Statement Summary
The recent meeting of the Investor Advisory Committee, led by the SEC Chairman, emphasized the importance of foreign private issuers in U.S. capital markets. A focus was placed on updating the regulatory standards for these issuers to better align with modern market conditions and protect U.S. investors. The SEC is seeking public feedback on potential conditions for foreign firms listing in the U.S. The meeting also discussed enhancing retail investors’ access to private market assets, which have expanded significantly over the last two decades. The goal is to democratize investment opportunities while ensuring appropriate safeguards against risks. This aligns with the SEC’s commitment to reform its regulatory framework to reflect changes in the investment environment and meet the needs of retail investors.
Original Statement
Good morning, ladies and gentlemen. It is a pleasure for me to be with you in person for the first time as Chairman. I have long believed that the Investor Advisory Committee has an important mission to give considered input to the Commission. And I should like to thank you for your dedicated service—especially those of you for whom today marks your first meeting. We are excited by the perspectives that you will bring to the committee—and by the ways in which you will enhance the public dialogue on key issues facing investors.
Of course, I should also like to extend a warm welcome to today’s moderators and panelists, including two distinguished participants from the United Kingdom’s Financial Conduct Authority (FCA), Ashley Alder and Helen Boyd, whom we are very honored to have with us to discuss the evolving landscape of foreign private issuers (FPIs) in U.S. capital markets. Having just returned from the UK and Europe, where I had the chance to address this very topic, I can say how timely today’s panel truly is.
It is also very timely and fitting for the FCA to be represented here today in light of the long collaboration of our two countries in the financial markets. Both of our countries have vibrant capital markets, and I look forward to working with our UK counterparts to enhance our mutual cooperation and harmonization of regulatory approaches to promote innovation and economic growth.
As I stated last week in London and before the OECD in Paris, strong, sovereign nations like the United States must continue to engage constructively with the world in ways that promote our prosperity. And at the SEC, these priorities find expression in our work to attract foreign companies to U.S. markets and provide Americans with the opportunity to invest in those companies while ensuring that U.S. and foreign firms experience a level playing field.
In the early 1980s, the SEC developed the foundations of its current standard for which foreign companies qualify for special accommodations. These accommodations recognize the differences in business and market practices, accounting standards, and corporate governance requirements, among other matters, between U.S. and foreign companies.
Over the decades, the SEC has reassessed and reformed its standard as needed to address changes in the global markets and to protect U.S. investors. In one of my first actions as Chairman, I asked the Commission to approve the issuance of a concept release to gather public feedback on whether this standard should be updated to reflect the evolution in financial markets and corporate legal structures. The concept release solicits broad public feedback on whether foreign companies listed in the United States should be subject to additional conditions—such as a minimum foreign trading volume or listing on a major foreign exchange—for them to receive accommodations not available to U.S. companies.
Now, to be clear, the SEC welcomes foreign companies that seek to access the U.S. capital markets. I must emphasize that the concept release is not a signal that the SEC intends to disincentivize such firms from listing on U.S. exchanges. Rather, our goal is to better understand the impact on U.S. investors and the U.S. market resulting from significant changes to the population of foreign companies listed in the United States over the last two decades.
Among the notable changes are the makeup of foreign companies reporting to the SEC and the trend of incorporating in a jurisdiction, such as the Cayman Islands, that differs from where the company is headquartered, operates, and is subject to a governance framework that implicates shareholder interests. In light of these changes, I believe that it behooves us to consider whether the SEC’s original rationale and current standard for extending special accommodations to foreign companies still make sense.
Retrospective review of our rules to evaluate whether they continue to achieve their intended policy goals is one of the hallmarks of an effective regulatory agenda. And I look forward to reviewing the robust public feedback—and of course, the committee’s input—on this topic.
Today’s second panel, meanwhile, will explore the regulatory framework governing retail investors’ access to private market assets. To its core, I believe that this conversation is about freedom and fairness. It is about the idea that exposure to the full dynamism of our markets should not be reserved for the wealthiest or for those deemed to be the most sophisticated.
For context, from 2002 until very recently, the sale of closed-end funds investing 15 percent or more of their assets in private funds was limited to investors that satisfy the accredited investor standard. Consequently, for over twenty years, retail investors who were not accredited lacked the opportunity to gain exposure to private assets though such vehicles as private equity and hedge funds. Earlier this year, I directed the SEC staff to reconsider this position, and, as a result, funds will no longer receive comments to this effect during the registration process.
This change reflects the profound shifts that have taken place since 2002—including the accelerated growth of private markets, as well as the increased oversight and enhanced reporting by both private fund advisers and registered funds. In the last decade alone, private fund assets have almost tripled from $11.6 trillion to $30.9 trillion. Allowing this option could increase investment opportunities for retail investors seeking to diversify their investment allocation in line with their investment time horizon and risk tolerance.
In that spirit, I was therefore delighted by President Trump’s Executive Order to democratize access to alternative assets. The Commission is exploring ways to facilitate the ability of individual investors to participate in the private markets, while at the same time protecting those investors from bad actors and fraud.
There is investor demand for these products. But, we also must have appropriate guardrails to guide proper investment of retirement and other funds into these private vehicles. We must address the important issues and potential pitfalls inherent to this genre of investments, including liquidity, valuation, diversification, and strategy, terms, and conditions of investment such as investment priority and relative investment seniority in the capital stack. These sorts of questions cannot be left to chance, and fiduciaries who have a long-term retail clientele must understand their duties and investor expectations.
As the Commission works closely with the Department of Labor on implementing the Executive Order, I very much welcome today’s discussion on recalibrating the existing regulatory framework and working on these fundamental, practical issues.
Before I close, I am grateful once again to all of our committee members, moderators, and panelists. Thanks also to our Investor Advocate, Cristina Martin Firvida, and her staff for their diligent efforts in organizing today’s meeting. Your contributions help to ensure that our work remains both rigorous and responsive to the interests of investors. I convey and share in the agency’s appreciation for your service.
Thank you, and please accept my best wishes for a productive meeting.
These remarks reflect my individual views as Chairman of the Commission and do not necessarily reflect the views of the Commission or my fellow Commissioners.
