[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]




 
                EXAMINING THE SEC'S AGENDA, OPERATIONS,


                  AND FISCAL YEAR 2018 BUDGET REQUEST

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           NOVEMBER 15, 2016

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 114-110
                           
                           
                           
                           
                           
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking 
    Vice Chairman                        Member
PETER T. KING, New York              CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
SCOTT GARRETT, New Jersey            GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas              MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico            RUBEN HINOJOSA, Texas
BILL POSEY, Florida                  WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK,              STEPHEN F. LYNCH, Massachusetts
    Pennsylvania                     DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia        AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri         EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan              GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin             KEITH ELLISON, Minnesota
ROBERT HURT, Virginia                ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio                  JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee       JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana          TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina        BILL FOSTER, Illinois
RANDY HULTGREN, Illinois             DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida              PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri                 KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania       DENNY HECK, Washington
LUKE MESSER, Indiana                 JUAN VARGAS, California
DAVID SCHWEIKERT, Arizona
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas
TOM EMMER, Minnesota

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
                    
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    November 15, 2016............................................     1
Appendix:
    November 15, 2016............................................    53

                               WITNESSES
                       Tuesday, November 15, 2016

White, Hon. Mary Jo, Chair, U.S. Securities and Exchange 
  Commission.....................................................     6

                                APPENDIX

Prepared statements:
    White, Hon. Mary Jo..........................................    54

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written statement of the National Association of REALTORS...    89
    Article from The Washington Post entitled, ``Trump: A True 
      Story,'' dated August 10, 2016.............................    93


                      EXAMINING THE SEC'S AGENDA,



                    OPERATIONS, AND FISCAL YEAR 2018



                             BUDGET REQUEST

                              ----------                              


                       Tuesday, November 15, 2016

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:06 a.m., in 
room 2128, Rayburn House Office Building, Hon. Jeb Hensarling 
[chairman of the committee] presiding.
    Members present: Representatives Hensarling, Royce, Lucas, 
Garrett, Neugebauer, McHenry, Pearce, Posey, Luetkemeyer, 
Huizenga, Duffy, Mulvaney, Hultgren, Ross, Pittenger, Wagner, 
Barr, Rothfus, Messer, Schweikert, Tipton, Poliquin, Love, 
Hill, Emmer; Waters, Maloney, Velazquez, Sherman, Meeks, Clay, 
Lynch, Scott, Green, Moore, Himes, Kildee, and Sinema.
    Chairman Hensarling. The Financial Services Committee will 
come to order. Without objection, the Chair is authorized to 
declare a recess of the committee at any time.
    Today's hearing is entitled, ``Examining the SEC's Agenda, 
Operations, and Fiscal Year 2018 Budget Request.'' I now 
recognize myself for 3 minutes to give an opening statement, 
but I warn everybody I am going to take a lot longer because 
there is unanticipated news.
    First, before proceeding to the purpose of this hearing, I 
do want to note for all my colleagues that as we begin this 
hearing today, in room B318 of this very building, the Rayburn 
building, our friend, our colleague, that great American hero 
and patriot Sam Johnson, is being honored by having that very 
room, B318, named after him.
    I think we all know that he is a decorated war hero who 
served his Nation with great courage, and great valor in Korea 
and in Vietnam, and he spent 7 years enduring torture in the 
infamous Hanoi Hilton.
    But we also know him to be one of the kindest, most gentle 
souls in this institution, and he has many distinguished 
accomplishments for the people of his district and from his 
position on the Ways and Means Committee. I personally look 
forward to visiting the Sam Johnson Room soon, and I hope all 
my colleagues look forward to that, as well.
    This morning, we welcome Securities and Exchange Commission 
Chair Mary Jo White. And I will take a little longer due to 
news that we received last evening that the Chair intends to 
step down at the end of the Obama Administration. I do wish to 
acknowledge all that Chair White has now completed over 2 
decades of distinguished public service as a U.S. Attorney, and 
as Chair of the Securities and Exchange Commission. She has 
brought an incredible amount of professionalism to her 
position.
    She is known for her independent judgment, which is greatly 
admired and respected. I also want to personally thank her for 
being one of the witnesses, one of the few witnesses from the 
Administration who has never requested an artificial time limit 
on her attendance at a hearing. She has always made herself 
available to this committee, and she has always made herself 
available to all subcommittees. She has, indeed, epitomized 
what it means to be an accountable agency to Article I of the 
Constitution, and she is to be commended for that.
    Also, she has always, always submitted her testimony on a 
timely basis. If there were cash and valuable prizes we could 
award you, Madam Chair, for such an accomplishment, we would, 
but I am sure we would breach a number of ethical and legal 
considerations by doing so.
    She has always made her division and office directors 
available here, and also at the Capital Markets Subcommittee 
hearings. And again, the accountability and transparency that 
she has brought to this office is greatly, greatly admired. But 
just in case you are lulled into a false sense of security, 
Madam Chair, we still have some concerns and we still have some 
disagreements.
    So it has been almost a year since your last appearance 
here, and there are many subjects we are eager to discuss. 
Chief among them are the SEC's ongoing failure to develop a 
capital formation agenda. Notwithstanding two very minor rule 
changes approved last month, the SEC has done little to promote 
capital formation since Congress passed the JOBS Act in 2012. 
The failure by the SEC stems in part from the Commission's 
refusal to act on recommendations made by its Small Business 
Capital Formation Forum.
    I encourage the SEC to review these recommendations and act 
on those that will help small businesses to access the capital 
markets so they can improve, grow, and provide economic 
opportunities for all American workers.
    Also languishing at the SEC is a directive passed by 
Congress requiring the SEC to simplify its disclosure regime. 
The FAST Act that became law nearly a year ago requires the SEC 
to eliminate or reduce burdensome, duplicative, or outdated 
disclosures.
    Chair White, I also know that you are under enormous 
pressure from those who are intent on politicizing the SEC's 
disclosure regime. But you have an obligation to follow the law 
and not appease extremists whose ideological objectives have 
nothing to do with the SEC's core mission.
    In addition, the SEC's failure to require the electronic 
delivery of mutual fund documents is disappointing. How can the 
SEC force public companies to engage in social, environmental 
or sustainability disclosures while simultaneously promoting 
the wasteful use of paper, the cost of which is ultimately 
borne by investors? It is time for the SEC to move into the 
21st Century and allow for the e-delivery of mutual fund 
documents.
    Finally, we need to discuss the SEC's budget request. As I 
look at the disturbing national debt clock before me and to my 
side, I see no need for the SEC to receive a prefunded escrow 
account of more than $290 million for a potential move of its 
headquarters. The SEC will have to increase its fees to prefund 
the move, which is nothing less than a tax on capital 
formation.
    Furthermore, the claims that the SEC is underfunded are not 
supported by the facts, since the SEC's budget has increased by 
a whopping 325 percent since the year 2000, an increase that 
the American people do not enjoy. However, the SEC's current 
budget of $1.6 billion does not account for the money in its 
reserve fund, which can include up to $100 million, plus 
another $25 million in unused funds that carry over from the 
previous fiscal year.
    Finally, Chair White--and this is most important--whenever 
there is a transfer of power from one Presidential 
Administration to another, there is a temptation for Federal 
agencies to rush pending rulemakings to completion as a way of 
submitting the policy priorities of the outgoing 
Administration.
    But this type of midnight rulemaking is neither conducive 
to sound policy nor consistent with principles of democratic 
accountability. As there are currently two vacancies at the 
Commission, absent an emergency, given your current reputation 
and legacy, I would strongly urge you to respect the results of 
last week's election and resist the temptation to finalize any 
regulations, including Dodd-Frank Title VII regulations, in 
deference to the right of the incoming Administration to set 
its own priorities upon taking office in January.
    I now yield 5 minutes to the ranking member.
    Ms. Waters. Thank you very much, Mr. Chairman.
    And thank you, Chair White, for being here today, I am 
truly disheartened to hear that you will be stepping down, 
Chair White, considering there is so much at stake and so much 
to fight for.
    But I am encouraged because of all of the kind words that 
Chairman Hensarling had to say about you when he started his 
testimony today. That is the nicest I have heard him be to you 
and any of the others in our oversight agencies since we have 
worked together here, so--
    Chairman Hensarling. Will the gentlelady yield?
    Ms. Waters. Yes, I will yield.
    Chairman Hensarling. If anybody on your side of the aisle 
wishes to depart, I will say very kind words about them.
    [laughter]
    Ms. Waters. Well, I am sure since you have said such kind 
words about Chair White today, you will be asking her to please 
stay, please don't go.
    [laughter]
    Also, I am appalled that the reaction on Wall Street to 
Tuesday's election is record highs for bank stocks, as the 
industry rallies on the news of a massive, destabilizing, 
lawless agenda. But let me be clear--short-lived increases in 
the stock market are not the same as real, hard-earned economic 
growth. And the demise of the regulations that Wall Street is 
cheering are the better regulations that have made our 
consumers, investors, and economy safer and more resilient.
    In fact, just yesterday, Wells Fargo stock closed at the 
highest price this year, on the expectation that a Trump 
Administration and Republican Congress will erase its 
culpability. Indeed, we are facing uncertain times, and at the 
forefront of that uncertainty is a President-elect who does not 
have a coherent or consistent stance on anything.
    We don't know if he is building a wall or just a fence. We 
don't know if he is repealing Obamacare or cherry-picking some 
provisions that he now seems to support. We don't know who he 
is, what he stands for, or what kind of President he will be. 
We cannot rely on anything he says because it changes from one 
day to the next.
    So when Mr. Trump talks about financial services reform and 
dismantling the Dodd-Frank Act, what does he mean? Does he mean 
letting the Wall Street banks he is so indebted to write their 
own rules? Does he mean repealing the fair housing laws that 
the Department of Justice sued him over decades ago? Does he 
want to repeal investor protections and make it harder for the 
SEC to go after bad actors? Does he want to gut the Consumer 
Financial Protection Bureau despite the agency being the 
strongest champion of everyday consumers?
    Does he mean breaking up the banks by reinstating Glass-
Steagall? In that regard, I am sure we could find some common 
ground.
    Does he mean closing the carried interest loophole and 
ensuring that private equity fund and hedge fund managers pay 
the same taxes that everyday Americans pay? Will he pay the 
same taxes that everyday Americans pay?
    I am curious to see how Republicans in Congress react to 
this wide-ranging, sometimes progressive agenda. Mr. Trump said 
he is not beholden to Wall Street and other special interests. 
Yet here he is with rumored appointments of Wall Street 
insiders and their friends in Congress to run his 
Administration.
    Mr. Trump also said he wants urban renewal and to ensure 
that African-Americans have access to loans to start small 
businesses and get mortgages. Yet he appoints a leader of the 
white nationalist movement as his chief strategist in the White 
House, and he himself has made racist, misogynist, and 
demagogic comments.
    Chair White, even though you are about to leave I hope you 
will share with this committee and the incoming Administration 
the important role the SEC plays in our financial system. I 
hope you will explain the importance of a well-funded cop on 
the securities beat and strong investor protections.
    The SEC has been the victim of woefully inadequate budgets 
as a result of Republican obstructionism for years. Despite the 
crucial role that the SEC plays policing our ever-expanding 
financial markets, we are now at a crossroads where Wall Street 
is poised to profit off of American consumers and investors.
    If we enact these special interest wish lists or if the SEC 
weakens its rules at the expense of the greater good, our 
economy will go right back to the darkest days of the financial 
crisis. I hope that common sense will prevail.
    With that, I yield back the balance of my time.
    And, Chair White, I apologize for not spending more time on 
the SEC and a lot of time on Mr. Trump, but that is what I am 
going to be doing for a long time to come.
    I yield back the balance of my time.
    Chairman Hensarling. The Chair now yields 2 minutes to the 
chairman of our Capital Markets Subcommittee, the gentleman 
from New Jersey, Mr. Garrett.
    Mr. Garrett. Thank you, Mr. Chairman.
    And welcome, once again, for the last time, Chair White, to 
our committee. Before I begin, let me just echo many of the 
positive sentiments expressed by Chairman Hensarling regarding 
your tenure at the SEC.
    Every SEC Chair receives criticism when they sit here and 
around from both the left and the right about certain policy 
positions that they take. But recently, you have had to endure, 
I would say, an unprecedented level of attack from certain 
groups and from individuals, as well, who have called out your 
integrity and called out your professionalism and put them into 
question.
    They have even so gone so far as to call for you to break 
the law, if you will, or be fired for your refusal to follow 
their direction. Chair White, it is clear from these many 
hearings that we have had that you and I disagree on certain 
policy issues, on more than a few occasions.
    But I can say this here, that I have never, ever questioned 
your professionalism. I have never, ever questioned your 
integrity and your devotion to doing the good in your work. It 
is a difficult job that you had, and you have handled it very 
well. And you have done so for all the right reasons.
    So I just want to take this moment to say thank you for 
your service and for your thoughtful approach with which you 
have tackled a number of issues, in particular, the area that I 
spend a lot of time on, the equity markets, which continues to 
be an important priority for the SEC.
    Now, having said all that, I did mention that we have 
disagreed on certain policy issues a couple of times. So let me 
highlight a couple of those before we go off.
    Despite the SEC having an important mission to, as you 
know, facilitate capital formation, the SEC, I believe, has 
still not organically, within itself, developed a capital 
formation agenda, and instead, really I believe has relied 
almost exclusively on our committee and the full committee in 
Congress, if you will, when it comes to trying to change some 
of that and trying to modernize some of those areas of 
securities laws for the benefit of the small and the medium-
sized enterprises. These are things that we have talked about.
    This, despite the fact that, as the chairman was just 
mentioning, the SEC's budget has not only continued to grow, 
but the agency has again requested a substantial increase 
without detailing how it will expand those on these missions.
    And finally, I also want to remain concerned that the SEC 
has not done an adequate job to assert its jurisdiction, this 
is important, in expertise in the capital markets when other 
regulators attempted to trample on your turf, whether it is the 
Department of Labor or prudential regulators over at FSOC or at 
the FSB.
    So with that said, I hope that in your testimony today, as 
you wrap things up, that you address both of these issues and 
others to ensure that Congress and the SEC is actually prepared 
to carry out its threefold mission before Congress decides 
whether the agency deserves that increase in budget.
    And with that, Mr. Chairman, I yield back.
    Chairman Hensarling. The gentleman yields back.
    Today, we welcome the testimony of the Honorable Mary Jo 
White, Chair of the SEC. Chair White has previously testified 
before this committee on many occasions, so I believe she needs 
no further introduction, and she has received her deserved 
accolades.
    Without objection, Madam Chair, your written statement will 
be made a part of the record, and you are now recognized for 5 
minutes to give an oral presentation of your testimony.

