies over the years using that avenue there have been a few majority votes by those shareholders and those companies have generally gone ahead and made the disclosures voluntarily. certainly in large companies, the number of them voluntarily disclose political contributions has grown. i think more than half of the s&p 500 now provides that disclosure voluntarily which i think is a good thing.

in terms of the reg flex issue which is what i think you're raising i think there's some misunderstanding about what was on the s.e.c. agenda and perhaps even, you know, what i did in reviewing the reg flex agenda as i found it. what is not been on the reg flex agenda at the s.e.c. before i arrived or after i arrived is to go forward with such a rule. what was on the reg flex agenda put on there in late 2012 and was there when i arrived was an item reflecting that the division of corporation finance would research and consider whether to recommend a rule proposal on this subject. my predecessor wrote to congress a response, actually to a congressional investigation on this issue that neither she nor the commission nor the staff had reached, you know, any conclusion about that and that no one was actually working on a rule proposal at that time.

what i did when i arrived is looked at -- shortly after i arrived the first yaend was due and so i basically carried forward for the most part what was on the previous agenda including that item. in the fall, when i had been there a little longer, hay add chance for the staff to do a deep dive of all the items on the reg flex agenda, many there for many years. and were aspirational and what the reg flex agenda instruction, you know, has you do is to put on that agenda, you know, the items that you reasonably believe you can complete in the next 12 months. and so, as you know, i have prioritized since i arrived here completing the congressional mandates under the dodd-frank act and the jobs act as well as as we went forward -- >> i'm way over my time and in courtesy i'll just stop you

there because we can't get a full history and listed as a proposed rules stage in the april 2013 and taken off in 2013. you have the sole power on the commission to establish the agenda. this is an issue that goes to the core of who we are as a country that people cannot spend your money on political speech without telling you how the healthy're spending it or that you as an owner have a full right to know how your funds are being spent. i think for you to unilaterally remove it from the ruin making agenda was an affront to the core issues of the republic. it came after political pressure. i think it's unacceptable. i think you should put it back on the jend. >> that item and about 20 other tight items on the previous agenda i removed for the reasons i said and it was never on there to advance a proposed rule. >> senator rounds. >> thank you, mr. chairman. good morning, chair white. you've stated in the past that

you believe there should be uniformity between the fiduciary rules issued by the department of labor and s.e.c. recently released a staff report of the dol's rule and found extensive disagreement of staff at the s.e.c. and the dol over the fiduciary rule. the report found in addition to the he fusal of an analysis of the cost and benefits of alternative proposals and required but that the staff economist from both agencies also had disagreements over the rule. in fact, the report found that the disagreements reached the point of the labor department's staff writing, and i quote, we have now gone far beyond the point where your input was helpful for me. if you have nothing new to bring up, please stop e-mailing me about this topic. end of quote. chair white, how do you believe the s.e.c. can structure a

uniform fiduciary rule when it appears there's disagreements of the two agencies over the fundamental goals of the rule? >> i think what i've said in the past is i believe that there should be a uniform fiduciary duty rule for broker dealers and investment advisers when they are giving securities advice to at least retail investors. that's really under our rules. the department of labor and s.e.c. are separate agencies. the rules aren't identical in certain areas where our registrants may overlap with theirs. in terms of the department of labor, s.e.c. staff interactions on their rule proposal and there was a prior one, as well, and i think the comments you mentioned is from 2012, actually, on the prior proposal and i wasn't here then, but i'll say that the s.e.c. staff did give substantial what we call technical assistance to the dol staff, you know, on the current

now final but then proposed rule. including technical assistance on, you know, our own rules and what they provided but also the likely or the possible is a better word i think impacts, you know, on the availability of reasonably priced advice by brokers and the impact on the broker model itself. the nature of those exercises and we have done it with other agencies on other rules where we have that tech kl assistance to provide was not really to reach agreement but to make sure we were giving our best technical input and assistance to department of labor and obviously made the decision of what the proposal should be, put it out for notice and comment. i think it was focused on some of those same issues. >> would it be fair to say that based upon the rule which is in effect right now out of dol would it be fair and i don't want to put words in your mouth

but would it be fair to say there's concerns of the availability of the investment advice to the smaller investors and the perhaps a limiting of some of that advice right now based upon the traditional way that is we provide investment services to some of your smaller invest to recalls in the united states today? >> i mean, again, that is an issue that, again, i'm very focused on that issue myself in connection with the work on a uniform fiduciary duty rule. certainly the labor department was focused on it. you know, and i think, you know, certain changes were made i think in response to that concern and possible impact but i think to some degree and this would be true of our rules, too, you know, you need to see what happens as the rules are implemented. certainly, we are available, you know, to provide whatever help and assistance we can to, you know, our registrants if they run into a situation of, you

know, conflict with our rules. nobody's come to us yet for this. >> my concern is as we try to proverdict individuals we limit availability to them of opportunities to invest. and i'm good to go 92 into one of the areas hire. one recent trend is the even crease in issuance of private shares which can have significantly less disclosure requirements relative to public share offerings. priority offerings can only be sold at qualified high net worth investors in 2014 more than $2 trillion was raised privately. private stock issuance is under the sec's regulation deaccounted for more than 1.3 trillion of this amount in comparison registered public offerings amounted to approximately 1.35 trillion in 2014. are you concerned by the fact that issuances of private stock has now outstripped public shares sold to all retail investors in terms of new

issuance? doesn't this kind of point to a trend here of kind of the guys who can afford the -- the guys who are capable of investing large amounts of money are basically providing a lot of the new public issuances they're receiving it and the smaller retail folks seem to be not in that position? isn't there something going on here that maybe isn't moving in the right direction? >> well, again, i think we have an obligation and we do monitor both the private and the public hash markets you know very closely and continuously. i mean, as you know, we have a tri-part hide mission which is protect investors an assure the fair and functioning market and to facilitate capital formation. i don't see those three pieces to be in conflict but they need to be taken into consideration in terms of everything we do. i think the point you're also making is on who should be within the definition of accredited investor, which

