Investors benefit from timely and accurate disclosures, and large institutions should be prepared to make such disclosures in the event of a major change or crisis, according to Securities and Exchange Commission Chair Gary Gensler.
“Reliable, comparable accessible data benefits everyone,” Gensler said Sept. 10 during a speech before the Peterson Institute for International Economics. “No one private entity, though, has the incentive to create reliable, comparable and accessible data, even if they themselves might benefit. … It’s not in the incentive system. Thus, such data is a public good.”
Gensler later said he wanted to give a speech about disclosure when the markets were calm to urge institutions to prepare for more turbulent events.
“The time to best prepare for that disclosure is when there isn’t a tornado,” he said.
As a hypothetical, Gensler said if a large financial institution is restructured, the market’s need for disclosure doesn’t go away. “In fact, I believe the market’s need for robust disclosure goes up; it’s even more critical,” he added. “I think disclosure is the best way to ensure that investors, counterparties and depositors will have sufficient confidence to remain with the firm.”
Following the speech, Roger W. Ferguson Jr., PIIE board member and immediate past president and CEO of TIAA-CREF, told Gensler that private firms are hesitant to disclose more information than required in times of upheaval.
“During those moments … of maximum uncertainty limits the ability to say things that are very concrete and may in fact open you up to second guessing,” Ferguson said.
Gensler responded that while it’s important for firms to not mislead the public in disclosures, “That doesn’t leave you the luxury of saying nothing.”
