House Financial Services Committee members on Tuesday questioned the SEC on everything from shareholder engagement and proxy advisers to corporate stock buybacks and climate risk disclosure.
It was the SEC's first time testifying before Congress since 2007 as a full five-member commission.
Committee Chairwoman Maxine Waters, D-Calif., started the hearing by criticizing the SEC for "not fulfilling its mission as Wall Street's cop" by revising the Volcker rule on proprietary trading by banks; not finalizing rules on executive compensation and other Dodd-Frank Wall Street Reform and Consumer Protection Act reforms; and issuing a controversial Regulation Best Interest. Ms. Waters also raised concerns about Facebook's plan to create a digital currency, Libra, and digital wallet, Calibra.
One issue bothering SEC Chairman Jay Clayton "is that more capital is raised in private markets," which are now double the size of public markets, according to a committee memo. Mr. Clayton told committee members that he is discussing ways to address that with SEC examination officials, including the proper level of oversight of private equity, particularly investments by public pension funds.
Ms. Waters said securities laws were not preventing corporate executives from "taking advantage" of the four-day gap that allows companies to trade before disclosing significant events to the SEC. Legislation to close the 8-K trading gap was unanimously approved by the committee Sept. 20 and recently introduced in the Senate by Sen. Chris Van Hollen, D-Md. SEC Commissioner Robert J. Jackson Jr. told the panel that he has called for an open concept release on revisiting stock buyback rules, which have not been reviewed in more than a decade.
Mr. Jackson also told the committee that "SEC rules should not incentivize buybacks that allow insiders to cash out but don't make long-run sense for shareholders," and said the SEC should give investors more transparency into how public companies spend money on political activity.
On the subject of proxy advisers and shareholder engagement, Mr. Clayton said the SEC's "proxy plumbing" is not where it should be. "We really haven't looked at the calibration around the shareholder engagement process," he said, while Commissioner Elad L. Roisman added that guidance issued in August is "an important first step."
Asked where he stands on significantly raising the stockholder threshold for introducing shareholder resolutions for proxy voting, known as Rule 14-a-8, Mr. Clayton said, "My ideal world allows access for people who are long-term investors in the company and have a meaningful stake."