     STATEMENT OF THE HONORABLE MARY JO WHITE, CHAIR, U.S. 
               SECURITIES AND EXCHANGE COMMISSION

    Ms. White. Thank you very much, Chairman Hensarling, 
Ranking Member Waters, and members of the committee. Thank you 
all also for your kind remarks. I appreciate it very much. It 
is my honor to serve.
    And again, thank you for inviting me to testify today on 
the current work and initiatives of the SEC, as well as on our 
Fiscal Year 2018 preliminary authorization request.
    As this committee knows well, the SEC is a critical, 
independent agency that is charged with protecting millions of 
investors and overseeing the strongest and safest markets in 
the world. I am very proud of the Commission's hard work and 
many accomplishments since I became Chair in April 2013. We 
have achieved record numbers of enforcement actions and 
examinations each year. We have completed dozens of 
transformative rulemakings, including fundamental reforms to 
money market funds, credit rating agencies, and the 
securitization markets.
    We have built important, new regulatory regimes for capital 
raising, like critical market infrastructure and municipal 
advisers. And we have put in place enduring frameworks for our 
future work in areas that are central to the SEC mission: asset 
management; equity market structure; and disclosure 
effectiveness.
    Our latest results in enforcement and examinations 
exemplify the agency's high level of performance during this 
time. In Fiscal Year 2016 alone, the Commission brought over 
850 enforcement actions, an unprecedented number; secured over 
$4 billion in orders directing the payment of penalties and 
disgorgement; and performed approximately 2,400 exams, a 7-year 
high that reflects a smarter, more efficient program.
    The strength of our enforcement program can also be seen in 
the kinds, complexity, and importance of our cases that span 
the markets and the securities industry, including numerous 
first-of-their-kind actions.
    As this past year also shows, the Commission, with only 
three Members, was able to continue to pursue a very 
consequential set of policy measures designed to protect 
investors, strengthen the markets, and open new avenues for 
capital raising.
    Since I last testified, the agency has, for example, 
advanced major rules addressing important equity market 
structure issues, including the transparency of ATS's and order 
handling practices, while moving forward with a comprehensive 
assessment of other fundamental structural questions.
    And this afternoon, the Commission is scheduled to consider 
in an open meeting approving a final plan for the critical, 
consolidated audit trail. Over the last year, we have also 
continued implementation of a series of proposals to address 
the increasingly complex portfolios and operations of mutual 
funds and exchange traded funds. We adopted final rules to 
modernize the data reported by both funds and their advisers, 
completed rules for enhanced liquidity management by funds, and 
adopted a proposal for new controls on their use of 
derivatives.
    We also adopted new rules to better enable businesses to 
raise capital through local and regional offerings and advanced 
our comprehensive review of the effectiveness of our disclosure 
regime, including through several detailed proposals, and along 
with several other rules prescribed by statute, we finalized 
critical components of the regulatory regime for security-based 
swaps and established new standards for the clearing agencies 
that stand at the center of our financial system.
    In addition to our many discretionary initiatives, the 
Commission has now adopted rules for nearly 80 percent of the 
mandatory rulemaking provisions of the Dodd-Frank Act and all 
of the rulemakings directed by the JOBS Act. We have also made 
significant progress on the rulemakings required of us late 
last year under the FAST Act.
    While our enforcement and our rulemaking work are perhaps 
the most prominent examples of the agency's achievements, the 
imperatives of our mission are also carried forward by our 
exceptional and diverse staff every day, from reviewing 
thousands of filings each year, to assessing complex 
submissions from exchanges and other SROs, to incisive, 
economic analyses and publications. And as publicly reported 
today, the Commission has, for the second year in a row, 
received from GAO an unmodified audit report with no material 
weaknesses or deficiencies on the SEC's financial statements.
    The Commission today is, I believe, a stronger and more 
effective agency, and I am honored to have led it during this 
time of progress. But significant challenges remain if we are 
to adequately address the growing size and complexity of the 
securities markets and the ever more sophisticated financial 
services industry.
    And it is critical that the SEC have the resources required 
to discharge its important responsibilities, the new ones, and 
many others we have long held. I deeply appreciate that we must 
be prudent stewards of the funds we are appropriated.
    And we strive very hard to demonstrate how seriously we 
take that obligation by the work we do. At the same time, our 
resources are insufficient to fulfill our extensive 
responsibilities to investors in our markets, and cuts to the 
SEC's budget would seriously imperil the progress we have made 
and diminish our ability to fulfill our mission.
    While more remains to be done, the agency's accomplishments 
in the last few years across the range of its vital 
responsibilities have both been impressive and enormously 
important to investors, the markets, and capital formation. For 
that, I want to thank, first and foremost, the exceptional 
staff of the SEC, as well as my fellow Commissioners, present 
and past.
    And I want to thank the chairman, the ranking member, and 
this committee as a whole for your continued support which will 
allow the SEC to fulfill its essential mission for the American 
economy.
    If I might, on a personal note, as the chairman has 
indicated, I did formally announce yesterday that I would 
complete my nearly 4-year tenure as Chair of the SEC at the end 
of this Administration in January. It has been my high honor 
and privilege to serve. And while I have not yet actually done 
my David Letterman Top 10 list of what I will miss most, I am 
sure my appearances before this committee will be somewhere on 
it.
    But more seriously, as an independent head of an 
independent agency, it is to be expected that we have had areas 
of agreement and areas of disagreement. But I very much 
appreciate the professionalism and the courtesy of the 
chairman, the ranking member, and the committee generally, as 
we have together grappled with the challenges before the SEC 
that are so important to the American public.
    Thank you, and I am happy to answer your questions.
    [The prepared statement of Chair White can be found on page 
54 of the appendix.]
    Chairman Hensarling. Thank you, Chair White.
    And the Chair now yields himself 5 minutes for questions.
    Chair White, as you know, significant tension has been 
devoted recently to liquidity concerns in our U.S. and global 
fixed-income markets. When you testified last year before us, I 
asked you about the regulatory impact on bond market liquidity.
    And at the time, you testified that while, ``No question, 
there are concerns about the liquidity in the fixed-income 
market,'' at that time, a year ago, you could not identify a 
culprit.
    Since your testimony of a year ago, we have had some news 
and some evidence of the regulatory impacts on liquidity, and 
they have become starker. On September 27th, former Treasury 
Secretary Hank Paulson commented that, ``The Volcker Rule 
solved the problem that was not a problem. We have much less 
liquidity in the markets. It has become much harder for 
financial institutions to provide liquidity.''
    On September 16th, Douglas Cifu, CEO of Virtu, one of the 
world's largest electronic market-makers, announced that his 
firm would no longer invest in certain bond exchange traded 
funds, certain ETFs because the underlying securities had 
become too hard to trade, thereby eliminating sources of 
liquidity as banks continued to reduce their roles as market-
makers.
    On October 7th, the value of the British pound plummeted 
from $1.26 to $1.18 in a matter of minutes. During trading in 
Asia, with some electronic platforms recording trades as low as 
$1.15, The Wall Street Journal attributed this extreme 
volatility in part to a lack of currency traders in the foreign 
exchange markets.
    So since your last appearance, Chair White, have you been 
able to determine whether regulations, such as the Volcker Rule 
and Basel III capital and liquidity requirements, are a 
contributing cause of the continuing decrease in liquidity in 
the fixed-income markets, particularly the corporate bond 
market?
    Ms. White. The short answer to that is no, but we continue 
to study it very, very carefully, really effectively globally. 
And the SEC, as well, as you know, economists at the SEC from 
our Division of Economic and Risk Analysis are charged by 
Congress with actually studying and reporting to Congress on 
the impact of regulation generally on market liquidity. I think 
that report is actually due in May of 2017. But I know--
    Chairman Hensarling. Well, Chair White, does the recent 
data concern you? Because it has been a year, and it is 
disappointing that there still are not conclusions.
    Ms. White. The data does concern me. I think I said that at 
my last testimony, as well. And the issue, the overall issue 
also deeply concerns me. And it is something I will say that I 
go back quite frequently to our staff to try to drill down on 
what we are reporting to Congress, this committee, in 
particular, each quarter is on corporate bond liquidity, 
primary market, as well as secondary liquidity levels in the 
bond markets. And that essentially, although some decrease 
obviously in dealer inventories, but by most measures, there 
has not been a deterioration. I will say--
    Chairman Hensarling. I think you are aware, Chair White, 
that many economists believe that, frankly, the next financial 
crisis very well could be triggered by this bond market 
illiquidity phenomenon.
    So as you are soon to depart your stewardship and 
chairmanship of the SEC, I would simply request that resources 
be focused on this. Now, during your appearance before the 
committee in March of 2015, I asked you and other Members of 
the Financial Stability Oversight Council (FSOC) to conduct an 
analysis to see what systemic risk could be posed by this 
diminution, a significant diminution of liquidity in our bond 
markets.
    Since that time, has the SEC or FSOC, of which you are a 
voting Member, conducted any analysis of the systemic risk that 
could result from a lack of liquidity in the corporate bond 
market?
    Ms. White. Clearly, we are studying at the SEC--I have 
mentioned our economists, as well as others on our staff. In 
terms of FSOC, again, there have been working groups on the 
staff of FSOC looking at that. But there is no definitive 
conclusion there. I know some work is going on in different 
working groups there.
    Chairman Hensarling. Again, I would commend to you this is 
an area that is deserving of laser-like focus, and I hope the 
appropriate resources will be devoted. Again, it has been at 
least over a year since these concerns have been brought to 
your attention and the attention of FSOC.
    One last question. During the adopting phase of the Volcker 
Rule, five regulatory agencies had the ability to interpret, 
examine, and enforce compliance with it. That has led to 
overlapping and conflicting guidelines.
    To what extent are the five adopting regulatory agencies 
trying to coordinate efforts concerning the Volcker Rule?
    Ms. White. We still have our working group that we have 
talked about before that meets quite frequently both on 
interpretations and also coordinating enforcement. As you know, 
that is a sign to the different agencies. So we are working 
very, very hard to try to coordinate and be as consistent as we 
can possibly be.
    Chairman Hensarling. The time of the chairman has expired. 
I yield to the ranking member for 5 minutes.
    Ms. Waters. Thank you very much, Mr. Chairman. I would like 
unanimous consent to enter into the record a story from The 
Washington Post from August 10th of 2016.
    Chairman Hensarling. Without objection, it is so ordered.
    Ms. Waters. This story, for those of you who are unfamiliar 
with it, recounts a legal deposition, from late 2007. Donald 
Trump has sued a New York Times reporter for defamation, 
alleging that the reporter lied in his book about Trump's net 
worth and his general lack of success in business, something we 
know that Trump is very sensitive about.
    Now, because Trump sued the reporter, it allowed the 
reporter's lawyers to get access to Trump's business documents. 
As the Post story documents, through the defamation trial of 
this reporter, it became clear that it was Trump who was guilty 
of the lying.
    In fact, the reporter's lawyers caught him in lies 30 
separate times. He lied about sales levels in his condo 
buildings. He lied about how much it costs to join his golf 
clubs. He lied about his amount of debt. He lied about his 
number of employees. He lied about how much he was paid to give 
a speech at the Learning Annex overstating the payment by 1\1/
2\ times.
    He lied about borrowing money from his rich dad, and he 
tried to pin the blame for some of the lies on a co-author of 
one of his books. He lied about facts that were simple to 
disprove, things easily verifiable by searching documents and 
public records.
    Now, this lawsuit that Trump leveled against the reporter 
was thrown out by the judge and was denied an appeal, so there 
was justice in this case. But this man is now, unfortunately, 
our President-elect. And I expect him to continue with these 
distortions.
    Only now our Nation is at stake. And when he is this thin-
skinned bully, I hope he doesn't lash out on the freedom of the 
press or on peaceful protesters. But we stand ready to protect 
our sacred American freedoms and will hold him accountable 
starting with this committee.
    Chair White, I bring all of this up because you were the 
lawyer in the 2007 case who had deposed Mr. Trump and exposed 
all of these lies. This deposition I mentioned is part of the 
public record. So is the Washington Post story true? Did Mr. 
Trump really systemically misstate, invent, and lie about 
business information? And was this lawsuit ultimately thrown 
out by the judge on the case?
    Ms. White. I don't think it would be appropriate--you are 
correct, Ranking Member Waters, that I participated in the 
defense of that reporter who wrote the book that you mentioned. 
