Oversight of the Securities and Exchange Commission (EventID=116403)

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On Wednesday, September 27, 2023, at 10:00 a.m. (ET) full Committee Chairman McHenry and Ranking Member Waters will host a hearing entitled, “Oversight of the Securities and Exchange Commission."

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Witness for this one-panel hearing will be:

• The Honorable Gary Gensler, Chairman, Securities and Exchange Commission


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Background

During the peak of the Great Depression, Congress passed the Securities Act of 1933 (“Securities Act”) and the Securities and Exchange Act of 1934 (“Exchange Act”), which created the Securities and Exchange Commission (“SEC”). The SEC’s mission is to: (1) protect investors; (2) maintain fair, orderly, and efficient markets; and (3) facilitate capital formation. The SEC oversees more than 30,000 registered entities, including investment advisers, mutual funds and exchange traded funds, broker-dealers, national securities exchanges, credit rating agencies, clearing agencies, the Public Company Accounting Oversight Board, the Financial Industry Regulatory Authority, the Municipal Securities Rulemaking Board, the Securities Investor Protection Corporation, and the Financial Accounting Standards Board. The SEC oversees over $125 trillion in securities trading annually. Additionally, it reviews the disclosures of approximately 8,700 reporting companies.

This hearing will examine the regulatory developments, rulemakings, and activities that the SEC has undertaken in the period since October 5, 2021. Examples of the types of regulatory and policy developments that may be examined are noted below.

Staff Accounting Bulletin 121

On March 24, 2022, SEC staff issued Staff Accounting Bulletin No. 121, requiring a reporting entity that performs digital asset custodial activities, whether directly or through an agent acting on its behalf, to record a liability with a corresponding asset.

Amendments Regarding the Definition of Exchange

On March 18, 2022, the SEC proposed a rulemaking to modify the definition of “exchange” to include “communication protocol systems,” which would expand the SEC’s authority over digital asset trading platforms.

Safeguarding Advisory Client Assets

On February 15, 2023, the SEC proposed changes to require SEC-registered investment advisers to put all their clients’ assets, including all digital assets like Bitcoin, with “qualified custodians. The proposal would also require a written agreement between custodians and advisers, expand the “surprise examination” requirements, and enhance recordkeeping rules.

Climate-Related Disclosures

On March 21, 2022, the SEC proposed a 500-page climate disclosure rule that would require publicly traded firms to disclose detailed emissions data and climate risk management strategies. Among other details, the rule would also mandate certain publicly traded firms to disclose direct and indirect greenhouse gas emissions emanating from their supply chains.

Cybersecurity Disclosure

On July 26, 2023, the SEC adopted final rules requiring expansive new disclosures by public companies regarding cybersecurity matters.7 The final rules include an amendment to Form 8-K that mandates issuers to publicly disclose a cybersecurity incident within four business days following the company’s determination that the incident is material. The final rules also include a series of new disclosure obligations regarding risk management and governance, including a company’s policies and procedures for identifying and managing cybersecurity risks and the board members’ cybersecurity expertise.

Amendments to Rule 14a-8

On July 13, 2022, the SEC proposed amendments to Rule 14a-8 under the Exchange Act. Rule 14a-8 governs shareholder proposals included in a company’s proxy statement to be presented for a shareholder vote. The proposed amendments would amend several of the bases on which a company may rely to exclude a shareholder proposal from its proxy statement, meaningfully altering the rate at which these requests are granted and reducing options for a company to exclude a shareholder proposal from its proxy statement.

Equity Market Structure

On December 14, 2022, the SEC released four proposals that would overhaul the regulations governing equity markets. These proposals make sweeping changes to how national market system stock orders are priced, executed, and reported, and cumulatively span more than 1,600 pages.

Further Define “As a Part of a Regular Business” in the Definition of Dealer and Government Securities Dealer

On March 28, 2022, the SEC proposed two rules...

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Hearing page: https://tinyurl.com/yjyvpuvf