obviously drives a lot of what happens on the private side of the markets. i mean, clearly from our inception that concept is meant to protect investors, protect investors who may not be able to protect themselves. that obviously hits the core of our investor protection mission which we feel obviously very strongly about. in terms of, you know, the public markets, i mean, one thing i do think we have a responsibility for and we certainly are looking at this constantly is whether by virtue of our rules, is there something about our rules for the public markets that is unnecessarily driving away, you know, public offerings? so we look very closely at that. obviously we've had with the jobs act, the ipo on ramp, some things that make it somewhat easier to do that, again, we're still focused on investor protection, but i think this whole range of issues deserves and is getting very close

attention from the sec. we published as you may know the staff's credited investor study with a series of recommendations open that and that also hits some of the issues you're mentioning. >> mr. chairman, thank you. >> chair white, i'd like to bring you to the plight of the citizens in puerto rico. this is a situation where puerto rico finds itself paying 33 cents of every dollar that it has towards its debts. the government has been forced to make excruciating decisions to shut down schools, scale back essential services, hospitals with no access to power are closing the doors. the island is losing at least one doctor each day, and we have one muof the most significant migrations from the island to the mainland in quite some time, which underlines the critical importance of a congressional solution which will allow the government to restructure its debts and protect the people.

but beyond those reasonable and necessary solutions that should come from the congress, the people of puerto rico deserve to know whether illegal activity by advisers to puerto rico and its municipal entities controlled and contributed to the current debt crisis. dodd/frank explicitly mandated that the sext s.e.c. and the municipalities board protects municipal entities. yet despite the problems on the island, neither the s.e.c. nor the msrb has held one hearing. commission meeting, niinitiativ or any particular attention to puerto rico's debt crisis at least not to my knowledge. so what i want to know is -- all of whom subject to the s.e.c. and msrb regulations have done so free of conflict of interest, whether they packaged and sold bonds worthy of the savings of hardworking investors and most

importantly whether they've acted in the best interests of the puerto rican government and people. how will the s.e.c. pursue this element of their crisis? >> well, i mean, i couldn't, you know, agree more with obviously the state of that crisis and what -- what our government collectively in my view needs to do to address that in a positive way. but in terms of the s.e.c.'s jurisdiction there, i mean, we have actually -- i mean, very closely attended with respect to investments in various funds with bonds that may be at risk in terms of investor protection, we put out guidance on some of that from our investment management division. we also have brought and there are two i think public enforcement actions that have dealt with brokers who have misled investors about the riskiness of those bonds. >> in puerto rico?

>> yes. both of them. one this year and i think one in 2014. i can give your staff the details of that. again, i can't comment on specifics of anything ongoing that we're looking at, but i think i can say that we're very focused on the issues that you raise in some of the other work we're doing. >> so you know, several colleagues of this committee and others have joined me in a letter to you and to the commission urging you to be not just a cop on the street and wall street but also in san juan. and to make sure that those who may have contributed to this crisis are fully prosecuted. sending a strong message is critical. i'd like -- i look forward to your continuing work in that regard and i'd like to be advised of what's happening when it is available to be public. secondly, i'd like to go back to

the question of corporate political spending. i continue to believe that transparency and disclosure to shareholders is the utmost importance, both as a matter of corporate governance and investor protection. and it's into the just me. 1.2 million americans have implored the s.e.c. to act as virtue of their commentary during the rule making. it's been nearly six months since i along with 96 members of congress wrote to you asserting that the s.e.c. retains the authority to take critical steps to prepare for a possible rule on the issue of corporate political spending. and as we indicated in the letter, we expected and continue to expect the agency to move forward with plans to prepare for a rule making. now, i know that the 2016 omni bus act as seen by the commission as preventing them from taking the type of action, but that action specifically

talks about issuing, implementing, or finalizing a rule. it does not speak to preparing a rule for that moment because i can assure you that that provision will die. that provision will die. and we need not wait for it to die when 1.2 million americans have said to you, probably in an unprecedented number, that they want to see a rule in this regard. so i hope that -- and i'd like to get from you a sense of whether or not -- i mean, we have pending nominees to the s.e.c. i don't care for the way either of them answered me on this question. i'd like to know, are you going to at least prepare and respond to those 1.2 million americans and nearly 100 members of congress who believe that you should move forward in this regard? >> sir, again, you may have heard some of my answers to senator merkley's questions, and i deeply respect the strong views of those that you've mentioned.

there are very strong views on both sides of this issue. and i've also mentioned kind of how the disclosure is developing both voluntarily and through our shareholder proposal process. but the issue of the s.e.c. doing a rule making to mandate political disclosures by all public be companies is not on our -- agenda. so with or without the appropriations language, the priorities that we are pursuing and pursuing is hard and as fast and as well as we can are really the ones that i've outlined since my early days here, which are the mandated congressional rule makings and certain of the mission critical initiatives. i've talked about asset management and equity structure. so i -- that is the status now, and i say that with a full appreciation of the deeply held views on this on all sides,

including by i think it's 200-plus unique comment letters we've gotten on the petition that you referenced. >> i'll just close. 1.2 million americans i think it's very rarely have the s.e.c. seen that extent of commentary tells you the incredible importance that people believe in the nature of unlimited corporate spending at a time when n our national pol sicks that determines decisions in every asset of our life. so i think that should be a far greater level of consideration by the s.e.c. than it presently is. thank you, mr. chairman. >> senator, we have over 300 million people in this country so 1.6 million, what, would be about a third of 1%? and self-generated? i hope that you as chairman of the s.e.c. or any agency would not react to generated mail from

republicans or democrats but would do what's best for the country and also under your jurisdiction. it's my understanding this is under the basic jurisdiction of the federal election commission for what it's worth. >> chair white, welcome back. you observed a few moments ago that one of the responsibilities of the s.e.c. is to facilitate capital formation. there's legislation that i think would be very constructive to that end. it was introduced in the house by congressman mulvaney, and what it would do is streamline some of the regulations affecting business development companies, bdcs, and included in that is a modest increase in the leverage they'd be permitted to use from a 1 to 1 ratio to a 1 to 2 ratio f. this were adopted, it seems to me, bdcs would be better able to provide loans

that they do provide to small and medium sized companies, which by the way are finding it more difficult to access bank loans given the regulations of dodd/frank. it would also allow better returns for investors potentially with some added risk that would be fully disclosed to those investors. and it has demonstrated extremely broad bipartisan support in the house i think the bill passed the house financial services committee 53-4. and it was included in legislation that passed the house floor overwhelmingly. we have not taken this up yet, but my understanding chair white is that you have some concerns about the leverage component in this. and i'm wondering if you could briefly because i've got limited time tell me why you're concerned about the increasing the leverage of bdcs. >> yes. i mean, first, let me just say that i think bdcs have been very good vehicles for growth. they were designed to be that for developing companies that might not otherwise be financed.