I actually argued the appeal myself. And the reporter prevailed 
in that case. I don't think it would be appropriate to comment 
on specific statements during the litigation.
    Ms. Waters. Okay, so I just wanted to confirm and place in 
the record that this case did take place and that you were part 
of the deposition. So now you know firsthand, we all know 
firsthand the character of the man who is going to be our next 
President.
    Mr. Chairman, now I understand why Chair White is stepping 
down. Oh, he left. I can't tell him. I yield back the balance 
of my time, Mr. Garrett.
    Mr. Garrett [presiding]. The gentlelady yields back. Thank 
you.
    I recognize myself now for 5 minutes.
    So, Chair White, you and I have both talked, but we also 
had correspondence go back and forth about the SEC's 
implementation of the FAST Act, which was to simplify and 
modernize the disclosure requirements under Regulation S-K. And 
as you know, there were a couple of deadlines for the SEC to 
meet under the FAST Act. So the first was to propose simple 
rules to eliminate outdates disclosure, right, which you have 
done, thank you.
    And the second deadline, which is due next month for 
November and December, is for the SEC to issue a report to 
Congress on further ideas to modernize disclosure. So in going 
through the testimony today, on page 12 of your testimony you 
say, ``Staff has also completed a study and report on how to 
further modernize and simplify Regulation S-K as mandated under 
Section''--and so forth, of the FAST Act.
    Can you just apprise us of what report that you are 
referring to and what report are you referencing? And I say 
that because to the best of my knowledge, I have not received, 
and our staff has not received a report or a study on that.
    Ms. White. I noticed the same reference in the testimony 
but there isn't a footnote cited to it. I believe that 
reference is to the report that is due November 28th to 
Congress. And the staff has completed certainly a draft of that 
report that is with our Commission now for review. It is a 
staff report, but as is customary under our procedures for most 
staff reports that are provided to the Commission before they 
are provided to Congress.
    Mr. Garrett. Okay. So my next question, I guess, is the 
easy follow-up then. Is this--so the deadline I didn't--is 
established in the FAST Act of December--
    Ms. White. I think November 28th, I believe--
    Mr. Garrett. Yes. As far as you are concerned, that is 
going to be met and so will be--
    Ms. White. I certainly believe so, yes.
    Mr. Garrett. Before you leave here for good, Congress will 
have that report?
    Ms. White. I hope long before I leave here. I hope it is to 
you on November 28th.
    Mr. Garrett. Okay, fine.
    Moving on, the SEC, as you know, has the Equity Market 
Structure Advisory Committee. That term for that committee 
which has been around for--for a while now, right--is slated to 
end in January of 2017, so next year.
    So next question is, do you anticipate renewing that 
committee for another term or is that something that you are 
leaving to your successor to handle to renew?
    Ms. White. I certainly think it should be renewed. I think 
it has been very, very useful, and I think it will be useful 
going forward.
    Mr. Garrett. Right.
    Ms. White. I will be discussing it with my Commissioners. I 
think it is maybe a February 2017 date. But in order to renew 
the charter, we need to deal with it now, so I will be 
discussing that with my Commissioners.
    Mr. Garrett. Okay, so for all intents and purposes, from 
where you sit, yes, go forward with it?
    Ms. White. It certainly--in my view, it certainly should go 
forward.
    Mr. Garrett. All right. And when it is done, are there 
other industry representatives who are not there now who should 
be, such as retail brokerage or anybody else?
    Ms. White. There has been a lot of discussion about the 
composition--the initial composition, I think there are 17 
members was actually approved by the full Commission, when it 
was a full Commission, actually, five members. And so you know, 
obviously, our goal was to get balance and representation but 
clearly, there are--retail brokerage is one area where I 
think--it is represented there by virtue of knowledge of 
members who are on the committee, but it is one area where I 
think we have all sort of identified as maybe the one place we 
would like to identify an actual member of the committee.
    Mr. Garrett. Yes.
    Ms. White. And then I think we have also had requests from 
various other folks--NASDAQ, the New York Stock Exchange--to be 
members. That is also up to the full Commission.
    Mr. Garrett. Okay. And so that is something you are going 
to throw out before you leave, as far as just--
    Ms. White. I think we have the issue before us of the 
renewal of the committee. Separate from that is the membership. 
It is possible we would proceed by extending it and then 
figuring out the membership in short order.
    Mr. Garrett. Okay, moving on. The SEC--other topic--Rule 
NMS, the SEC publishes list of rules that were reviewed 
pursuant to the Regulatory Flexibility Act, which included Reg 
NMS.
    As such, do you believe that the SEC should continue to 
examine the impact of that rule on the equity markets--which is 
what I look at all the time--and the behavior of individual 
market participants, as you indicated several years ago, back 
in 2004, your speech on this topic and--yes?
    Ms. White. I absolutely do, and I believe we are.
    Mr. Garrett. In what sense?
    Ms. White. As part of the--I sort of talk about our equity 
market structure review, and we have certain proposals out 
there on specific areas where we think we should act now. And 
then, we have a comprehensive review of what I would call the 
more fundamental structural issues. Reg NMS is clearly front 
and center in that more comprehensive review. Our MSAC 
committee is working on that.
    Mr. Garrett. Yes. My time has expired; I have much more as 
far as what I was talking about in my opening statements as far 
as capital formation not being done, but again, thank you for 
your service.
    Ms. White. Thank you very much.
    Mr. Garrett. The gentlelady from New York is now recognized 
for 5 minutes.
    Mrs. Maloney. Thank you very much, Mr. Chairman.
    And Chair White, thank you for your public service. You 
have been a trailblazer and a role model to many young boys and 
girls. New Yorkers are very proud of your service to New York 
and to the country, and we thank you so much for your 
leadership and really, ground-breaking stellar career in so 
many different areas.
    My question to you is about a statement you made last month 
when you gave a speech on the regulatory regime for the U.S. 
Treasury market. You noted that under the Government Securities 
Act, firms that act as dealers in Treasury securities are 
required to register with the SEC as government securities 
dealers.
    But you also noted that the regulators' joint report on 
Treasury market volatility had found that the most active 
dealers in the interdealer Treasury market were high frequency 
traders, principal trading firms, many of which are not 
registered with the SEC as government securities dealers.
    You stated, ``There is significant concern that this 
activity indicates that certain principal trading firms are 
acting as dealers, but without the appropriate registration and 
regulation that is designed to protect investors and the 
markets.''
    So my basic question is, why has this been allowed to go on 
for so long? You, yourself, admitted that some of these 
principal trading firms for you are ``clearly engaged in dealer 
activity'' without being registered as dealers.
    If that is true, why hasn't the SEC brought in any 
enforcement actions against firms that are acting as 
unregistered dealers?
    Ms. White. I think I indicated that the data from which I 
drew those observations came out of that joint interagency 
study of events of October 15, 2014, and raised questions about 
whether some of those firms shouldn't be registered.
    I believe I also mentioned in that speech--I know I have 
elsewhere--that the staff is working on whether there needs to 
be public guidance issued as to where the line between dealers 
and traders is to take account of that phenomenon. It is sort 
of interesting, the Treasury markets, I think what is happening 
there is terrific, frankly, because you have great cooperation 
among the various agencies, including Treasury, banking 
regulators, the SEC, and the CFTC, working together.
    We each have certain spheres of authority of the Treasury 
markets, and I also indicated in that speech that I thought we 
ought to apply some of the SEC's authority to create greater 
transparency and, frankly, other protective measures in the 
Treasury markets, as well as the equity markets.
    Mrs. Maloney. Okay, thank you.
    My second question is about the statements you have made 
several times over the past years. You have suggested that the 
SEC should rethink its 2009 diversity disclosure requirements 
to provide more useful information on the diversity of boards 
and their nominees.
    And you directed your staff to review the existing 
disclosures. At my request, the GAO reviewed these requirements 
and found that the information provided by companies is 
inadequate and unhelpful to investors. And I am wondering if 
your staff reached the same conclusion.
    And because of repeated studies that indicate more diverse 
leadership helps companies avoid so-called group-think and make 
better, strategic decisions many investors want access to data 
on board diversity as they make investment decisions or 
exercise their voting rights.
    Leading institutional investors petitioned the Commission 
in March of 2015 to revise the diversity disclosure. They 
suggested that a simple matrix could make the disclosure 
simpler for investors, issuers, while providing investors with 
actionable data.
    So do you think--where does this stand does and where are 
you? I do want to say that in this GAO report, it showed that 
women were 16 percent of boards, and if they upped their 
activity significantly, it would be 2040 before there was any 
gender balance.
    The GAO report also provided research from private firms 
that showed when there was gender diversity, the bottom line 
was better for investors. And my office has received requests 
from institutional investors, major, major investors, on 
getting more accurate information on gender diversity.
    I even went so far as to put in a bill that merely added 
another line that said just disclose how many women are on your 
board. It would not be in any way burdensome to industry. It is 
just another check or another number that would be added.
    And this is information that investors--significant 
stakeholders and investors--are asking for. They are asking for 
this information. So I wonder where this stands with the 
activities--
    Mr. Garrett. The gentlelady's time has expired, but if you 
would like to answer that, Chair White?
    Ms. White. I will be very brief. As you know, I am a very 
strong proponent of diversity on boards, and I am aware of the 
studies you indicate, which I think are quite telling. Where 
that stands, as the staff has studied it, and they are 
preparing a recommendation to give to the Commission. It is 
pretty far along in that in terms of trying to provide more 
meaningful disclosure along the lines you indicate.
    Mrs. Maloney. Do you think you will receive this before 
you--
    Ms. White. I do not. Unfortunately, I do not. Will they 
receive it before? They may well receive it before. I don't 
think there will be a proposal before I leave.
    Mrs. Maloney. Okay, thank you.
    Mr. Garrett. The gentlelady's time has expired. Thank you 
for your answer.
    The gentleman from Texas is recognized for 5 minutes.
    Mr. Neugebauer. Thank you, Mr. Chairman.
    Chair White, you and I are kind of in the same situation. 
This is probably my last hearing with you, and I want to thank 
you for your service.
    Yesterday, the SEC held its first-ever FinTech Forum, which 
included panels on recent innovations and investment advisory 
services, trading, settlements, and clearance, and investor 
protection, and capital formation. So after this forum, what is 
the next step for the SEC in the FinTech space?
    Ms. White. First off, it was a very, very useful forum. We 
have been quite active in that space in terms of doing 
significant outreach. Some issues are sort of on our plate 
right now; some are for the future.
    I formed earlier this year, in effect, a FinTech Working 
Group that I have directed to make quite targeted 
recommendations, quite specific recommendations to the 
Commission on what the next step should be at the SEC, both in 
terms to some degree of regulations that we have now that may 
apply to certain FinTech activity, how we can appropriately 
foster innovation, but also obviously, protect investors in the 
space.
    The three topics we really discussed yesterday and the ones 
we have been most focused on, obviously, the distributed ledger 
technology generally and the settlement and clearing space, the 
so-called robo-advisers--that is not the name they would like 
to apply to that, but how automated providers of advice--and it 
is not only automated often--can comply with their duties, 
fiduciary duties on the Investor Advisers Act and Investment 
Company Act.
    And then marketplace lending, those are the three big areas 
that we are focused on, although our folks in the Division of 
Corporation Finance have also been reviewing and passing on 
companies that, for example, would actually issue digitized 
securities.
    So we essentially will receive those recommendations, I 
don't think imminently, but I think in the next few months, and 
then decide what we need to do next in terms of concept 
releases, rulemakings, or just giving more clarity to 
entrepreneurs as to the spaces that they may be in and need to 
comply with.
    Mr. Neugebauer. So this working group that you have formed, 
will the recommendations that were--that you heard yesterday, 
will it be their responsibility to respond to and to--
    Ms. White. Certainly what we heard at the forum will be 
part of the analysis, part of the input of the analysis that 
they are doing. The recommendations will come from that working 
group to the Commission. They are doing much broader outreach 
than just what we heard at the forum. But it was enormously 
useful input for that set of recommendations that I expect to 
receive.
    Mr. Neugebauer. And in your response to my question, one of 
the things that I think is a common theme that I think concerns 
a lot of us about what is going on with the SEC is you 
mentioned regulations, I think, 2 or 3 times when I mentioned 
the FinTech space. And I think one of the things that we are 
