MIL-OSI USA: Prepared Remarks Before the 30th International Institute on Securities Market Growth and Development

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Source: Securities and Exchange Commission

Washington D.C.

Thank you, YJ, for that kind introduction.

As is customary, I’d like to note that my views are my own as Chair of the Securities and Exchange Commission, and I am not speaking on behalf of my fellow Commissioners or the staff.

I’d like to welcome you—the nearly 120 members of the “Class of 2024” attending the SEC’s International Institute on Securities Market Growth and Development.

Traveling from approximately 70 different countries and territories, and spending the next week and a half here, is a big commitment on your part.

You’re investing in your own human capital, taking time out of your busy lives, and learning about our securities markets, U.S. securities laws, and the SEC.

You’re also investing in your nation’s capital by learning about how to promote your capital markets to the best they can be.

This is the 30th International Institute. It’s also the 90th anniversary of this agency’s formation. One of the SEC’s founding principles is what President Roosevelt called “complete and truthful disclosure.”

In the spirit of disclosure, I will share that the SEC has a direct interest in sharing our expertise and experience with each of you.

First, robust regulatory frameworks across the globe limits opportunities for fraudsters to harm U.S. investors when investing overseas. It also limits opportunities for regulatory arbitrage.

Second, meeting the highest standards for international cooperation will ensure that you have the legal authority and tools to assist us on regulatory, enforcement, and supervisory matters, when needed.

History of the Institute

This program has its roots in post-World War II. President Truman envisioned a coordinated U.S. effort to assist its allies around the world and help them develop their own market-based economies.[1]

Then, just months before the Berlin Wall collapsed in 1989, SEC Chair Richard Breeden created the Office of International Affairs.

He crafted a global strategy to assist other countries in developing their capital markets, which began this very program. It’s a great example of how this agency has continually responded to the unique challenges of the times.

Let me now turn to say a bit about our capital markets, our securities laws, and who we are as an agency.

Capital markets

First, the U.S. has the deepest, most liquid capital markets in the world. At over $110 trillion, we’re over 40 percent of the world’s capital markets, though we’re only roughly 24 percent of the world’s economy.[2]

Second, the U.S. capital markets benefit from significant engagement from everyday investors. Over half of American households, representing more than 115 million individual investors, own registered funds.[3]

About 58 percent of U.S. households own stocks, up from 52 percent in 2016.[4]

Third, the U.S. has long benefitted from robust competition between nonbanks and banks. In fact, each of the registered funds and private funds sectors surpasses the size of the banking sector. Further, U.S. debt capital markets facilitate 75 percent of debt financing of non-financial corporations. In Europe, the U.K., and Asia, only 12-29 percent is raised in capital markets.[5]

Today, registered investment advisers advise 57 million clients with respect to $129 trillion in assets. Roughly speaking, that breaks down to advising on more than $32 trillion in registered funds, $30 trillion in private funds, and nearly $50 trillion in separately managed accounts.[6]

Let me put this in context. The entire U.S. banking system is $23 trillion.[7] Thus, the capital markets are nearly five times the size of our banking sector. Each of these sectors, in and of themselves, are larger than our banking sector.

Fourth, we also have robust competition between both public and private markets. Our public markets have approximately 7,400 actively reporting issuers, of which more than 4,000 companies listed on U.S. exchanges.

With the privileges of dollar and capital markets dominance also comes real responsibilities and challenges. Given how integrated our capital markets are into the world’s capital markets, events in our capital markets can flow into others—and, events in yours can flow into ours.

We’ve seen this time and again. For instance, in the 2008 mortgage crisis, we exported instability to the rest of the world, which then had further reverberations back into the United States.

In terms of challenges, foremost of course is that nothing stands still. The economies, rule of law, and capital markets of other countries will continue to evolve and compete for leadership.

Technology and business models continue to change. Further, nation states, including the United States, can be prone to policy mistakes.

Our securities laws

Our securities laws play a crucial role behind our success. After the 1929 market crash, President Roosevelt signed the first of the federal securities laws in 1933. He followed a year later with the passage of the Securities Exchange Act—making June 6, 1934, our birthday at the SEC.[8]

Roosevelt went on to work with Congress to enact five more securities laws, ending with the Investment Company Act and Investment Advisers Act of 1940.

