“The commission should think about each rule proposal as an opportunity to foster a public discussion with the goal of developing the best solution to a carefully identified problem, not as the opening bid in a hard-driving negotiating strategy (with the public),” said Peirce, who serves as one of two Republicans on the commission.
In addition, the SEC sometimes fails to identify what problem it aims to solve with a proposed rule, “so that makes it really hard to comment and offer more workable alternatives,” Peirce added.
She specifically referenced the predictive data analytics rule proposal as an example in which industry groups have questioned what issue the SEC is trying to address. That rule, which has faced both industry and congressional pushback, would require investment advisers and broker-dealers to “eliminate or neutralize” conflicts of interest that arise from the use of certain technology in investor interactions.
Aside from the commission’s rule-making, Peirce said that SEC staff also lacks genuine, productive conversations with the industry it regulates.
“When individuals and entities come to the SEC with their novel ideas, their feedback, their concerns, their objections, their questions about implementation of a new rule or application of an old one to new circumstances, too often they’re met with crickets,” she said, mostly blaming the “culture” at the SEC for discouraging discussion with the public.
“We're scaring people off from coming to talk to us,” Peirce added, citing the SEC’s recent enforcement actions against cryptocurrency firms.
Peirce listed a number of recommendations for the commission to improve, namely paring back its rule-making and focusing on the rules that are most important, which would “(enable the SEC) and the public to devote the appropriate attention to each proposal.”
Speaking at the conference via video conference, SEC Chair Gary Gensler said in separate remarks that the SEC is constantly updating “the rules of the road” for the industry, naming a number of recent rules as examples.
One rule he referenced, finalized in February 2023, will accelerate the settlement cycle to T+1, settling a trade one business day after it is executed, shortening it from T+2, or two business days. That change takes effect on May 28 this year, or the Tuesday after Memorial Day.
“We're aligning stocks, municipal bonds, corporate bonds, mortgages to that which we have in mutual funds, derivatives and treasuries,” Gensler said, noting the latter group largely settles in one day.