also looking for is facilitation from the SEC on how do we make 
these markets better and not how we immediately--the first 
thought that we have is how do we want to regulate these folks.
    And so what I would hope is that the forum was a positive 
step. What I would hope is that if you are going to put 
together--or your successor--put together working groups, it 
might be kind of handy to have people who are in the industry, 
a part of that and spend some time focusing on how we 
facilitate this, because as you know there are some exciting 
things going on in that space and actually some things going on 
that could revolutionize the way that we do some of these 
functions.
    Ms. White. And I essentially, agree with that. And I really 
said that yesterday, I did some opening remarks, that you don't 
necessarily jump to regulation.
    We did put out also a concept release at the end of last 
year, request for comment on the transfer agent space for 
example, and asked questions just like that. So it is a matter 
of, there are some exciting things going on out there that 
really will improve the markets, improve things for investors.
    We certainly don't want to be thwarting those, but 
obviously, we have to make certain that investors are protected 
in that space. The market lending space for example, to make 
sure that, if in fact there are investors that are providing 
that money through offerings, that they are being given the 
information they need to have.
    So I think it is a mixture of things, but certainly not 
with a mindset of we have to regulate, regulate, regulate. 
There may be some rules we need to do, there may be some 
clarifying we need to do, but we certainly have the encouraging 
innovation lens that we are applying to that, as well.
    Mr. Neugebauer. Since most of these are non-depository 
institutions, should the SEC be the primary point from a 
regulatory perspective for these companies?
    Ms. White. I think they range, in terms of the nature of 
the institutions that are involved. But I certainly think we 
should be taking a primary role, yes.
    Mr. Neugebauer. Thank you, my time has expired.
    Mr. Garrett. The gentleman's time has expired.
    The gentleman from Massachusetts is recognized. Welcome 
back.
    Mr. Lynch. Thank you, Mr. Chairman, and Ranking Member 
Waters. It is much appreciated.
    Madam Chair, congratulations. Sorry to see you departing. 
But thank you for your service to your country. I think you did 
a remarkable job under the circumstances, and I have a feeling 
that as far as your critics on this side of the aisle go, I 
think they will miss you very shortly. I think we can all 
expect that.
    I know you are wrapping up, but on market structure, I had 
proposed a Maker-Taker Conflict of Interest Reform Act of 2015 
last year. And I know there was a competing proposal among 
your--you have an equity market structure advisory committee--
they had a little different wrinkle on it. It didn't go as far 
as what I had proposed. But it talked about lowering access 
fees, which is a good thing. But I don't think it really got at 
the issue of the routing, the conflict of interest in routing 
certain trades.
    Going forward, as you wrap up, is there anything 
percolating that might actually come to fruition in your 
closing months?
    Ms. White. I don't know if it will come to fruition quite 
in my closing months, although we are really in response--not 
just in response--but including in response to that 
recommendation that you referenced, which really is to do a 
pretty comprehensive pilot. It may not do everything.
    We also have an outstanding proposal on more transparency 
in order routing too, which I think is a very important 
proposal that is out there. The staff is working very hard on 
it to--it will be the staff's recommendation to the Commission 
as to the next step to take.
    And clearly, we take very seriously and we think--I think 
it is a good proposal that we have gotten from our Equity 
Market Structure Committee. But obviously, we will be studying 
that as to whether to do it in the first instance, although I 
think you have a lot of support for doing such a pilot in that 
space. And then what precisely the component should be. I can't 
tell you that something will come out before I leave, but we 
are still driving it.
    Mr. Lynch. Okay. And the question of resources, over the 
past while, at least over the last 6 or 8 years, we have had a 
defunding or a lack of resources for your agency. Can you speak 
to that a little bit about just the practical impact of that 
defunding, and as the cop on the beat for our financial 
markets, and also, morale-wise in terms of trying to retain the 
best and brightest people at the SEC?
    Ms. White. Just to go to the latter point first, it is so 
important that we are able to retain the best people and 
attract the best people with the expertise that you need to 
protect investors and to be that strong cop.
    I have said this before. The biggest challenge I have had 
as Chair of the SEC--and there is no lack of challenges as the 
Chair of the SEC--is just how significantly under-resourced we 
are. And I appreciate we have gotten budget increases but look 
at what our responsibilities are, how extensive they are, how 
complex they are, how much they have been added to, look at the 
volume in the equity markets.
    Look at--for example, I think 10 years ago we had 17 
examiners for every trillion dollars of assets under management 
by registered investment advisers. We have eight now.
    And I talk mostly in terms because it is so stark of our 
investment--our responsibility to examine investment advisors. 
And I have done everything I can and I appreciate the support 
we have gotten when we get funding to really increase the 
number of examiners smartly in that space, and I have done 
that. I have actually increased the staffing in that area of 
our OCIE program--National Exam Program--by 20 percent, between 
transferring some from the broker-dealer side where we have 
FINRA that is also operative, and some of the funding that we 
have been given.
    But we are still in the position, we are smarter, we use 
risk analytics. But we examine 11 percent of those 12,500 
registered advisors every year, 35 percent of the assets under 
management, on the broker side, where we have FINRA, it is 
about 50 percent. And so it is a big, big investor protection 
issue. Of course it affects morale, because you have some of 
the brightest, most dedicated staff in the world at the SEC. 
And their lone star mission is to protect investors.
    And when you can't examine those advisors who are dealing 
with those investors and have a duty to those investors to act 
in their best interests, you are not able to do the job that 
you are assigned to do by Congress and so much want to do in 
order to fulfill our mission.
    Mr. Lynch. Thank you again. My time has expired. I just 
want to thank you again for your service to your country, thank 
you.
    Ms. White. Thank you.
    Mr. Garrett. Thank you. The gentleman's time has expired.
    I recognize the gentleman from Missouri, Mr. Luetkemeyer.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Chair White, thank you. I want to add my kudos to those of 
my colleagues for your service and your responsiveness to this 
committee; it is very, very much appreciated. So we wish you 
well in whatever endeavors you may pursue from here on out.
    I just have a comment first, and I want to ask for you to 
comment on it, if you would. I understand that you have 
announced your departure, but you are still the SEC Chair, and 
I want to raise one issue in hopes that you will give it some 
thought. It is on credit agencies. I know the SEC has taken 
steps to address the entrenchment of incumbent rating agencies, 
but I think more needs to be done. We should facilitate broader 
competition amongst credit agencies and encourage those acting 
on behalf of U.S. investors to do the same.
    I know Senators Scott and Franken, among others, have 
raised this issue with you. And the SEC's own work has shown 
that this lack of competition has the potential to harm 
investors. It is your job to protect investors, and I hope you 
will give this issue all due consideration.
    I am certainly going to be in touch with your successor and 
with SEC staff on this issue as we go down the line. I realize 
that is a general statement, but if you would like to comment 
on it, I would certainly offer you that opportunity.
    Ms. White. Just briefly, clearly that is an area on which 
we continue to focus. We have done a number of reforms in the 
credit rating agency space that I think are very important to 
have done, in terms of governance and transparency, and 
conflicts of interests.
    We have seen some improvement in competition, but it is 
still a major issue. It is a very difficult one to come upon an 
optimal solution for, I think, in both a cost-effective way, 
but also in a way that actually deals with the issue that you 
are trying to correct.
    But it is something that our economists continue to study, 
as well as our policy staff divisions.
    Mr. Luetkemeyer. I don't know if you watched the movie, 
``The Big Short,'' but it was very graphic on how the problems 
were created, and what was going on. And obviously, this is a 
point that we need to shore up with regards to allowing 
investors to have confidence in our bonds and the ratings of 
those. So certainly, I appreciate your consideration.
    The chairman, a while ago, also mentioned something about 
pending rules. I guess my question would be, do you have any 
request for the Administration or does the SEC have any ideas 
of--any midnight rules that you are getting ready to propose 
that we need to be watchful for or that are going to come in 
the backdoor here that we need to be thinking about?
    Ms. White. Effectively, I set out our agenda for 2016 in 
February of 2016 at the conference called SEC Speaks, which is 
where the Chair usually talks about the agenda. We have 
advanced a number of those priorities already. I said we would 
do as many of them as we could, and we have also--we have 
talked--we have basically set the agenda for the rest of the 
year, and into January--
    Mr. Luetkemeyer. And you don't see a divergence?
    Ms. White. I don't see any last minute rushes to--I do 
intend to carry out the agenda I outlined in February of 2016 
as much as I can.
    Mr. Luetkemeyer. Okay. In the Bloomberg report this 
morning, there is a report--its headline says, ``U.S. Consumers 
are Increasingly Defaulting on Loans Made Online.'' And the 
story talks about how delinquencies and defaults are reaching 
key levels known as triggers for at least four different sets 
of bonds. Reaching those levels has forced lenders or 
underwriters to start paying down bonds early. I guess my first 
question is, are you aware of this with regards to the online 
lending--loans that secure these bonds and are having some 
problems?
    Ms. White. I am certainly aware of the reports of those 
issues. Obviously, our space is the investors in the space, not 
the lenders, but obviously they become relevant in terms of 
what are those assets underlying the investment.
    Mr. Luetkemeyer. I would say they become very relevant, 
very quickly.
    Ms. White. Very relevant, I agree, I didn't mean to 
minimize it at all.
    [laughter]
    Mr. Luetkemeyer. In the article, it talks about how 
breaching these levels can force a company to divert cash flows 
from assets to paying off bonds instead of making new loans, 
which often means it has to find new, more expensive funding in 
order to scale back its business.
    They are going to force some of these bond folks to change 
their business model. And to me, that it is very concerning. 
Are you considering any actions to prop this up or to 
investigate further, or are you just kind of watching from the 
sidelines?
    Ms. White. We are continually studying this space to the 
extent it really impacts what we are doing and the offerings 
made in effect to raise the money to provide the funds to lend. 
Disclosures of--
    Mr. Luetkemeyer. What kind of notices or disclosures are 
required by these bonds when these things trigger? Do they have 
to send these notes out to the investors, or--
    Ms. White. Yes, when they are offerings, they do have to 
make various disclosures. Sometimes they are public offerings, 
and sometimes they are private offerings. But you have to make 
material disclosures to investors.
    And I think I mentioned that yesterday actually at the 
FinTech Forum. That is very, very important information, to 
talk about the underlying loans in a very accurate way.
    Mr. Luetkemeyer. I am sure you are monitoring this if that 
is the case, so where do you see this going? Do you see this as 
a blip on the screen or is this a bubble getting ready to 
burst? Or do you see this as a trend? What do you see?
    Ms. White. I think, without putting sort of an umbrella 
characterization on it, we have seen an increase in those 
concerns in the last year. Now, that may be because more 
information is available on it now. But it is something we are 
watching very, very closely.
    Mr. Luetkemeyer. Thank you.
    Thank you, Mr. Chairman.
    Mr. Garrett. The gentlelady from New York is now recognized 
for 5 minutes.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Chair White, I want to congratulate you for finalizing the 
mutual funds data reporting rule. That rule will give the SEC 
an important window into the fund industry while at the same 
time preserving the ability of the industry to manage 
portfolios in a manner that serves clients without prescriptive 
constraints.
    Given the vast amount of new information that the 
Commission will be receiving, what special resources is the SEC 
committing to protect the data from cyber criminals who will 
want this proprietary investing information?
    Ms. White. I think it has been in our budget request for 
certainly, the last--the years since I have been here because I 
have really prioritized our data security obligations, both 
with respect to the new information we are going to be 
receiving there, and the existing information we have. It is 
also relevant in what we are doing this afternoon with respect 
to the consolidated audit trail. So we are devoting significant 
resources there. Our budget request for 2017, and when it is 
finalized for 2018, you will see resource requests specifically 
for that purpose.
    Ms. Velazquez. Thank you. Yesterday, Commissioner Piwowar 
said the SEC should take the lead on FinTech regulation. Last 
year, I sent you a letter expressing my concern about 
regulatory uncertainty in this area and to better understand 
the needs of your agency now and in the future.
    I know you are stepping down soon. Do you have any final 
thoughts on this rapidly growing industry and the role you 