Taken together, they formed the foundation of our capital markets. These laws were about protecting the investing public by ensuring they had what Roosevelt called, “complete and truthful disclosure.”

The SEC was created to ensure that the markets worked free of fraud and manipulation—and that investment advisers carried their duties to the clients they advised. 

Our laws have been updated over the years in response to changes in technology, markets, business models, and, from time to time, inevitable turmoil in the markets.

At its core, the SEC has a three-part mission: protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.

Who we are as an agency

That brings me back to who we, the SEC, are as an agency and as a Commission.

Our responsibility is vast. We oversee approximately 40,000 entities—including more than 13,000 registered funds, more than 15,400 investment advisers, more than 3,400 broker-dealers, 24 national securities exchanges, 103 alternative trading systems, 10 credit rating agencies, 33 self-regulatory organizations, and six active registered clearing agencies, among other entities.

We’re led by a five-member Commission appointed by the President—which, by law, requires that no more than three Commissioners can be from his or her party.

The SEC has nearly 5,000 staff here in Washington and in regional offices across the nation. Many may think of us as the largest group of securities lawyers in the world, with over 2,000 lawyers at the agency—but we do a lot more. Our work is organized across 6 main divisions and 25 offices.[9]

The Divisions of Enforcement and Examinations account for about half of the SEC’s staff. Without examination of compliance with and enforcement of our rules and laws, we can’t instill the trust necessary for our markets to thrive.

Last year, we filed 784 enforcement actions and conducted approximately 3,000 examinations.[10] Stamping out fraud, manipulation, and abuse lowers risk in the system. It protects investors and reduces the cost of capital. The whole economy benefits from that.

Think about a football match without referees. It would quickly break down—it would start to look like rugby, and get worse from there.

Next, we have three programmatic divisions.

The Division of Corporation Finance oversees the disclosures of public companies so that investors can make informed investment decisions. 

The Division of Investment Management oversees the funds and advisers that steward nest eggs for millions of American investors.

The Division of Trading and Markets serves on the front line for maintaining fair, orderly, and efficient markets. Market monitoring and supervision are essential parts of the Division’s activity—especially during times of market stress.

Intertwined in everything we do is the Division of Economic and Risk Analysis, which supports the Commission in every role, whether it’s enforcement or examinations, monitoring the markets, or rulemaking.

As I said, we also have 25 other offices that contribute to our mission every day.

Closing

Finance knows no geographical boundaries. With a tap of a smart phone, money and risk can move across the globe in less than a second.

That’s what makes it so important to foster international dialogue and coordination regarding global capital markets.

It’s also why, with appropriate safeguards around confidentiality, that we’ve come to collaborate on information sharing around our examination and enforcement efforts.

In the coming days, you’ll hear from SEC staff about securities regulation, including building strong disclosure, examination, and enforcement programs.

They also will share lessons learned on oversight, creating an effective secondary market for securities, capital formation, and international cooperation.

Finally, they will cover new and emerging issues in data analytics, fintech, cybersecurity, and artificial intelligence.

Keep in mind that you all play an important role in our international capital markets. You were hand-selected by your agencies to represent your nations.

I encourage you to invest in the human capital in this room. Look around—there are likely future finance ministers and world leaders amongst you. Some of the alumni of this Institute have gone on to become Chairs of securities regulators and Ministers of Finance. Some have taken on leadership roles at the highest levels of their governments.

Finally, beyond all the technical skills and networking you take home with you, I hope you also remember the words of President Roosevelt’s advisor, Felix Frankfurter, who would go on to be an Associate Justice of the U.S. Supreme Court.

90 years ago, when Roosevelt was first setting up the SEC, Frankfurter wrote: “You need administrators who have stamina and do not weary of the fight, who are moved neither by blandishments nor fears, who in a word, unite public zeal with unusual capacity.”[11]

I hope we can all answer Frankfurter’s call. Thank you.


[6] See Form ADV instruction 5.b. for further information on the calculation of RAUM. Because of the way that RAUM is calculated under this instruction, assets of securities portfolios reflected may be counted more than once (e.g., fund of funds, sub-advised portfolios, etc.).

[9] See Securities and Exchange Commission, “U.S. Securities and Exchange Commission Organizational Chart – Text Version” (Modified January 2023), available at https://www.sec.gov/sec-orgtext.

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