Two SEC commissioner nominees fielded questions from lawmakers Tuesday on a variety of issues, including Reg BI, private equity fund disclosures and digital currencies.
Commissioner Hester Peirce, a Republican who was renominated to another term in June, and Caroline Crenshaw, a Democrat who was nominated later in the same month, testified before the Senate Banking Committee in a hearing that indicated broad support for their nominations, though there were contentious moments.
While senators like Tom Cotton, R-Ark., urged quick approval of the nominees — perhaps by a voice vote — others were less supportive.
Chiefly, Sen. Elizabeth Warren, D-Mass., questioned the SEC nominees about requiring private equity funds to publicly disclose more information, adding, "investors and the broader public are left in the dark about risks in this industry."
While Ms. Crenshaw said additional disclosure would benefit the public, Ms. Peirce, who has served on the commission since January 2018, said the SEC should focus its attention elsewhere.
"The investors in private equity funds, to the extent that they share the concerns that you have, have a fair amount of leverage in terms of trying to get the disclosure they want, and so given the way the market is structured, I think it's less important for us to focus on private equity disclosures and more important to focus on the disclosures that are reaching typical retail investors," Ms. Peirce said.
Ms. Warren said she was not surprised to hear that answer from Ms. Peirce. "Nothing in your record suggests that you're willing to take on powerful interests to protect either investors or workers," Ms. Warren said. "That's why I think it would be a mistake to confirm you for another term."
If confirmed to a term that expires in June 2025, Ms. Peirce, a former senior research fellow at the Mercatus Center at George Mason University, where she was director of the financial markets working group, said she'd use the next five years to "unleash the power of our securities markets in order to brighten more children's futures, build more Americans' retirement nest eggs, transform more communities across the nation and rebuild an economy weakened by COVID."
Ms. Crenshaw, who if confirmed would serve as one of two Democrats on the five-member commission for a term expiring in June 2024, previously served as a staff member for former SEC commissioners Robert Jackson Jr. and Kara Stein. She is currently senior counsel at the SEC and a captain in the Army JAG Corps.
In her prepared remarks, Ms. Crenshaw said she'd like to ensure Americans saving for retirement get a "fair deal." She said the SEC should "provide clear, plain-English information and access to high-quality investment advice that allow individuals to distinguish between financial advisers on one hand and fraudsters on the other and to fund their retirements in safe and sustainable ways."
When Sen. Sherrod Brown, D-Ohio, the committee's ranking member, asked Ms. Crenshaw about the SEC's Reg BI package, which gets its name from its centerpiece best-interest standard and went into effect June 30, she said the SEC should with work with the office of compliance inspections and examinations and Financial Industry Regulatory Authority to drive successful compliance.
"That means working with the firms to make sure Form CRS is actually providing information that is useful to investors and that it's information they can understand, and it's also working with firms to make sure that their policies and procedures are appropriate to mitigate conflicts of interest, and to the degree they're not, we have to be willing to hold those firms accountable," Ms. Crenshaw said.
Part of the rule package, Form CRS necessitates that firms disclose to retail investors the nature and scope of their services, the types of fees customers would incur, the conflicts of interest faced by the firm and the firm's disciplinary history.
Sen. Mike Crapo, R-Idaho, the committee chairman, commended Ms. Peirce and her SEC colleagues for a "quick and decisive response to the current COVID-19 pandemic" and asked for her thoughts on the cryptocurrency landscape. As a big proponent of digital currencies, Ms. Peirce has garnered the nickname "crypto mom."
"Crypto is clearly going to be here to stay and I would like us to set up a regulatory framework that works well for crypto and I think that we have some of the structure in place to do that but we have a lot more work to do," Ms. Peirce said.
Though no timeline has been laid out, the next step in the nomination process is for the Senate Banking Committee to vote and, if approved, the nominations will head to the Senate floor.