envision the SEC playing in the next few years?
    Ms. White. I agree with Commissioner Piwowar that the SEC, 
in its spaces that FinTech touches--and there are a lot of 
them--should certainly take the lead and be proactive. I think 
we have been.
    Some spaces and I think--if I remember, your letter 
addressed at least in part, market-lending platforms. We are, 
uniquely among the regulators that are actually involved in 
those sets of issues, focused on the investors as I just 
mentioned, if in fact that is how the funds are raised to lend.
    Where we don't act is really in terms of the lending 
standards or the actual loans that are made. But I see the SEC 
playing a major, major role going forward in all the FinTech 
spaces that we have any jurisdiction over.
    Ms. Velazquez. I am glad to hear that, thank you.
    You and your fellow regulators have spent years crafting 
the Volcker Rule to balance the needs of market-makers and 
underwriters with the mandate to eliminate proprietary trading 
with federally-insured funds. What happens if the Volcker Rule 
is eliminated and banking entities that have access to the 
Federal safety net are once again allowed to make risky 
proprietary trades?
    Ms. White. I guess I would maybe answer that a little more 
broadly, that I think the reforms that are contained in the 
Dodd-Frank Act have been enormously important to strengthening 
our financial system and for the protection of investors.
    Obviously, the Volcker Rule is a significant component of 
that. So I think we are much stronger and more resilient than 
we were before the various reforms in the Dodd-Frank Act. And 
so, I certainly would not want to see those rescinded or 
repealed.
    Ms. Velazquez. Thank you. And I was happy to hear about the 
SEC's recently adopted rule regarding interstate security 
offerings. This has the potential to cut red tape and help many 
small businesses raise capital where they live and work.
    Outside of interstate offerings, are there any other areas 
the SEC is or should be looking at to streamline small business 
capital formation?
    Ms. White. As you know, we have fairly recently, under the 
JOBS Act, reformed and really expanded Regulation A+; it is a 
crowdfunding regulation. We have a proposal that is outstanding 
on what the definition should be of a small reporting company 
so that if there was an adoption of that, you would have more 
smaller companies that we are able to scale disclosure.
    Our disclosure effectiveness review tees up various issues 
about scale disclosure for smaller businesses. We were very 
pleased to recently adopt the interstate amendments to our 
rules to make it easier for small businesses to do intrastate 
offerings, including in the crowd-funding space.
    But it is something--we have our annual forum coming up 
this week, actually, and we will be talking about more avenues 
to try to facilitate raising capital for smaller businesses.
    Ms. Velazquez. Thank you, and thank you for your service.
    Ms. White. Thank you very much.
    Mr. Garrett. The gentlelady's time has expired.
    Mr. Huizenga is recognized for 5 minutes.
    Mr. Huizenga. Thank you, Mr. Chairman, I appreciate that, 
and I too want to echo the sentiments of my colleagues, and 
thank you for your service and your efforts in here. And I 
think you have tried to come in and be as honest and forthright 
as you possibly can within the constraints of what we are 
dealing with.
    I am concerned about something that has been brought up by 
the much-cited Commissioner Piwowar, concerning activism really 
overwriting market soundness and in some cases common sense 
about how we regulate and make sure that good business 
decisions and regulatory decisions are behind them.
    We have tons of examples, but pay ratio and conflict 
minerals, political spending disclosures, he talked about that, 
so how do you guard against that in these closing days, is 
really I guess kind of my question?
    Ms. White. There are several things you have grouped in 
there. A couple of them are congressional mandates. And I have 
talked about that before when I have testified.
    I do regard my job as the Chair in part to carry out 
congressional mandates--they are passed by Congress, but we 
carry them out. It is our obligation to, and we try to do it in 
the most cost-effective way we can, as consistent with our 
mission as we can, but they really come from Congress. And then 
there are various things--
    Mr. Huizenga. How about those things that don't come from 
Congress?
    Ms. White. Yes, and I was about to say, there are various 
things we don't do also, because of the concerns that you 
mentioned. I think it is--and as far as I am concerned, since I 
have been Chair, we know what our mission is. I make a judgment 
myself, as to what is the right thing to do. We obviously take 
input from all constituencies about that, but then ultimately 
make that decision based on our mission: protecting investors; 
the markets; and capital formation.
    Mr. Huizenga. Very specifically I guess, then, there are 
two Commission seats currently open. Blaine Luetkemeyer, my 
colleague, had started kind of going down this road and I guess 
I would like to get as definitive of an answer--I would like to 
get a definitive answer. I will stop, period, on that.
    But there were reports that regulators are trying to ``rush 
to finalize the incentive compensation rule'' prior to 
President-elect Trump taking office. Will you commit to us, 
here, that you will stay any Commission vote on that rule until 
after the inauguration? Because this is a multi--
    Ms. White. Yes, I understand. It is a multi-agency, it is--
and basically, I think the repurpose was issued by the agencies 
in May of this past year. The staffs are clearly working 
through the comments on that; it is not a new issue. So, I 
can't commit, as I said here, what the timing will be on that 
other than to say that--
    Mr. Huizenga. Regardless of time--
    Ms. White. But I hear what you are saying.
    Mr. Huizenga. Yes, regardless of the timing, they may or 
may not have it done. The reports are they are rushing to try 
to get it done, and what I am asking for, I guess, is the 
commitment from you that you will then not vote on this or not 
allow a vote on this from the SEC to implement that before 
there is a new President.
    Ms. White. I would say two things, and I will be very 
straight, and as clear as I can on this. I don't think any 
rulemaking benefits from it being rushed. It is hard to do it 
right, it is hard to do it optimally, and I have really tried, 
even in joint rulemakings, to make sure that our economic 
analysis comes into play and our expertise comes into play, and 
I certainly will commit to do that. But I think I can't judge 
in a vacuum the next 2\1/2\ months.
    And I don't mean to--but as I sit here today, that is the 
commitment I can give.
    Mr. Huizenga. So if you were satisfied--we have another 
minute and 15 seconds, so we can keep going back and forth, me 
asking and you avoiding it, but--so if you are saying, if you 
are satisfied that they have gone through and properly vetted 
this, then you would have no problem moving ahead with that, 
or--
    Ms. White. Again, I don't know what is going to be in it. I 
want to be satisfied--
    Mr. Huizenga. They don't know, either. That is why we are 
trying to understand--
    Ms. White. No, no, no, but ``they'' is ``us,'' too, 
``they'' is ``me,'' too, in the sense that I have to put it on 
the agenda to vote. And obviously, what is always an issue 
there is the content of the rule, obviously, in terms to be 
satisfied with it, that I think it ought to go to the 
Commission--
    Mr. Huizenga. It is both content and context, correct? As 
long as there is the content--
    Ms. White. No, let me say it this way. I understand 
completely the sensitivity that you are raising, in terms of 
the time period that we are in. I will say that this is 
something that has clearly been sort of proceeding apace all 
year. It is not something that is all of a sudden proceeding 
apace. But I am absolutely sensitive to what you are raising.
    Mr. Huizenga. Okay, so--
    Ms. White. That is as far as I can go.
    Mr. Huizenga. --in 15 seconds, you are not--are you willing 
to commit to not vote on this--
    Ms. White. No, I can't give that commitment in a vacuum. 
That I can't do. I think I have said all I can, but I would 
hope--I think I have said all I can say.
    Mr. Huizenga. And I guess I would like to hopefully 
emphasize, your view that rushing into these things is a bad 
path to go.
    Ms. White. I think rushing into anything is, but certainly 
I take your point on that.
    Mr. Huizenga. Okay. With that, I gave it a shot.
    All right, thanks, Mr. Chairman, I yield back.
    Mr. Garrett. Okay, so we are going to rush over to the 
other side, then.
    Mr. Scott, you are now recognized.
    Mr. Scott. All right, thank you very much, Mr. Chairman.
    Chair White, I want you to know that I think that you have 
been one of the very best Chairs of the Securities and Exchange 
Commission in the whole history of the SEC. And we all want to 
thank you for your service; you are so smart, and so tough.
    And many people don't know, but as a former prosecutor you 
showed that toughness when you took on John Gotti, the big 
mafia boss, and brought him down. And you showed that toughness 
when you dealt with the terrorists that attacked and bombed our 
World Trade Center in New York.
    And that same toughness you brought to the SEC, as you 
really stood up and supported Dodd-Frank as our main instrument 
to prevent any future taxpayer bailouts of the financial 
sector. So I say congratulations on a job well done.
    Let me just ask you something. About 6 weeks ago, this 
committee had a hearing about Wells Fargo and the scandal. Now, 
it is my understanding that almost 3 years ago the SEC did an 
investigation regarding the aggressive cross-selling of Wells 
Fargo. Is that true?
    Ms. White. Again, I can't comment on any investigation we 
did or we might be doing. But I think what you are referring 
to, at least the reports that I have seen, and again I am just 
commenting on the reports that I have seen, the media reports 
that I have seen, refer to our Division of Corporation Finance 
and their comment letters. That is not our enforcement staff, 
it is--
    Mr. Scott. I just wanted to get to the fact that a few 
years ago, perhaps as many as 3 years ago, somebody informed 
you about this cross-selling.
    Ms. White. No, again, what the SEC looks at--the actual 
cross-selling practices obviously is not in the SEC's 
jurisdiction--
    Mr. Scott. Right.
    Ms. White. It is banking regulators. Disclosures are within 
our jurisdiction, though, and I think that is--
    Mr. Scott. Yes.
    Ms. White. --where that is emanating from.
    Mr. Scott. And now, we have a new report that the SEC is, 
again, investigating Wells Fargo's cross-selling practices. Is 
that true?
    Ms. White. Again, I can't comment on whether and what we 
are investigating. Our jurisdiction is to investigate--
    Mr. Scott. All right, what I am trying to get at is, you 
are doing your job, and I certainly respect your comments on 
that. But I think it is very important to show that the SEC has 
been on the case and has been dealing with this in the best 
interests of the American people.
    So could you just maybe tell us, tell the Financial 
Services Committee, how the investigation is proceeding? What 
can we expect? Any conclusion? Is there any input you could 
give us as to--
    Ms. White. I am afraid, again, I really cannot because we 
don't comment on whether we are investigating something or what 
we might be looking at if we are. I just can't do that in any 
case, yes.
    Mr. Scott. Okay, let me go to this one. I am the ranking 
member on the Commodities Exchange and Derivatives Swap 
Subcommittee, and I have been constantly assessing the numerous 
rules surrounding derivatives in terms of equivalency on the 
world stage.
    My committee handles the jurisdiction of the CFTC. And of 
course, you are involved in that, as well. Now, a major concern 
I would raise is on the equivalency issue, particularly with 
the European Union. I want to know what the status of that is 
going forward from your knowledge. And I also want to get an 
idea of how you feel this exit of the largest market within the 
European Union, Great Britain's exit from the European Union, 
impacts this issue of equivalency.
    Ms. White. First, I think, as you know, the derivatives 
markets are uniquely global. So obviously, that is why all the 
regulators internationally have been dealing with these issues.
    SEC's own cross-border proposal on the securities-based 
swaps space is under the rubric of substituted compliance, when 
can we and can we not accept other jurisdictions' rule to 
satisfy our rules? Our staff is involved in those discussions. 
The CFTC has been, as you know, more involved earlier, more 
extensively in some of those discussions. And in terms of the 
U.K., that is still sorting itself out, I think.
    The concern is that it needs time-wise also to be put back 
on track so those rules can actually work together and be 
effective. But I guess we are in the stage now where everybody 
is already focused on those priorities, but the discussions 
still go on.
    Mr. Scott. Thank you very much, Mr. Chairman. And best 
wishes to you, Chair White.
    Mr. Garrett. I now recognize Mr. Duffy.
    Mr. Duffy. Thank you, Mr. Chairman. Chair White, welcome 
again for your last appearance with us as the Chair of the SEC. 
I want to join my colleagues--I have not been the biggest fan 
of the Administration, how they have complied with Congress' 
requests for information, how witnesses have come in and 
testified before this committee I think has been obstructionary 
at the least, but that has not been the way you have run the 
SEC and you have been frank and honest and cooperative.
    I think you have come in and tried to answer the questions 
that we have asked to the best of your ability, and I think you 
are a standout in how you have run the SEC and how you have 
engaged with Congress.
    I want to thank you for that. And I know that is probably 
at risk of making your next 2 months more challenging that we 
heap such great praise upon you, but I think it is a job well 
done. And to be clear, we don't agree on everything and that is 
understandable, but I think, again, you have done--
    Ms. White. Thank you very much.
    Mr. Duffy. --an outstanding job. I do want to drill into--
and you can pick up our concern with what is going to happen in 
the next 2 months. And we always get concerned about the lame-
duck session of a Presidency and a rush to implement a whole 
bunch of new rules. And I think the better practice would be to 
wait and let the new Administration come in. We have kind of 
