Statement Summary
In a recent address at the SEC Speaks event, the speaker raised concerns regarding the SEC’s current trajectory, warning against the risks associated with rolling back regulations and diminishing investor protections amidst market volatility. Drawing a parallel to the game of Jenga, the speaker cautioned that the agency’s recent staff reductions, changes in enforcement practices, and rescinded rules could lead to an unstable financial environment, ultimately harming everyday investors and small businesses. Key issues highlighted include:
- A lack of rigorous scrutiny on emerging crypto markets
- Negligence of enforcement obligations
- An abandonment of essential regulatory frameworks
The speaker emphasized the need for caution and a commitment to the agency’s foundational role in maintaining market integrity, as the consequences of deregulation could echo the failures leading to the 2008 financial crisis.
Original Statement
Good afternoon. As you know, SEC Speaks is an opportunity for the agency, and specifically the SEC staff, to speak directly to practitioners in our space. This year’s SEC Speaks feels a bit different…
My remarks today offer a word of caution as the agency chips away at decades of our own work – and, at the same time, as we stare down alarming market volatility, emerging risks, and calls for deregulatory action in all corners of our markets.
As we careen down this path full speed, it almost feels like we’re playing a game of regulatory Jenga. Our proverbial Jenga tower is made up of a set of discrete but interrelated rules and laws, deeply and carefully developed over the years, and implemented by a strong agency of experts.
But how many blocks can you pull before the tower gives way?
When it comes to the stability of our markets, I worry that those losing the most won’t be the influential, monied interests; rather, it will be the Main Street Americans who can least afford the greatest loss.
Main Concerns
Consider some of the actions of the agency over the past weeks and months:
- We pushed out our staff. This has been the most devastating piece to go.
- We diluted or effectively rescinded laws without due consideration.
- We are failing to enforce laws that have been on the books for decades.
- We are ignoring significant risks in markets, particularly in crypto.
These actions could create confusion and disarray within the financial system. We have already experienced significant losses in the crypto sector, raising alarms about investor protections.
Cautionary Conclusions
This is a dangerous game. We are pulling apart our own regulatory foundation – block by block, case by case, and rule by rule.
The speaker warned that if we continue down this path, the carefully constructed regulatory framework could eventually collapse, harming small businesses and retail investors. The past failures of regulation, particularly leading to the 2008 financial crisis, serve as a warning to not repeat the same mistakes.
We must remember that tomorrow’s hindsight is today’s foresight. We cannot play games with the institutional integrity of the SEC and expect that we won’t ultimately lose.