i think the -- 1980. the current reality is that retail investors hold the majority of those shares so that always raises our investor protection antenna and i think we have worked over the years and the staff to try to facilitate bdcs' operations because they have sort of a patch work quilt of regulations because of their exemptions from some of the investment act provisions. i've written about this in i -- i think when i first got here in october of 2013 there were some changes made in the bill which i think improved it. i appreciate those. and then i've recently also written a letter late last year to chairman -- and ranking member watters. i still have investment protection concerns or i wouldn't have written the letter. >> what is the concern? >> one is leverage. >> what about the leverage? >> it doubles your leverage which means your upside and downside potential are obviously multiplied or are multiple. and i think it's a higher level

of leverage than any sort of counterpart kinds of funds have. >> so -- >> secondly, i think it allows more investment in financial institutions than was originally conceived and allows investments in registered investment advisers. >> so plenty it is true that it the risk profile increases the exposure. but so does investing in a bank. a bank is a highly leveraged entity. retail investors are allowed to buy securities on margin. do you support allowing retail investors to continue to buy securities on margin? >> i mean, i'm certainly not opposed to that. but i think there are more issues with respect to this bill and risks with respect to this bill than just that. >> well, but that's what -- >> that's one of them. >> that's what leverage is about. i thought leverage was the main concern. i would simply observe that there are many, many opportunities for an investor to take on leverage if an investor sees fit to do so. buying options, for instance,

can create the equivalent of enormous leverage. much, much more than this very limited increase that would be after all managed by a professionally managed company. so i would really urge you to consider that among the various ways that retail investor can achieve leverage this would be a very modest -- it's heavily regulated. it's run by professionals and the upside benefit i think is very significant. let me touch on another item here. i think the s.e.c. has a proposed rule that would govern the use of derivatives by registered investment companies. and of course derivatives are used for a variety of reasons. they're all disclosed. it's articulated. if the s.e.c. were merely consolidated previous guidance letters then i rather doubt we would have seen the volume of comments that have resulted. in fact, i think there are some things new. one that i'm concerned about is that the exposure that's used to cap the amount of derivatives is based simply on the aggregate

notional amount of those derivatives when in fact notional amounts are a terrible proxy for risk. they don't measure risk at all. so why are we using the notional amount to determine the limit on these investment companies' derivative holdings? >> i think that is one of among several important issue that's we teed up in the rule proposal and one as you point out we've gotten a lot of comments on which the staff is very thoroughly going through as they consider what their recommendation will be for the final rule. you know, that's one of the -- probably one of the most frequently kpented on aspects of it, not all critical mind you by a number that are for the reasons you state. >> so is it your intention that there will be some modification here and there will be a measure other than simply the really meaningless notional principal amount? >> again, i can't get ahead of the process, but i can say that we are very folk you used on

that issue and the nature of our notice in comment process is that we very seriously consider all of the comments and try to basically propose a final rule that is optimal and better than our proposals. >> okay. thank you, mr. chairman. thank you. >> senator donnelldonnelly. >> thank you mrsh, mr. chairman. good morning. thank you so much for being here. in 1982 the s.e.c. adopted rule 10b-18 to provide a safe harbor from market manipulation liability on certain stock buybacks. buybacks could have been considered market manipulation back then. recently in my home state of indiana 2100 workers were let go by a highly profitable company in order to get $3 an hour jobs to mexico. the ceo said returning cash to share owners continues to be a top priority. we're targeting $22 billion of total shareholder returns to

share repurchases and dividends through 2017. of that 22 billion, 16 billion will come -- stock buybacks while firing 2100 workers in indiana in order to get $3 an hour jobs in mexico to help fund the stock buyback. i will also note that the savings they get from this are less than one-half of 1% of the amount of the stock buyback. so my question is, you know, in 1982, this could have been considered market manipulation. what does the s.e.c. think of actions like this now? >> well, i mean, the safe harbor rule that you mention does not immunize liability from market manipulation if it occurs. you know, it's basically

designed to impose some rules to at least try to prevent market manipulation but it doesn't -- for example, if the buyback is done on the basis of material nonpublic information, you know, a fraud action can be brought. i mean, that's -- safe harbor doesn't deal with that at all. i'm acutely aware of the -- sort of the whole set of issue with buybacks. gotten a lot of attention in a lot of situations so we're focused on it. but the s.e.c. -- >> let me ask you this. should the s.e.c. play a larger oversight role in overseeing stock buybacks as this has been funded by firing american workers? >> well, again, without -- i mean, i take your point completely. i think the s.e.c. i don't think has the authority to tell a company how to spend its money. what we can do and we're focused on doing because we also have disclosure rules with respect to

buybacks that provide transparency to investors and the public frankly of companies that buy back at least shares registered with the s.e.c. under 12g and we are addressing that issue in our disclosure effectiveness review in our recent sk to -- >> let me ask you, do you think this was the conduct envisioned when the rule was changed back in the '80s? >> well, again, i think it is very -- i'm not sure what "the conduct" is you're describing. the way you're describing it -- and i'm not doubting it at all -- is obviously a horrific set of events and had obviously very significant unfortunate negative consequences. but again, i think what we have designed with our rule makings and we're looking at it again to see if we can't do more is to avoid market manipulation, which is within our jurisdiction. >> well, in the s.e.c.'s eyes,