done a little dance today as you have had questions, but what 
rules do you want to see finalized?
    Not the SEC, I am talking about you personally. What do you 
want to see finalized in the next 2 months?
    Ms. White. I think again, I mentioned it earlier. I am 
not--we are not rushing, in my view, anything, so as far as 
that is concerned, I did set out the agenda earlier in the 
year, and frankly, our agenda for the rest of this year and 
into early January has been set for some time.
    I think the--other than this afternoon which has been 
sunshine and publicly noticed when we will be considering--
approving the final consolidated audit trail plan, I think we 
have publicly noticed the others that we have talked about 
internally in terms of scheduling.
    Some that I have mentioned in terms of sort of year-end 
goals include the capital margins segregation rules under Title 
VII, something, by the way, that all of my Commissioners have 
firmly supported prioritizing, my current Commissioners and my 
prior Commissioners and myself. So, that is one that I have 
mentioned publicly. I mentioned, I think in my oral testimony, 
that we do have an outstanding derivatives proposal in the 
asset management space, and I have mentioned publicly before 
that that is a priority.
    We are also looking very carefully at what the chairman 
mentioned in terms of 30-e3, in terms of the providing mutual 
fund reports electronically. That is something that when we 
adopted the reporting rule but for that, I said we were very 
focused on trying to have the staff give us a final 
recommendation as to what to do by year end. I think those are 
the ones I have mentioned publicly.
    Mr. Duffy. Okay, and I just--we have blown through most of 
the timelines set out in Dodd-Frank. We are 6 years on. You are 
now at year end basically to the statements that you made at 
the start of the year, that we go 6 years and then the last 6 
weeks I think would not be the best practice. I would like to 
see you hold off as much as possible unless it is an emergency 
for the next Administration, but that is just my opinion.
    I only have a minute-and-a-half left. Quickly, I want to 
thank you for your work on the Tick Size Pilot Program. We 
worked on that in the House. You saw what happened here with an 
outstanding vote in this committee and on the Floor, and you 
took it upon yourself to implement this pilot program and we 
are grateful for that. We want to give our small companies 
greater access to capital.
    But as you have heard, some participants worry that the 
data will expose their trading strategies. You have heard that, 
as I have heard that. Can you assure the committee that you 
will ensure that the data that is provided will be protected? 
And can you give those who participate that assurance?
    Ms. White. The answer--I have heard those concerns raised. 
The staff is all over those questions that have been raised. 
And I think I said before in answer to another question that 
the security of the data that should be secured couldn't be a 
higher priority in every space including the Tick Size Pilot, 
so the staff is very focused on it.
    Mr. Duffy. Very quickly, I want to move over to shareholder 
proposals. Shareholders only need to own $2,000 worth of stock 
for 1 year to submit a shareholder proposal for inclusion in 
proxy materials. In addition, a shareholder proposal need only 
receive 3 percent of a vote cast the first time, and 6 percent 
and 10 percent in subsequent years respectively, to qualify for 
submission in the next year. This hasn't been updated for 50 
years. Do you have any thoughts on whether we should be 
updating these proxy submission rules?
    Ms. White. I certainly think--and again, I think everyone 
knows the sort of the press of our rulemaking agenda in the 
last 3, 4, 5, 6 years. That has obviously been discussed for 
several of those years.
    I think it is very important for the staff to refresh what 
their recommendations are in that space. I will say there are 
very divergent views on that, for example, that the $2,000 
threshold was originally put in deliberately small, so you 
could allow the small shareholder to have that kind of 
franchise participation, but as you say, that was set some time 
ago, and I am also obviously aware of the issue on how many 
times, and what vote do you get on a proposal.
    So I think you will see the SEC returning to that, not that 
they have left the study of that, but I don't think anything 
will come out during my tenure.
    Mr. Duffy. Okay, and again, my time has expired. I want to 
thank you again for your great work and cooperation with 
Congress. I yield back.
    Ms. White. Thank you very much.
    Mr. Garrett. The gentleman yields back. Mr. Green is 
recognized for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. And thank you, Chair 
White, for your outstanding service. It has been an honor to 
work with you, and my hope and my prayers are that you will be 
equally as successful in the next life as you have been in this 
one. Thank you.
    Madam Chair, without being specific, if a bank creates a 
circumstance such that it gives the appearance of being in a 
growth mode by engaging in some onerous tactics, by giving the 
appearance that it has more customers than it actually has, you 
are in the business of protecting investors. You are the 
investor protector. If a bank is giving this false sense of 
growth, is this the kind of thing that the SEC concerns itself 
with?
    Ms. White. And again, talking in the abstract as you 
presented the question--
    Mr. Green. Very general terms.
    Ms. White. No, there is no question that is very much in--
the disclosures to public investors, we will phrase it that 
way, or the accuracy of them is very much in the SEC's space. 
We bring cases in our enforcement division on misleading 
material disclosures all the time, in a lot of those cases.
    And so, what you look at--and you mentioned kind of the--
was there growth or not growth, you obviously look at both 
quantitative materiality and you can look at qualitative 
materiality, so if instead of a profit, there is a loss, you 
may have qualitative materiality issues even if it is not a big 
amount. So, you certainly--you do apply those lenses at the SEC 
to disclosures like that.
    Mr. Green. And when these circumstances manifest 
themselves, does it take a complaint from many investors or do 
you do this on your own motion, on your own volition?
    Ms. White. We very, very often do it on our own volition. 
Obviously, we are constantly surveilling the marketplace and 
the marketplace of public information. We have our own data 
analytics, so often we do it ourselves, often, we will get a--
obviously, we have a very vibrant whistleblower program so we 
get information there. We get it from all sources, but in 
terms--we don't have to wait on a complaint to act. We are very 
proactive.
    Mr. Green. And when you do this on your own volition, is it 
published that you are engaging in this process? Or is this 
something that happens and then we are accorded the results as 
opposed to an indication that the process has been engaged?
    Ms. White. If we are talking, and I think we are, about an 
investigation that we would be doing in our enforcement 
division, for example, and I think that goes back to my 
discussion with Congressman Scott, we do not disclose whether 
we are investigating something or what we are finding. And so 
you wouldn't see that until, if it did, resulted in an action.
    Now, sometimes when we do open an investigation, the 
companies, if they are public companies, will disclose the fact 
that that investigation is ongoing. Again, that is their call 
based on their read of what is required, what is prudent to do. 
But you won't hear from us if it is an ongoing investigation 
until there is a result typically.
    Mr. Green. I am going to come back to this, but I would 
like to go to another point, and I have time enough to do it. 
Do you find that there is a conflict between what your agency 
has as its responsibilities with the CFPB and its 
responsibilities?
    Ms. White. I have not found that during my time as Chair. 
Obviously, we work cooperatively with all other civil and 
criminal law enforcement agencies. So, could there be overlap 
that could--conflict is a word--try to work any conflict you 
have in these spaces. There is an awful lot of space to cover. 
Different agencies and--
    Mr. Green. You would not recommend the elimination of the 
CFPB, I take it?
    Ms. White. Clearly, it has been a very active enforcement 
agency, and I think there is a need for a lot of active 
enforcement agencies.
    Mr. Green. Thank you.
    My final comment will be this. Wells Fargo engaged in 
conduct unbecoming a bank. They took advantage of people at the 
entry-level in their business, such that it benefited the 
people at the top of the business. As bad as that is, it also 
caused people who were making what they thought were honest 
investments based upon quality information, they allowed those 
people to make those investments to their detriment.
    My hope, without getting into what you will do, is that 
Wells Fargo will be treated fairly and justly, and also those 
investors will be treated fairly and justly. Thank you very 
much.
    Mr. Garrett. Thank you.
    Mr. Pittenger is recognized for 5 minutes.
    Mr. Pittenger. Thank you, Mr. Chairman.
    And thank you, Chair White, for being with us. I must say, 
while we clearly have had disagreements, you have been very 
respectful, you have been very straightforward, and you have 
been professional in every manner. So I commend you for your 
work.
    Ms. White. Thank you very much.
    Mr. Pittenger. I would like to say an anecdotal reference 
is made to why you are leaving. Did you make the decision to 
leave prior to the election?
    Ms. White. I did. And I think in the last 50 years or so, 
the Chair of the SEC has left when there is an election, 
irrespective of which party is coming into power. I have served 
for almost 4 years, so it is really a normal course decision. 
In fact, I might have mentioned it somewhat later, but I was 
actually coming in here today, so I thought clarity was a good 
thing for coming in here today.
    Mr. Pittenger. I appreciate you saying that. There was some 
inference made that you left because of some individual who was 
elected President.
    Chair White, as you may know, I led an effort earlier this 
year with 50 other Members of Congress relative to concerns of 
the sale of the Chicago Stock Exchange to a Chinese government-
affiliated firm. As well, just 2 weeks ago, my staff met with 
SEC Commissioner Piwowar on this matter, and he expressed some 
of the same concerns regarding the corruption inside Chinese 
firms, as well as their complacency and the lack of 
transparency within them.
    Given that China remains the number-one state sponsor of 
corporate espionage and intellectual property theft and market 
manipulation, we urge the CFIUS to conduct a rigorous review of 
this transaction and block it if it is felt it was necessary. 
Would you kindly comment on this in your opinion relative to 
this transaction and your concerns of whether a Chinese 
government-affiliated firm should buy the exchange, given that 
it does put a more minor role in the markets, albeit it would 
be a foothold into our markets?
    Ms. White. I think the issues that you are referencing are 
CFIUS issues, which is obviously not our bailiwick. We do have 
a process that follows that, which hasn't begun yet, so I 
wouldn't want to particularly comment on that or prejudge that.
    Mr. Pittenger. I understand.
    Chair White, you previously noted that ``in enhancing 
market structure, we must focus closely on the particular needs 
of smaller companies and their investors.'' What do you believe 
are the most significant issues that smaller public companies 
face in today's equity markets? For example, the reduced 
liquidity. You have commented on this some, but I would like 
you to elaborate on that.
    Ms. White. I think one is obviously the availability or not 
of secondary liquidity. I think our Tick Size Pilot is 
obviously designed to see whether widening the spreads may help 
that. I also--in the public spaces, I think we have to be very 
focused on are any of our regulations such that, again, they 
need to be there, they need to protect the markets and 
investors, but are they unnecessarily inhibiting companies, 
smaller companies from going public? That is something we are 
focused on all the time.
    Mr. Pittenger. Sure, thank you.
    I would like to ask you, companies obtain capital through 
borrowing or equity financing, which we have discussed some. 
But do you agree that tightening of credit has made equity 
financing all the more important as a means of providing small 
companies with the capital they need to grow and to expand, 
create jobs?
    Ms. White. That seems to be what the data shows.
    Mr. Pittenger. Thank you.
    I yield back.
    Mr. Garrett. The gentleman yields back. Mr. Clay is 
recognized for 5 minutes.
    Mr. Clay. Thank you so much, Mr. Chairman.
    And thank you, Chair White, for being here. We are more 
than 6 years out from the passage of the Dodd-Frank Act, and 
far too many rulemakings have yet to be finalized, despite the 
ample time that has been afforded to our regulatory agency. One 
such rulemaking relates to Section 956 of Dodd-Frank. This 
section imposes upon large financial institutions the 
responsibility to institute clawback policies or policies that 
would allow the financial institution to snatch incentive-based 
compensation away from executives who engage in wrongdoing.
    Democrats on this committee wrote to you last month asking 
you to both work quickly to finalize the rule, and to 
strengthen it. I am now hearing that this rulemaking may not be 
finalized anytime soon. Indeed, as it relates to the SEC, there 
are reports indicating that the sole Republican Commissioner of 
the SEC has refused to grant a quorum for a Commission vote 
when it comes to any rulemakings he objects to. That is right, 
the Commissioner reportedly won't even show up and vote ``no,'' 
instead choosing to not attend the SEC meeting at all.
    Is it correct that the Republican Commissioner has 
threatened to deny a quorum and thereby prevent a Commission 
vote on any particular rules, including the 956 clawback 
proposal?
    Ms. White. Every rule that I have put on the agenda we have 
had a quorum for. So, the Republican and Democratic, I am only 
three, but we have all showed up for those.
    In terms of 956, the re-proposal that was in I think May of 
this year, which is joint but it is us--SEC as well, we moved 
that by seriatim, so there was no attempt to block that or not 
to have a quorum.
    Mr. Clay. Where is it now?
    Ms. White. I mentioned before and I think it has been 
publicly discussed by other regulators. All of the regulators, 
