SEC Chair Clayton Lays Out 2019 Regulatory Priorities

SEC staff has been "carefully reviewing" information culled from reports, investor testing and roundtables as well as the more than 6,000 comment letters "as they work diligently to develop final recommendations."

The proxy "plumbing" is broken, panelists at a recent SEC roundtable confirmed. The system "needs a major overhaul," relayed Clayton, while he encouraged market participants "to explore what such an overhaul would entail and to consider how technology, including distributed ledger technology, could improve the proxy plumbing."

For proxy advisory firms, Clayton said he believes there's "growing agreement that some changes are warranted." For instance, "there should be greater clarity regarding the division of labor, responsibility and authority between proxy advisors and the investment advisors they serve."

As in 2018, distributed ledger technology, digital assets and ICOs will occupy a "significant" amount of the SEC's time. Clayton's take: ICOs "can be effective ways for entrepreneurs and others to raise capital," but 'the novel technological nature of an ICO does not change the fundamental point that, when a security is being offered," securities laws must be followed.

As the agency's new Strategic Hub for Innovation and Financial Technology (FinHub) shows, the SEC's "door remains open to those who seek to innovate and raise capital in accordance with the law," he said.

Transitioning away from Libor as a benchmark reference for short-term interest rates will likely happen after 2021. "It's likely that banks currently reporting information used to set Libor will stop doing so after 2021, when their commitment to reporting information ends," Clayton said.

Cybersecurity will continue as a priority in exams of broker-dealers and investment advisors, Clayton said, with the agency's Cyber Unit dedicated to targeting cyber-related misconduct and assessing potential violations like "intrusions into retail brokerage accounts, the submission of false regulatory filings and hacking to obtain material nonpublic information."

As to capital formation and investment opportunities, SEC staff is gearing up to solicit input via a concept release on whether the SEC's "accredited investor definition — a principal regulatory threshold for participation in private offerings — is appropriately tailored to address both investment opportunity and investor protection concerns," stated the SEC chief.