who is the corporate responsibility to? is it to just shareholders? dhoe owe a duty to the entire corporate efrntnterprise includ workers? what is the corporation's responsibility in the eyes of the s.e.c.? who is it to? >> the fiduciary duty of the boarder, for example, and the officers is to their shareholders. but by my saying that, i don't want to exclude that i think there aren't duties and responsibilities -- >> well, does the s.e.c. assume that they have any responsibility to their workers, or can they just fire them willy-nilly? >> that is not a subject that's within the jurisdiction of the s.e.c. unless it is something that by virtue of what is within our authority to do has a positive impact on that. >> well, when you look at this, i think a big part of this is corporate short-termism. i don't know if that's a very technical term, but it's the reality of life. i met with these workers this

morning. they were making $13 an hour. their ceo made 11 ceo before him made 150 million out on his last day and they're making $13 an hour on a very, very, very profitable plant and they're fired so their jobs could go to $3 an hour in mexico to help fund the stock buyback. do you inherently see something wrong with this business model? is this the american dream, that we all fight for? is this what the s.e.c. expects in conduct from the corporations that you regulate? >> well, i mean, what we expect from the corporations we regulate frankly citizens expect from those we don't regulate also is fairness to not only their shareholders and the fiduciary duty they hold to shareholders which is within our direct bailiwick but also to their employees as well. i mean, there are studies out

there on the buyback s and the benefits and the detriments that kind of go both ways depending upon the context of the particular company, when they're buying back, what they're doing with their funds, what they have to do with their funds and so forth. but i take your point. >> thank you, mr. chairman. >> senator cotton? >> thank you. thank you, mr. chair. i want to talk a little bit about finra and its structure. finra is defined as i self-regulatory organization, is that correct? >> yes. >> does finra operate with a mandate from the federal government? >> finra is, as you point out, a self-regulatory organization that is a membership organization but it certainly is an organization that is primarily responsible for the surveillance and regulation of broker dealers. >> does it use tulools that are similar to or typical of those of an independent government

regulatory agency? >> certainly on its exam and enforcement side. i mean, they have tools we don't have, frankly, because it's a membership organization too. the things they can do that we can't do under our own authorities but they certainly use surveillance tools. they use enforcement. they use exams which are similar. >> and they make rules that will govern the conduct of their members? >> they certainly make rules. many of them are subject to s.e.c. approval, but yes. >> are there any other private organizations that are similarly structured and oriented within the securities law space? >> not at the present time. >> what sort of input, to your knowledge, do finra members have into finra's regulatory policy agenda? >> i don't know the specifics of that. obviously they have a board structure and they obviously are a membership organization. >> what authority does the s.e.c. have over the finra

board? >> we certainly oversee finra. we inspect finra. our exam staff does on various issues, some of their programs, obviously we have some authority over their rules as well, some of their rules. >> do you have the power to appoint board members? >> no. >> to remove board members? >> no. >> finra exercises investigative and prosecutorial functions related to s.e.c. rules, federal security laws and its own rules? >> yes, generally speaking. yes. there's some exceptions to that you but yes. >> are those functions executive power in your opinion? >> you know, obviously i know this is an issue that people talk about all the time, but they're not a government entity. but i'm not -- the answers i gave are accurate i believe in terms their powers. >> to your knowledge, does finra employ paid lobbyists? >> i don't know.

>> thank you. i'd like to turn to a separate topic, shareholder activism as it's sometimes called. on a number of occasions you've commented on the role that economically motivated investors play in the capital markets. in a speech last year in new orleans you noted that, quote, an intense debate is taking place in the business legal and academic communities as to whether activism by messahedge is a positive or negative force in the economy. in that speech you also said that the s.e.c.'s role in any given contest between shareholders and boards of public companies quote is not to determine whether activist campaigns are beneficial or detrimental but rather to ensure that shareholders are provided with the information they need and that all play by the rules. so putting aside the question of any particular dispute, any particular company, any particular investor, do you believe that unbalanced engaged shareholders provide critical market checks and balances to provide greater corporate productivity and management accountability? >> that's a very broad question.

i certainly think they can. >> you've also spoken favorably in the past about the role of cost benefit analysis at the commission. given your views on the importance of a data driven approach to developing public policy, are you concerned about some appeals to emotion that we see from some involved in the debate about so-called activists investing which is is sometimes also portrayed as short-term investing? >> well, i think, you know, the s.e.c. is an independent agency. and has always been. i'm an independent head of that agency and so i think it's very important for us to keep our eye on the ball and based on the merits which i think we do. >> in this space you're committed to developing rigorous -- any other limitations on marketplace participants before

rule changes would be mroepzed and adopt snd. >> certainly any of our rules are subject to that economic analysis. >> thank you for that. thank you for your appearance today. >> thank you mrsh, mr. chairman. thank you for being here, mary jo. i appreciate the work that you do. i want to talk -- i appreciate you taking the blame for a lot of stuff. but i want to talk to you about your -- the commission right now. how many members are active on your commission? how many members do you have on the commission? >> we have three. >> and it's my understanding and correct me if i'm wrong it's been that way for about the last eight months, right? >> the last -- want the hours and minutes? the last six months. >> six months. is it true that since you've only got three any one of those three can say if they don't like a potential vote that might be coming up just stay away and then you don't have a quorum and you can't work?