and there are either five or six of us--it is a joint 
regulation--are working through the comments and working on 
that re-proposal.
    Mr. Clay. Thank you for that.
    Last month, Reuters reported that the SEC questioned Wells 
Fargo over aggressive cross-selling practices in late 2014. 
Quoting correspondence from the Commission's Division of 
Corporation Finance, as you know, the bank's cross-selling 
practices, as they related to deposit and credit accounts, as 
well as online banking, were eventually found to be unfair, 
deceptive, and abusive by the OCC, the CFPB, and the City of 
Los Angeles, to the tune of a combined $185 million fine. Can 
you tell the committee what prompted the SEC's inquiry into 
Wells Fargo's cross-selling practices 2 years ago?
    Ms. White. Again, in terms of the practices themselves, 
that is obviously not in our jurisdiction at the SEC. I think 
what you are referring to--and I had mentioned earlier--are 
reports of our Division of Corporation Finance as part of their 
annual review of financial filings of lots and lots of 
companies, public companies, raising certain questions about 
the disclosures.
    But that is not--in terms of--that is not sort of the 
content of the cross selling practices. That is not in our 
jurisdiction. But I think what that is, is raising some 
questions about--I can't go beyond whatever is in the public 
record about the comments. But I think that is what that refers 
to.
    Mr. Clay. So that was just a routine inquiry on the part of 
the Division of Corporation Finance?
    Ms. White. Again, I can't say anything more specific than I 
have. But it does appear to be part of that annual review 
process of disclosures with just questions being raised, which 
is a routine part of what we do, a very important part of what 
we do but--
    Mr. Clay. And what was the outcome on the Division's 
inquiry?
    Ms. White. Again, as I understand it, comments may have 
been issued on the disclosure questions--really questions and 
comments. I can't tell you what the outcome was in that sense 
of the word.
    Mr. Clay. Okay, and earlier this month, Wells Fargo 
announced via a regulatory filing that the bank again was being 
scrutinized by the Commission related to disclosures 
surrounding its sales practices. How does this differ from the 
2014 inquiry?
    Ms. White. Again, I can't--again, they made the disclosures 
they have. I can't comment on whether we are investigating or 
what we are investigating. I did point out before that 
obviously public company disclosures, if they are something 
that we not only do we review them in our annual reviews, which 
is what we were talking about before, but if we have some 
questions about them, they come under investigation. But I 
can't really say anything more than what the company itself has 
said so far. And I really can't comment further.
    Mr. Clay. Thank you for your responses. And my time is up. 
Thank you.
    Mr. Garrett. The gentlemen from California, Mr. Royce, is 
recognized.
    Mr. Royce. Thank you, Mr. Chairman. And I thank you, Chair 
White. Thank you for your service. Thank you also for always 
making your staff and yourself available.
    The focus of the SEC originally was, and I think should 
continue to be, the strength and resilience of our markets. And 
I think that is critical to economic growth and to the jobs 
that are created thereby.
    But when it comes to capital markets lending, I have a 
question about the last few years and maybe some reflection 
that you would make, because we have had a lot of changes--
major regulatory changes such as risk retention. We have had 
the accounting changes, we have had the prudential changes, and 
new capital and liquidity rule, and new disclosure regimes, and 
automated trading platforms. And all of this is occurring at 
the same time.
    European regulators have raised concerns about how these 
new regulations fit together and that this is the crux of a 
question here, because specifically on his way out the door, 
E.U. Financial Services Chief Jonathan Hill concluded that, 
whereas after 2008, the greatest threat to financial stability 
had been the financial crisis, over time, the greater threat 
had become the lack of growth itself. In other words, too 
little risk itself--in his words--became a stability risk.
    And then he went on to say that the crisis may have made 
the scale and the pace of regulatory change inevitable, but the 
various layers of regulation could have been better aligned.
    That was his reflection, and I was just going to ask you 
yours in terms of whether you agree with that sentiment. If we 
step back and we reflect on the cumulative impact of all these 
regulations and carefully understand what this means for growth 
and lending before we move forward with major changes, what 
would your observations be on that?
    Ms. White. I think in terms of the impact of the--let me 
back up to a threshold. Obviously--
    Mr. Royce. Yes.
    Ms. White. --the capital markets are--and innovation is 
built on taking prudent risks with factors fully disclosed. So, 
that is a very important driver of growth of the economy and 
everything that is positive. Obviously, one has to worry 
about--and we do--systemic risks that could destabilize the 
system and cause tremendous harm--
    Mr. Royce. Right.
    Ms. White. --to investors.
    I think in terms of the impact of regulations, I mentioned 
a little bit earlier that our economists at the SEC are 
studying--and will be reporting to Congress actually next 
year--the impact of--cumulative impact of regulations on 
capital formation as well as corporate bond liquidity. And it 
is something we study all the time.
    When we do our rules by the way, our economists do study 
the economic impacts, and they do look at not just the 
particular four corners of one rule and what you are changing 
there, but you have these other nine rules out there, so when 
you add this one, what is going to be the cumulative effect 
upon all sorts of economic impacts. And it may be a benefit for 
investors or it may not be. But what is the cost of it? And one 
of the costs may be a cost to growth. So you want to be 
concerned about that.
    Mr. Royce. I understand that. I think Financial Services 
Chief Jonathan Hill from the E.U. is just in retrospect looking 
at this. But at a time where, as you know, there is still more 
coming down the pipeline--we have discussions continuing on 
Basel IV, and we have the proposals on the fundamental review 
of the trading book.
    So I assume you share sort of that overarching goal, which 
I think he speaks to there, that we need to balance the goals 
of market stability and safety and soundness with the needs of 
market liquidity, efficiency, and of end users, and overall 
economic growth.
    Ms. White. I think that is--at least as I view it--part of 
the cost-benefit analysis that we do. I think you have to think 
more broadly, as I said before, when you do that. And that is 
very much a part of it.
    Mr. Royce. I appreciate your observations, and again your 
service. And thank you very much.
    Ms. White. Thank you very much. Thank you.
    Mr. Royce. Thank you, Chairman.
    Mr. Garrett. Mr. Meeks is now recognized.
    Mr. Meeks. Thank you, Mr. Chairman. And thank you, Chair 
White. Thank you for all of the hard work that you have done, 
and I particularly want to thank you and I will ask a few 
questions later in regards to making sure that our boards 
become more diverse. And I want to get into few questions on 
that.
    But first, I want to ask you this question. I think I heard 
my colleague Mr. Clay talk about it, and a few other members 
dealing with this whole Wells Fargo issue, et cetera. What 
concerns me about it is that--especially coming out of these 
elections--and I heard both Democrats and Republicans preach 
from north, from urban America, and rural America, they are 
losing faith in the honesty at times of some of our financial 
institutions.
    Now, I know that our financial institutions are absolutely 
essential to our well-being and our way of life. But the 
common, everyday American is--the question that Mr. Royce 
asked--they don't get into that to the in-depth-ness that I 
think that you have to and what the SEC does.
    But they ask me on a consistent basis, for example, how do 
we find out that someone is doing something wrong before it has 
the impact that it has had, whether it was on the employees or 
the consumers of Wells Fargo. So, I would like to ask you as 
you are outgoing, what kind of advice would you give Members of 
Congress or your successor on what we can do? Because even the 
Wells Fargo scenario, it was the--I am hearing this often. It 
wasn't the SEC that discovered it initially, it was the L.A. 
Times.
    And so then it puts a question on where we go with 
reference to our regulatory agencies and confidence in them 
that they are going to in fact be there to protect the American 
people and to make sure that banks are honest. What would you 
say or how would you--
    Ms. White. Yes. That is a very good question again. I can't 
comment specifically on Wells Fargo other than to say that the 
cross-selling practices themselves are not--they are in another 
regulator's jurisdiction.
    I am saying that just for clarity. But the broader issue 
that you are raising, which is really in part a corporate 
culture set of issues, it is in part a, how do we more strongly 
deter also misconduct in our companies and our financial 
institutions? That is a function of law enforcement.
    I have spoken before, and I am going to speak again in a 
few days, about things I think we need to really be 
considering. One of them is enhanced penalty authority for the 
SEC.
    But more fundamentally, I think a question we have to be 
focusing on is accountability at the senior executive level for 
things that may occur on their watch, even if they are not 
evolved in the misconduct. And how do you sort of infuse this 
``do the right thing'' culture throughout a big company.
    We have codes of conduct, and we have mandated those for 
years, which works better in some companies than others, the 
tone from the top in terms of what is said and even what is 
done may be good. I read something recently that resonated with 
me at least that when you want your employees to behave in a 
certain way, you have to really focus on what you are 
inspecting, not just what you are saying and what you are 
rewarding and what you are punishing.
    And so if you end up with the incentives misaligned, don't 
be surprised when you get misconduct that is occurring.
    In terms of earlier detection by the agencies, we are 
working on that all the time. One of the things I am proudest 
of at the SEC frankly is the use of data analytics and all of 
the data that is available out there to make us smarter and 
smarter earlier, about what may be problematic conduct.
    I think that is a whole set of issues that we have to kind 
of think about and I think Congress too has to think outside 
the box about how to really raise that bar of culture and 
compliance.
    Mr. Meeks. That is one of the things that I get concerned 
about, and that is why I appreciate the diversity initiative 
that you have taken with the SEC. Because I think that when you 
have more diverse boards, you have more diverse thinking and 
more diverse watching at that level, because clearly that is 
the best way.
    If you have a great board, they are not going to allow 
these kinds of things going on where they don't have self-
interest--that would be the hope. But in this scenario--in one 
scenario, do you think that there is a conflict, that companies 
can go when you have an individual who is both the CEO and the 
Chair of the Board? It seems to be sometimes, there is no--the 
Chair of the Board can check the CEO, the CEO makes--because 
there is the balancing act and when you have both, it seems to 
me that could lend itself to something unseemly.
    Ms. White. Clearly, it raises all of those issues. I guess 
I am--I think the SEC doesn't take a substantive policy 
position on that. That is really a matter for the shareholders 
and State law. I guess I am speaking for myself though, a bit 
of a one size may not fit all situation. Clearly, there are 
diverse--
    Mr. Meeks. But it should be something that should be 
considered--you look at--when you see that--that should raise a 
flag saying, let's ask some questions about it to see if a red 
flag presents itself that you know needs to be done further.
    Mr. Garrett. The gentlemen's time has expired. Mr. Hultgren 
is recognized for 5 minutes.
    Mr. Hultgren. Thank you, Mr. Chairman. Chair White, thank 
you very much. I echo much of what my colleagues have said and 
I do appreciate your service very much and wish you all the 
best.
    Earlier in the hearing you answered some questions from 
Congressman Garrett about the work of the equity market 
structure advisory committee. As a follow up, can you tell me 
what mechanism is in place to ensure the recommendations of the 
advisory committee are included in policymaking in the 
Commission? How can we be certain that the reports are not left 
on the shelf to collect dust as so many are? And as you are 
probably aware, the Dodd-Frank Act requires the Commission to 
respond to recommendations made by the investor advisory 
committee.
    Ms. White. Yes--first of all, I was behind the formation of 
the equity market structure committee and I think--we formed it 
in early 2015, really bringing a lot of expertise points of 
view to add to, what I also--reinvigorated I think--which is a 
comprehensive view of the equity market structure. And so they 
have been enormously helpful in keeping the focus, keeping 
the--not that our feet really needed to be kept to the fire, 
but we are all sort of in this laser-focused way to sort of get 
to concrete changes if they need to be made.
    So in terms of their recommendations, at the end of the day 
it is really the SEC that has to decide, not the committee. But 
essentially they are dealing with the issues that we are 
dealing with, the most serious ones that are out there, and 
everybody at the Commission, really, across the boards, I think 
there is a lot of unanimity about this, wants to get to the 
bottom of what enhancements should be made to one of the 
strongest and most resilient markets in the world. So, there is 
a lot of momentum to have these not sit on the shelf; that is 
the whole purpose of that structure.
    Mr. Hultgren. I hope that is the case. There is some 
concern here that--
    Ms. White. I understand.
    Mr. Hultgren. Moving on to another question, earlier this 
year Representative Meeks and I sent you a letter regarding the 
reimbursement of Section 31 fees by the Commission that have 
been overpaid by an SRO. In response, it was noted that in 
January 2011, the SEC issued a reimbursement to NYSE Arca when 
