The mission of the SEC is both straightforward and broad: To protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Though none of these objectives exists in isolation-and indeed, they interact and reinforce each other-today I thought I would focus on our primary mission of protecting investors. Specifically, I would like to discuss the role of economic analysis in furthering the Commission’s mission to protect investors and how the public can help the Commission craft regulations that effectively accomplish that goal.

Economic Analysis in Support of Commission Rulemaking

The Division of Risk, Strategy, and Financial Innovation (or “RSFI”) supports the Commission in a variety of ways, but the one that perhaps most directly impacts the investing public is the Division’s role in providing economic analysis in support of Commission rulemaking. And I believe that the economic analysis provided by RSFI is one of the essential elements of how the Commission works to fulfill its mission to protect investors.

…continue reading: Investor Protection Through Economic Analysis

The staff of the U.S. Securities and Exchange Commission (“Commission” or “SEC”) is planning to hold an SRO Outreach Conference (the “Conference”) this month. In anticipation of the Conference, I would like to address the challenges faced by self-regulatory organizations (“SROs”) as a result of the significant changes that the securities markets have undergone in the last decade, and the need for robust Commission oversight of SRO activities to enhance investor protection, maintain fair, orderly, and efficient markets, and facilitate capital formation.

The roles of SROs have a long tradition in our securities markets. As a practitioner in the securities industry for over 30 years, I’ve interacted with SROs as a member of the private sector as well as a Commissioner. I fully appreciate their role in the regulation of our marketplace by setting standards, conducting examinations, and enforcing rules among their members.

…continue reading: The Need for Robust SEC Oversight of SROs

This Annual Conference is an important opportunity for representatives of NASAA and the SEC to come together to discuss how best to accomplish our common goal of protecting investors. These annual conferences provide an opportunity to increase collaboration, communication, and cooperation for the benefit of investors, and to promote fair and orderly markets. I have been honored to have served as the SEC’s liaison to NASAA for the past four years. I know and appreciate NASAA’s mission of protecting main street investors and the critical role that state securities regulators play in the enforcement of the securities laws. You are often the first to receive complaints from investors and identify the latest scams devised to steal from investors.

I want to take this opportunity to highlight some of the recent achievements of NASAA’s members. According to the latest statistics, as of October 2012:

…continue reading: Fighting on Behalf of Investors Despite Efforts to Weaken Protections

What I’d like to talk about this evening is something that isn’t always recognized in day-to-day discussion of business and government and their interaction. That is, the importance of the public sector and those who work in the public sector, like my many dedicated colleagues, to the health of our markets and to a flourishing economy.

Of course, the regulations we write at the SEC, the examinations we conduct, and the enforcement actions we bring demand time and resources that businesses would rather spend on other things. But, the truth is that the SEC wants the investing public and the businesses in which they invest their hard-earned money to succeed.

That is why the SEC was created in 1934 as part of the effort to lift the American economy out of the rubble of the Great Depression. Since then, we have worked for nearly 80 years to make our capital markets the strongest and most vibrant in the world. And we understand that economic growth on a national level is the product of millions of individual financial achievements, so a great deal of our work is focused on facilitating your success:

…continue reading: Financial Literacy, Investor Protection, and Public Service at the SEC

As many of you know, I am now in my second term as an SEC Commissioner and this is my fifth time participating at SEC Speaks. During that time, I have served with three different SEC Chairmen, and a fourth is now in the works. It has been, and continues to be, a great privilege to serve at a time during which the SEC’s role as the capital markets regulator has never been more important. However, I must admit being frustrated that we haven’t done more to protect investors.

Clearly, my tenure as a Commissioner has been dramatically impacted by the financial crisis and the pressing need to address the many failings that were brought to light by that crisis. Throughout my tenure, I have worked to be a strong advocate for fulfilling the Commission’s mission to protect investors, facilitate capital formation, and promote a fair and orderly market. To that end, I want to talk to you today about the need to protect investors through robust and effective market oversight.

I am growing increasingly concerned about the stability of our market structure as we lurch from one crisis to another, be it the flash crash or the Knight trading fiasco. Today, I plan to focus on the dangers that investors face from a trading market structure that has shown too many signs of weakness and instability.