>> well, as a commission of three, we have to have all three commissioners to do a rule making. >> yeah. so any one of them can walk away from the table and you're sunk, right? pretty good power. >> they could, but i think we're very focused all three of us on getting the work done, too. >> that's good. what about your staffing? how are you staffed up? do you have adequate staff? >> i think the s.e.c. is significantly underresourced agency for our responsibilities. but -- >> would that change if you became a self-funded agency? >> it would. >> could you give me sort of -- i mean, are you 20% down, 30% down on staffing measures? >> i mean, i've certainly talked mainly and i suppose in the context of our ability to cover on the examination side investment advisers which are obviously enormously important to investors, particularly retail investors.

i've also talked about how we are so outspent on the i.t. side by those we regulate that in those areas, you know, we've done some analyses but again what i try too to do is i respect the appropriations process, the congressional oversight process and try to make the best case i can for more adequate -- more and adequate resources. >> well, look, there's been ten people speak ahead of me, and some of them have been very critical, some on my side of the aisle have been very critical about you not doing some of the work that is assigned. i could be critical, too, and by the way, i am. but the fact is that you've got to play the hand dealt to you and the hand that's dealt to you is a pretty weak hand right now, in my opinion. would you agree that if you were fully staff up and you had five commissioners you'd be much more effective and would get more work done? >> i think the answer to that is yes, certainly being staffed up would accomplish that. >> so we had a fiduciary rule

that several have talked about that got put out by the d.o.l., and i was critical because i thought it was a job you should have done and i think if you would have been fully up would have gotten it done, but unfortunately it didn't happen. is there any plans to get that fiduciary rule happening from the s.e.c.'s standpoint? >> i'm certainly committed to getting it done because i think it's of enormous importance. but i've also made clear how difficult and long a road that is under section 913 of the dodd/frank act and that i'm one vote. >> yeah. and so fair point. and it's been documented that there was some differences between the s.e.c. and the d.o.l. when that rule was put out. and i don't hear you saying it's going to be done before this administration is out the door. >> well, i'm committed to moving it as fast and as well as i can, but i can't give you that commitment, no. >> but in all practicality --

>> it's a longer route than that. >> okay. so we've got at d.o.l. rule. so the question occurred to me, do you have to enforce the d.o.l. rule? >> we do not. >> so who enforces it on investment advisers and broker dealers? >> i mean, they're enforcing the rules is their responsibility. >> so the d.o.l. enforce the rules on all investor broker -- >> they would enforce their own rules -- >> traditionally, wasn't that a job for the s.e.c.? >> not as to their rules, no. >> no. but as far as investment advisers and broker deal rz? >> and still is. still is. except not with respect to nir rules but with respect to our rules. >> so tell me how this is going to work. i mean, practically, how is it going to work? >> i think it's -- you know, again, independent agencies, independent rules, we've had before this rule rules by d.o.l. and rules by the s.e.c. that overlap so to speak, and we've

managed our way through that pretty well. you know, we clearly will watch this as it goes forward and if issues arise, you know, we'll certainly be available, i'm sure d.o.l. will be available to coordinate if a conflict should develop. and if we -- if and when i hope we go forward with our own rule makie ing obviously we'll coordinate with them about any new issue that's might arise with respect to that. >> mr. chairman, i'll put a few more questions on the record, but thank you very much. >> thank you. >> chairwoman, thank you very much for your presence today. we've had a conversation in the appropriations process. want to continue to ask you about deals with the regulations of the national marketing system. the question i have is whether the nms plan governance model should be reformed to reflect evolution of our markets and add additional participants as

voting members. the s.e.c. -- do she have the ll authority to -- paepants in the governance of nms plans? >> subject to our own rule process. one thick i should mention is we actually have recommendations coming from the subcommittee of the equity market structure -- but we essentially are typically in the position of approving a rule filing but we can also issue orders to solicit rule filings if i can say it that way. >> so maybe there's more to this story thab me just asking you whether you have the authority. is there smig omething in the w? can you bring me up to speed on this topic? >> it's certainly a topic that the commission is focused on, pfaff is focused on and so is our equity market structure advisory committee and in

particular i think it's called our trading venues subcommittee. and that's one of the topics indeed that they discussed at their last meeting with the full committee i think end of april. and is or may be the subject of recommendations. >> do you have any personal thoughts on this topic or are you just waiting for those recommendations? >> i'm very well aware of the issues. i know some accommodations have been made which obviously other participants, advisory participa participants, have not found sufficient or satisfactory. so it's an issue i'm focused on. it's an issue i continue to consider whether and what changes if so should be made. >> i want to follow up a bit on the senator from arkansas' conversation about finra oversight. i noticed that finra appointed a new ceo yesterday who is a former employee of the s.e.c. i guess my question is, how do you

satisfy the need for congressional oversight of finra? is it just a matter of we have oversight over the s.e.c. and the s.e.c. has oversight over finra? or is there a greater opportunity? we have no appropriations process there, no confirmation process, occasionally finra representation is before congress in a setting like this you but beyond that, it seems to me that finra's role is growing more engaged in regulatory activities and congress has little oversight in that regard. >> well, you certainly as you indicate have oversight authority over the s.e.c. who has oversight authority and exam authority over finra. and it's an important one i think and finra is a very important component of our investme investor protection and market safe guarding. since i've come to the s.e.c. as

chair, we've henhanced our oversight of finra and continue to do so. i think i heard rick catch em, the outgoing president and ceo, detective that he at least he understands the interest by congress given their activities and the importance of their activities in learning about them and if oversight is quite the right word for the reasons you indicated. i think rick and robert cook who is his successor are just tremendous public servants. we work very well with them. obviously we oversee them so there's -- but i've found them both to be extraordinarily knowledgeable. i know rick better than i know robert, but i know them both. about the markets, very committed to investor protection. that's always a's safeguard. >> i think you're telling me that my assurance is that you are watching over finra and we need to watch -- i know you wouldn't say this -- over the .

s.e.c. maybe you would say that. >> it will happen anyway, right? >> right. >> no. i think that is correct, and i think it's also i guess the other part of my answer was that i'm aware of the need and we've moved in that direction to enhance our oversight of finra at the s.e.c. >> you may use your position to encourage finra to be cooperative with congress, open and available to us, that would be useful. >> yes. >> thank you. mr. chairman? >> senator warren? >> thank you, mr. chairman. thank you for being here, chair white. as you know, the s.e.c.'s mission is to protect investors and our capital markets and requiring companies to disclose information is a critical part of that mission. publicly traded companies may not like disclosing potentially embarrassing or damaging information, but the s.e.c.'s job is to look out for inve investor,s not for big companies. there's a lot you could be doing to protect investors there are still 20 mandatory dodd/frank

rules from 2010 that the s.e.c. hasn't completed and there are more than a million people including countless investors and former s.e.c. commissioners pushing the agency to require publicly traded companies to disclose their political contributions. but instead of moving forward on issues intended to help investors, you've actually headed in the opposite direction. since your first year in office, you've dedicated significant s.e.c. time and resources to a project you invented and called the disclosure effectiveness initiative. according to a 2013 speech you gave, your big idea behind this project is that the s.e.c. might be requiring companies to disclose too much information causing investors to suffer from something you call information overload. now, i'm all for eliminating redundant disclosures or

improving the way that information is presented, but honestly i have never heard of the concept of information overload in the context of investing in stocks. i've never heard of the idea that investors actually want less information than they're getting. so i have a pretty simple question. the s.e.c. is an investor protection agency so when you launched your project, what evidence did you have that information overload was a real problem that investors wanted you to solve? >> it's an issue, senator warren, that the commission has been looking at for really decades among others. but the purpose of disclosure effectiveness -- by the way, it wasn't invented by me. it was basically in response to a congressional mandate to a report that reviewed our entire -- >> i'm sorry. when was this report you were talking about?

>> it was i think presented to congress filed with congress in i think at the end of 2013. >> so now wait. are you talking about the jobs act report? >> yes. >> because that one i actually have looked at. and what was asked of you was that the s.e.c. review one subset of disclosures to see if that subset should be be modified as they apply to one subset of companies. so-called emerging growth companies. your project has gone way beyond the boundaries identified in that law. >> yeah, emerging growth companies are a large swath of the -- we've been for decades at the s.e.c. is my point have been undergoing -- >> that's not my question. >> there's nothing more important. >> my question is, when you launched your initiative called the information overload, this is what you identified. i just want to know what evidence you have that this is a

real problem that investors have come to you and said, we're worried about getting too much information? just what evidence did you have? >> first of all, the review is not limited to duplicative or overloaded information. it's really -- >> you mean the review in the 2012 jobs act. >> no, no. our review. it ae's meant to make disclosur more meaningful to investors and we've also gotten comments i will say recently from all kinds of constituents including our investor advisory committee about identifying and really not objecting to removing things that are repetitive, duplicative, not useful. and the purpose much this review is to make disclosure more meaningful for investors. >> i started this by saying i don't have a problem with getting rid of duplication, with making it more effective. the question i asked you about is whether or not this so-called information overload is a real problem identified by investors that have come to you. let's be honest about this. i cannot find and you have not

produced a single investor who has complained to the s.e.c. about receiving too much information. investors don't want less information about the companies where they put their money. in fact, i think that's ridiculous. the s.e.c.'s own investor advisory committee which includes everyone from hedge funds to pension funds to retail investors say recently that the current amount of disclosure -- and here was their word -- is appropriate. so who wants less information to be disclosed? it's pretty clear. the national chamber of commerce, which represents the giant companies that have to do the disclosing. the chamber has produced a fact-free report whining about this nonexistent information overload problem in 2014 shortly after you launched your initiative. you know, information overload is a problem that was invented to justify a project aimed at

making life easier for big companies and harder for inve invest investors. in fact, keith higgins, the s.e.c.'s head of the corporation finance division and the lead on this project kind of let the cat out of the bag in 2014 when he said in a speech, the aim of this project was, quote, to reduce the burden on companies consistent with our mission of investor protection wherever we can. now, i recognize that congressional republicans slip language into the must pass highway bill at the end of last year that asked the s.e.c. to review disclosures with the eye to eliminating ones that are unnecessary. of course that doesn't justify the s.e.c. dedicating resources to this project for two years before that. but nevertheless --

>> the concern was expressed about, you know, too much information could sort of cloud the meaningful. i think -- >> instead of -- >> it's much narrower than its intent. one of the most important thin about a disclosure effectiveness review, we're also talking about adding information in this review that's needed to be added for example on foreign taxes and other things. but is also the manner in which the information is being provided to investors, giveren how -- which is a huge -- >> chair white, we're over time. let me just stop you there. i have said now three times i think in just this brief exchange, i'm fine with cutting out duplication. i'm fine with making the information clearer. and as should be clear, i'm fine with providing more information.

what i'm trying to identify is something that you specifically have targeted and talked about. i am frustrated that at your direction the s.e.c. has voluntarily spent two years trying to address a problem that you have no evidence exists. instead of making up work to help giant corporations, the s.e.c. should do its job, starting with the 20 required rules under dodd/frank that still aren't fixed six years after the law was passed. your job is to look out for investors, but you've put the interests of the chamber of commerce and their big business members at the top of your priority list. a year ago i called your leadership at the s.e.c. extremely disappointing. today i am more disappointed than ever. thank you, mr. chairman. >> and i'm disappointed at your disappointment and could not disagree any more with your characterization of what we're trying to do to improve our

disclosure regime for investors. to make it better. >> when you bring me evidence of this so-called information overload that you have initiated, then we can have more conversation about how disappointing the leadership has been. >> for the range of issues we are addressing including that. >> well, i'd like to see some evidence that there really is a problem here. >> senator warner. >> thank you, mr. chairman. chair white, it's good to see you again. i want to move to another area of concern that i have of i've seen evidence recently and i'm sure you probably have as well, rbc put together a chart of its complexity is a little overwhelming that there were 839 different fee structures, i'm getting to the make or take issue, with 2700 different

iterations in terms of incentives and rebates within our market structure right now that quite honestly give the impression that the system is rigged to direct trading through to those firms and entities that are going to give you the biggest rebate or fee structure. it seems to me there's an extraordinary amount of conflict of interest here in the whole question of the brokers and their clients. when we look at this and we've got obviously the complexity of our markets and trying to make sure, i agree with senator warren we've got to get information out in a clear and transparent way. boy, oh, boy, you talk about an area that is opaque, how are we going to get through this? now, you've talked about this back in 2014, the negative outcomes of some of this

structure. you know, i strongly believe we need to move quickly on the make or taker pilot. i would encourage you that when we look at this maker taker pilot, we have both lit and unlit when we think about again you look at that rbc chart and then you add the dark pools behind it, enormous challenges and that we don't -- you know, i know that the trade act component issue added a whole series of complexity to the tick size project and my hope is that we won't see those same kind of great to have you but potentially items that dramatically slow down the ability for us to bring more transparency to our markets in particularly in terms of this area where there appears to be an anorms amount of conflict of interest. could you speak to that.