…continue reading: Addressing Market Instability through Informed and Smart Regulation

I would like to talk about capital formation and the critical role that accountants play in that process. I want to particularly focus on capital formation from the investor’s perspective. Too often, the investor perspective is lost in the discussion over capital formation. The companies, lawyers, and investment bankers that often dominate this discussion often see regulation only as an obstacle to be overcome. They focus the discussion on how to raise money quicker and more cheaply — but seem to forget that the money raised comes from the pockets of hard-working Americans. The capital raising process should not make investors more vulnerable, and attempts to raise money quicker and more cheaply should not come at the investor’s expense. I want to put the focus on investors and examine how protecting investors facilitates capital formation by enhancing confidence, promoting integrity, and fostering transparency.

…continue reading: Capital Formation from the Investor’s Perspective

I am here to talk about the regulatory initiatives of the Public Company Accounting Oversight Board. The PCAOB is deeply engaged in examining ways to enhance the relevance, credibility and transparency of the audit to better serve investors.

The auditing profession has developed a highly skilled body of experts capable of analyzing accounts in a way that draws out truths and insights and sheds light on confused or misleading claims. It plays an indispensable role in making our capital markets fair and strong.

But I believe we are in a high risk period that merits more attention to the audit, not less. When companies make lay-offs, as we’ve seen recently, they often affect the internal audit and compliance staff — the first line of defense for fraud and other corporate malfeasance. This should be a concern to the legal community.

Although we have never needed it more, the audit too has, in the minds of some, become a commodity to be contained with other compliance costs.

In the United States, large audit firms’ revenues from consulting are growing 15 percent a year. Audit fees have stagnated at, basically, the inflation rate. Thus audit practices have shrunk in comparison to audit firms’ other client service lines.

This can weaken the strength of the audit practice in the firm overall. The problem is compounded when audit firms turn their talents to other endeavors that may further damage public views on the relevance and value of audit.

To be relevant, the auditor must speak to and for investors. Fair or not, that is in question today.

…continue reading: PCAOB Regulatory Initiatives

Small business is a powerful engine for economic growth. Independent businesses with fewer than 500 employees account for half of all private sector jobs and more than half of nonfarm private GDP. [1] Growth in small business helps fuel the U.S. economy, generating opportunity, competition, and demand. Small businesses are essential to sustaining a strong economy, strong communities, and a strong middle class.

Today’s Forum reflects the Commission’s continuing interest in capital formation issues for small businesses. Indeed, the Commission has had a long-term focus on small business, and has utilized multiple avenues to regularly and consistently seek input from small business stakeholders. For example:

…continue reading: Effective Small Business Capital Formation

Since the late 1990s, a “law and finance” literature emphasizing quantitative comparative research on the relationship between national legal institutions on the one hand and corporate governance and financial systems on the other has achieved academic prominence. An important tenet of the law and finance literature is that corporate law “matters” in the sense it does much to explain how durable and robust equities markets develop. While “law and finance” has an important forward-looking normative message, namely that countries must enact suitable laws to reach their full economic potential, the thesis that corporate law influences stock market development seems to be well-suited to offer insights into if, when and how a country develops a corporate economy widely held companies dominate. Law and finance thinking implies that this should not occur in the absence of corporate law providing significant stockholder protection. In Questioning “Law and Finance”: U.S. Stock Market Development, 1930-70, recently published on SSRN, we draw upon events occurring in the United States to cast doubt on this logic.

…continue reading: Questioning ‘Law and Finance’: US Stock Market Development, 1930-70

So, here we are in California — in beautiful San Francisco. For better and for worse, California municipal finance is national news.

As an SEC Commissioner, my job in general doesn’t get me involved in the specifics of the individual municipal finance debates covered in today’s news — at least not in my official capacity.

My job is to protect investors in the roughly $4 trillion municipal securities market, maintain fair, orderly and efficient markets, and facilitate capital formation.

And, as a member of the Commission that serves the public as the investor’s advocate, I want to remind everyone that, without the trust and willingness of investors, projects that are critical to our country’s infrastructure could suffer. These include vital projects such as water, schools, roads, hospitals, and many others.

I’d like to talk about the importance of better protection for muni investors and how the Commission under Chairman Schapiro’s leadership is enhancing investor protection. I’ll also share my personal observations on the “what now” question that follows the issuance of our recent Report on the Municipal Securities Market.

As I walk through this, I want to make it clear that your support in these efforts is critical — that whatever we do, it will be done better if we have your input and support.

…continue reading: Enhancing Disclosure in the Municipal Securities Market: What Now?