>> first, i'll say and i think i said it at the committee meeting as well, but i do think we should proceed with a -- promptly proceed with a well-designed pilot. the discussion of the -- >> how promptly do you think? considering what we saw the tick size and we've gone through this a number of times. >> and the tick size as you know we ended up having to order the basically sros to commit a plan that would work. i think it's enormously important it will launch in october of this year. but obviously it took a while to do that. i mean, i do think you've got to be careful that you're getting the information that you need to have from these pilots. i think you may not, senate oeo warner have been in the room when i said we're expecting a -- meeting from the subcommittee that's in charge of this subject matter at the subcommittee level to the full committee on july 8th. and frankly i urged that to

happen sooner than their next scheduled meeting. so that we could move this along. it obviously is up to the commission and the staff recommending to the commission what those parameters should be. but it is one that i think, again, everything is more complicated than it seems. i don't think the system is rigged you but i think it's developed in a way that we've really got to figure out how to deal with that. and i am particularly concerned about the conflicts of interest. >> again, you sort through this despoke byzantine process and how any investor small or large for that matter really knows where their trades are being directed based upon the level of fees and rebates. it just -- we need more market confidence and i really think moving aggressively on this -- >> i think our transparency proposals are an important part of that, too. >> let me, last few seconds here, go back.

senator moran raised some of the question around market governance. as more and more of these exchanges the security exchange processors and are making decisions to make huge capital investments in technology sometimes that technology which may give them that fractional second advantage over others and as i've said before, you know, i don't want to appear as a lud-ite but i do believe at some point speed and -- the god of liquidity is not always the complete answer. but as we sort through this and with all the various exchanges, can you expand on what you said to senator moran in terms of governance? how do we make sure in terms of market governance we've got all the right parties at the table sorting through these issues in. >> well, again, i'm not sure we're talking about the nms

governance which we were addressing, but frankly my whole idea for the equity market structure advisory committee was to try to bring in expertises across the range of constituents and also to make sure we had a panel at every one of those meetings that had everybody else there that had a different point of view and an expertise. and i've been very pleased with it so far. it's also something that folk y focuses and i think mofz along more promptly the commission's comprehensive review of this issue and it really needs to be there. in terms of the speed issue, certainly you get to diminishing returns i think you had that conversation with steve loupe rella at your subcommittee meeting. i don't think you roll back technology. we've had tremendous benefits obviously to retail investors and institutional investors in our markets in the technological

advances. sometimes people talk about high frequency traders as if they're one thing. and they're not. they're not monolithic. they have different strategies so one of the proposals that the staff is working on is an anti-trading disruption rule which sort of deals with when markets are particularly vulnerable liquidity being taken away by virtue of speed to avoid that. so the issues again are complicated but i'm largely agreeing with you. >> my time is expired. i just want to say, mr. chairman, as we look at complexities and equities market as we've seen complexities and the bond market, even if the treasuries markets obviously the options markets and my fear sometimes that some of these bespoke products and the incentive systems, i worry that the complexity has gotten so great and the effect it has on the overall market ecosystem that it's bleeding from one market into another. and i appreciate chair white your comments but would love to

come back and revisit that. >> senator schumer. >> thank you, mr. chairman. welcome back, chairwoman white, my fellow new yorker and as you know i have a great deal of respect for you. but i'm going to go back to the issue i care so much about. i just want to -- the money i am now involved in a lot of our campaigns, our races, the money that is pouring in is unprecedented. and it is undisclosed. and it's a few organizations. one is the koch brother organizations, chamber of commerce, pouring in and poisoning our politics and we don't know where that money comes from. the share hoirlds don't know where that money comes from. it is i'll have to tell you, it's more important than anything else to me before the s.e.c. all the things between shareholder and corporate governance pale before what's

happening in america. and you want to know why people are so discontent? in part, it's because a few powerful people can send cascades of money into our system, the ads they put on tv have nothing to do with the issues they care about. and you, frankly, are aiding and abetting it at the s.e.c. because we can't do everything and we know that our house republicans mitch mcconnell is insisting that this stay they gain from this and it's short-term gain because in part people become so discontent with the powers that be that they not only go against the -- they go against the republican establishment, witness the last prima primary. and i just don't get it. i just don't get why corporations that give money shouldn't tell their shareholders. these are major decisions.

they have effects on the corporations. if exxon and i'm just picking one i have no idea what they do undisclosed, but if they put a ton of money of undisclosed into the chamber of commerce to fight global warming -- let's just assume that -- their shareholders have a right to know. they may be making a bad decision. i think you're hurting america. you are hurting america. and i know you can stay in your narrow little box and say, well, the rules of the s.e.c. are limited and this and that. first, a lot of people don't agree with that. most people. second, the public, i mean, i know senator shelby said 1.2 million petitions is a small amount compared to the population of america. that's true. but how many other issues have you gotten 1.2 million petitioners calling you? and i wish you would change your mind. i'm just so disappointed. so disappointed. because every one of our

commissioners should be a citizen. they have to do things within the law. this is within the law. and you've made the decision not to go forward. so let me just ask you this. this is a relevant question. menendez touched on this issue, but i want to come back to this. john coats analyzed that the s.e.c. -- the republican leadership insisted that this provision be put in the bill. shows you the provision that says that congress can't touch what you do. but it wasn't that explicit. and as i understand it, it only explicitly prohibited the s.e.c. from finalizing, issuing or implementing such a rule during this appropriated period. so do you disagree with coats' analysis? and second, if you don't disagree with his interpretation, will you add this issue to the s.e.c.'s

agenda? >> i mean, i haven't studied his interpretation of it, and i think -- let me just say that, you know, obviously i respect you enormously. >> it's a mutual respect. >> and i also deeply respect the views on all sides of this issue. and i think -- you know, again, i sort of explained what the s.e.c. was looking at earlier when i came in and so forth. i won't basically repeat that or what i've prioritized for the benefit of investors and our markets since i've been there, although i certainly made a commitment to advance the mandated rule makings and other mission critical issues. but having said that, i've also talked about the avenues for shareholders to bring this issue to their companies, which is in our rules, the 14a-h shareholder proposal wrote the average approval rate for those petitions last year was about

26%. i also and i said it earlier certainly applaud those companies that are voluntarily information which by the way, they are doing in greater numbers. >> what else can you do to encourage companies to do it voluntarily? i understand the worst ones are not going to do it. the violators are not going to do it. >> i think there was a report that came out i think in 2015. showing that over half of the s&p 500 makes disclosures, and half of them have policies governing their spending. so that material was provided. obviously, our rules could never reach the koch brothers because it's not a public company. so our rules, the rules, the campaign finance reform, i know you're not taking the position they are.

but subject to doing the rule making has actually not been on the sec's agenda before me or after me. >> since you're not prohibited from starting the process would you be willing to start the process? >> well, again, the subject is not on our red flag's agenda now, and so it's not one of the priorities that we are advancing, so of i get to that before i get to what could we do or couldn't we do under the appropriations language, which obviously the appropriations language is there with its prohibitions. the corporate finance staff did look at this, actually before the item was put on the red flag's agenda in 2012, which is the recommendation to advance the proposed rule -- >> time has expired. but i'm explicitly asking you the question, which is are you

willing to start the process that is allowed even with the legislation we passed? >> i have not researched the legal issue but the answer it is it is not a subject that is currently on our regular flag's agenda because of the priorities. >> i would just say to you your priorities are out of line with what corporate america needs and what america needs and i hope when you go to bed late at night you think about that because our country is basically being steered in an all direction by a narrow few wealthy people, at the very least there ought to be disclosure. >> thank you, mr. chairman. and thank you chair wait for appearing as you know i have been working on a number of provisions within the homeland security and government affairs committee regarding supervision of independent agency rule-making. obviously, still concerned that

we have been unable to eff oo effectuate the implementation of the long-standing order and has met with as you know great resistance from all the independent agencies. it's not going to be the basis of my question but i just want to remind you that when we met you offered to actually sit down and have a conversation about this. because i think there is a growing amount of concern in the regulated community that there is not the kinds of safeguards that other rule making have. and so i just want to remind you that i have not forgotten about that. but i want to ask you about sec rule making in small business. as you know, senator heller and i introduced a bipartisan bill that would create an office of small business, within the small business advocate within the

sec. i'm wondering if you have had the chance to review that legislation and if you have an opinion? >> well, first let me say that i think -- we've really prioritized the -- the interests of -- and perspectives if i can say that, and special needs of small businesses, and the day i arrived, and taking a number of steps. we actually have in our division corporation finance an office of small business policy, which responds to you know, a thousand-plus -- sometimes nearly 2,000 requests for you know how do i navigate the rules, how do i do this and that? they look at all of our rules from the perspective of how this will impact small businesses. so it's a very highly functioning unit. so in terms of -- i'm an advocate for small business.

so conceptually, i'm an advocate for small business. i know the staff has given some input on this, but i worry if the bill is adopted that we don't fragment or dilute the opportunities that we have. >> i feel that way with a lot of small business, they're being left behind. their captivatatiitalization is restricted in ways where they feel -- they need to create an advocacy which is not just the good will of the chair and the rest of the commission, but to basically be that voice that is heard on small business. >> i certainly understand the priority on it, i can say that. that is why we also have the office we have. but the priority that you're putting it on in this way, as well. >> and i don't know if you have had a chance to answer questions about the department of labor

fiduciary rule yet. >> i have, but i kind of just read the testimony on the rule rather than what's been said. the sec has been credited for adopting a march 2012 current guidance on economic analysis and rule-making which emphasizes the rule making including relevant cost benefits. it's generally recognized that accurately measuring the bene t benefits is more important rather than determining the costs that can be quantified or modified. what lessons if any have you learned to justify regulations actually when these limitations exist? >> well, i think obviously we -- adopted, implemented our economic guidance, i think it was march of 2012. we take the cost benefit economic analysis of our rules and treat our rules you know,

quite seriously. and i think it's working very well. we've actually received sort of some compliments on it authnd t thoroughness of it, and i wouldn't say much about it but you alluded to the bills that are pending to sort of add more factors. what i worry about is the compromise of independence and burdens at least at the sec, i think we are discharging -- >> and i'm running out of time. but i just want to reiterate that, that we can all have good intentions. but sometimes we need a cop on the beat who is going to be reviewing the work. and so that is really what we're asking for in that legislation. and we'll continue to talk about what makes the independent agencies comfortable as we move forward. but i haven't given up on my challenge of making sure that there is some oversight that assists this body in terms of

oversight on independent agency regulations. so thank you very much for appearing and thank you for your work. if you haven't been thanked already as you know i'm greatly appreciative that you have stepped up and taken the chair. >> thank you very much. >> one last question, mr. chairman, first, one brief comment. i join the senator's plea to move on that with you, i think there is a huge majority of the country people paying attention. we need to do that, and so many members of this committee do. along with other members of both houses i sent you a letter in march asking you to consider rule-making pursuant to a petition that would enhance the board nominees. you were asked on the provisions and could you give this committee an idea on what you're doing?

>> yes, this is an example of an existing rule that we have that investors have basically indicated is not providing useful enough information on diversity. there is no difference on diversity, so those concerns resonate with me and i have had the division of corporate and finance to work on what the disclosures have been in the past, what they are now and how we might enhance that rule. so they have not completed that process but they're well into it. and i expect them to make a recommendation to me fairly soon. >> please keep me ap priprised the findings, thank you. >> we appreciate your appearance here today and look forward to some more. >> thank you, mr. chairman.

the house oversight committee will vote on whether to censure john