it was operating as the Pacific Exchange.
    I wonder if you could explain why another exchange such as 
Chicago or NASDAQ is not entitled to the same treatment under 
the law. I know the Commission has maintained that the statute 
requires clarification but it is clear that the Commission has 
already established a precedent.
    Ms. White. I think the earlier situation occurred before I 
was here. The status is, we are still waiting on word, really, 
from OMB and counsel as to what we can--if we can do this 
without a legislative fix. In terms of what was done earlier, I 
can't speak to what the analysis was there but the current 
analysis is we are not certain we have the authority to return 
those fees. I would like to have the authority to return those 
fees.
    Mr. Hultgren. That certainly seems like a precedent. Is 
there--and at least here, where there is bipartisan support 
of--
    Ms. White. Understood.
    Mr. Hultgren. --the--and, again, just a fairness issue and 
is significant in some of these situations, not in the scheme 
of things but again for--
    Ms. White. No, absolutely. Absolutely.
    Mr. Hultgren. --these--as it is, and so--again I would 
appreciate your help in moving this forward and getting it 
done.
    Moving on, on March 25, 2015, the SEC proposed amendments 
to rule 15b91 that would require additional firms to register 
with FINRA. During a speech on September 14, 2016, you stated 
that the rulemaking would be finalized in the near future.
    While I share the Commission's goal for proper oversight of 
the securities market, there are concerns that the rulemaking 
does not adequately contemplate the impact on the option market 
and its existing regulatory structure. I wonder if you could 
provide an update on the status of the rulemaking? We are short 
of time for this hearing but this is something I hope we can 
continue to discuss.
    Ms. White. What the status of that is that the staff is--
among the comments very carefully studying the impacts in all 
areas on that. It is moving along in that analysis, but there 
is not going to be--I don't think an imminent adoption.
    Mr. Hultgren. Okay. Earlier in this hearing, you mentioned 
to Congressmen Neugebauer when he had some questions in 
discussion with you, that you had performed a working group 
with the SEC to make recommendations to the Commission in 
regards to some FinTech issues. Can you please tell me when 
this working group will make recommendations to the Commission 
and then what questions you have tasked them with answering?
    Ms. White. I can't give you a precise time on that. We are 
still doing--we have done extensive outreach--obviously, our 
FinTech forum was an important part of that. But, we are still 
doing really, still extensive outreach encouraging for example 
the participants yesterday to continue to engage with us.
    So, timing wise, again, I wouldn't call it imminent. And, 
what I have tasked them to do is really across the FinTech 
spaces that touch on SEC functioning to make recommendations as 
to--concrete recommendations as to what the Commission needs to 
do. Whether it is rulemaking--and I start there, but that is 
not kind of the primary focus, if that is the answer that is 
the answer on the recommendation.
    So we need to clarify to entrepreneurs what they need to 
do, having in mind the lens of--this innovation could really 
help the markets and investors and we want to be encouraging of 
that, obviously balancing the investor protection. So we could 
have concept releases, we could have interpretations being 
made, staff guidance being issued, conceivably a recommendation 
for rulemaking, conceivably just messaging more clearly to 
entrepreneurs what the existing requirements are.
    At the end of the day we could end up saying we think our 
existing system of regulation is adequate at least in part to 
these issues, and so very exciting space, lots of potential, 
and I think we are doing it the right way.
    Mr. Hultgren. My time has expired, and again thanks for 
your service. I would echo Congressman Neugebauer, and I do 
think any future policy-making from the Commission certainly 
would benefit from industry input, especially in the FinTech 
area. With that, I yield back. Thank you, Mr. Chairman.
    Mr. Garrett. The gentleman yields back. The gentleman from 
California is now recognized for 5 minutes.
    Mr. Sherman. Mr. Chairman, I have one request, and that is, 
when we put up the $19.8 trillion graphic, we add below it, 
plus $1 trillion for President-elect Trump's infrastructure 
program. Madam Chair, on my request, I have one view. I 
recognize your hard work. I can recognize you crossing off the 
days until an extended and well-earned vacation.
    The tradition is for the SEC Chair, as I understand it, to 
resign when the new President takes over. But that tradition 
was developed at a time when we had a more efficient Senate and 
a more efficient Congress in general that could quickly confirm 
your successor, and that tradition was developed before the 
Chair sat on FSOC, which should not have an empty seat. So you 
now have two very important seats, one at FSOC, and one at the 
Commission, and I would urge you to consider staying on until 
your successor is confirmed. I will just ask you to think about 
it.
    Turning to more immediate or rather more mundane business, 
you still have proposed rule 38e-3. The only folks in the 
financial services industry who can't provide information 
electronically are the mutual funds. They promised me that if 
you pass this rule you will save 2 million trees every year. On 
behalf of those trees, can you move the rule?
    Ms. White. I had indicated earlier--although, obviously I 
have been talking about the agenda with both of my fellow 
Commissioners as I always do, but that is one of the areas 
where I had indicated that we would hope to get a 
recommendation by year-end on that, so--
    Mr. Sherman. Please inform me electronically of what you 
are able to do.
    Ms. White. Okay, I shall.
    Mr. Sherman. Okay, as to small business investment 
companies, the House Appropriations Committee has asked you to 
reopen for comment your proposed rule in that area. Do you see 
yourself reopening that comment?
    Ms. White. Sorry, I didn't hear. What area?
    Mr. Sherman. That is in the area of BDCs, small business 
development companies.
    Ms. White. In terms of that--again, the staff is sort of 
constantly working on what should be done in that space to 
modernize. But I don't think we--I don't know if we are 
reopening a formal comment period on that.
    I need to get back to you on that because I am not 
precisely sure what you are targeting--
    Mr. Sherman. As I seek--
    Ms. White. And I have written about that issue, obviously. 
Yes.
    Mr. Sherman. As I seek money for things that are important 
to my district, I look--
    Ms. White. Fair enough.
    Mr. Sherman. --forward to showing the Appropriations 
Committee that I brought up their issue.
    Ms. White. Understood.
    Mr. Sherman. Final issue. Accounting and auditing consists 
of defining the terms with generally accepted accounting 
principles and then auditing the information. And we do a great 
job of looking at numbers like revenue, expense, assets, 
earnings per share.
    So we have a whole system for those numbers. Now there are 
a bunch of other important numbers. You--I will give for--it 
might be the backlog of a manufacturing or aircraft 
manufacturing company. It might be same-store sales.
    And I wonder, in your closing days, or perhaps on the to-do 
list for your successor, if we could have a project to do the 
same thing that we do for the numbers in the financial 
statements for the numbers in what I hope would be a 
supplemental audited disclosure relevant to certain industries.
    Because when I look at Macy's or Nordstrom, my most 
important number might be earnings per share. Great job, clear 
definition, they can't change the definition year to year 
within the company, it is comparable between the two companies. 
And then I look at same-store sales and it is as loosey-goosey 
as it gets.
    A hundred years ago, we developed the balance sheet and the 
financial statement. Those were thought to be the most 
important numbers then. Can we move forward to have industry-
specific, perhaps voluntary, perhaps required, supplemental 
numerical disclosures with this generally accepted--which means 
SEC or delegated by the SEC--defining and have the public 
accounting companies that have spent 100 years just auditing 
two or three pieces of paper audit a few of those numbers? Or 
are we in this bizarre circumstance where some of the numbers 
are audited and defined and some aren't?
    Ms. White. To some degree, that is correct. Obviously, we 
have done a lot of work on non-GAAP measures, as you know, that 
are not currently audited. And we have given a lot of guidance 
on that.
    Same-store sales, as I understand it, would be auditable. 
There isn't a consistent definition, there is no question about 
that. I think, in terms of sort of adding it to something that 
would be required to be audited, you would have to consider--as 
you would in others the sort of cost benefit of that in terms 
of those figures. But I think there clearly is not consistency 
in that space. It is clearly a metric that people pay attention 
to so--
    Mr. Sherman. Thank you.
    Ms. White. --it is a point well raised.
    Mr. Garrett. The gentleman's time has expired. I now 
recognize Mrs. Wagner
    Mrs. Wagner. Thank you, Mr. Chairman. And Chair White, 
thank you for appearing before us today to testify on the SEC's 
operations, and also I want to lend my voice to the chorus 
thanking you sincerely for your service as you prepare for 
whatever comes next. And we wish you all the very, very best.
    With the election results from last week, there has been a 
lot of discussion and strategizing about the prospects of a 
Department of Labor's fiduciary rule, one of my favorite 
topics, as you well know. So I wanted to ask some questions 
regarding that as we look forward to next year.
    Earlier this month, Chair White, Merrill Lynch announced 
that it would no longer allow its customers with Commission-
based IRAs to purchase mutual funds. Already, choices are being 
taken away from customers. Are you at all concerned, ma'am, by 
the impact on the retirement services market that the SEC 
oversees and regulates?
    Ms. White. I think we are probably all concerned about 
anything that results in depriving retail investors of 
reasonably priced reliable advice. I think we have had that 
discussion before in terms of our own--thinking about a 
fiduciary duty rule. So, markets do adjust to rules in ways 
that sometimes have effects that are not desirable.
    We are obviously talking to where we overlap various 
effects of the Department of Labor rulemaking. And our job is 
to coordinate as best as we can, provide relief if we have the 
authority to and it makes to kind of minimize impacts. But that 
is one of the impacts that--again the Department of Labor, 
certainly they ask a lot of questions about--we have talked 
about before.
    Mrs. Wagner. Merrill Lynch certainly isn't the only company 
to announce major changes to their business operations, 
including even selling off of entire businesses. Are these 
impacts of the DOL rule being considered by the staff at the 
SEC as they develop a proposal to establish a uniform fiduciary 
standard, ma'am?
    Ms. White. The answer is, certainly that data will be 
considered. The status of the SEC is that the staff has 
provided a detailed outline of how it would approach what is a 
very difficult thing to do, and certainly to do well, to the 
Commissioners.
    I don't expect that to--there is not--and as I think I have 
said before, I am one vote on this. And so there is--I don't 
think there is a consensus to move that forward in the current 
Commission. But, it is definitely something that continues to 
be studied, all impacts, and most especially impacts like that 
are being considered.
    Mrs. Wagner. And to that point, has the SEC undertaken a 
specific analysis on the impact of the DOL's rule on 
investments advisors registered with the SEC?
    Ms. White. The answer is that is part of the analysis that 
is done continuously. Actually, there is not a specific sort of 
project for that. But clearly, before we would move towards a 
proposal or a rule, it would be quite definitively studied. But 
it is also being studied as it happens.
    Mrs. Wagner. Earlier this year, before the Capital Markets 
Subcommittee, David Grim, the Director of Investment 
Management, stated that an analysis of the potential impacts of 
a uniform fiduciary standard was ongoing in preparation to 
draft a recommended rulemaking, but made clear that, ``Whether 
a rule is ultimately proposed and adopted depends on further 
analysis and action by the full Commission.'' Can you provide 
the committee any update on the staff's--as I push towards this 
analysis and some closure on this--of an analysis of the 
proposal's impacts?
    Ms. White. Again, I think analysis is ongoing all the time. 
Obviously, everything is up to the full Commission eventually 
as to what rule to do, if any, and what the contents would be.
    Often, when we do rule proposals we do significant economic 
analysis and then we do even more analysis before we decide 
whether to move toward adoption. I don't know if that is what 
he is referencing or not, but it is a continuous process and 
you certainly complete that process before you would do any 
final rule.
    Mrs. Wagner. Any timeframe at all? I know that your tenure 
is coming to a close, but where do you--
    Ms. White. Again, as I have tried to make clear, we would 
do this--if we did this under 913 of Dodd-Frank, it has certain 
parameters in it. It is a really hard, complex rulemaking. I am 
one vote, and I think it is very important to do. But it is 
something that I don't expect there to be action on while I am 
still the Chair. And I think in this current Commission, you 
won't see that advanced. We are a Commission of three, so--
    Mrs. Wagner. I understand. And--
    Ms. White. Okay.
    Mrs. Wagner. And certainly, I also agree that the 
jurisdiction of the SEC in this space is what is very 
preeminent and important vis-a-vis Section 913 of Dodd-Frank. I 
would just encourage you as you come to an end of your tenure 
that you make sure that the--in asking and imploring them that 
the analysis be publicly shared.
    And if not publicly, then certainly that it is shared with 
this committee before there would be any proposal of a uniform 
fiduciary standard. Thank you.
    Ms. White. Thank you. And certainly we would come out with 
a proposal if there was a proposal. Yes, but I hear what you 
are saying.
    Mrs. Wagner. Yes. Just to the analysis as we move forward. 
So, I thank you, Mr. Chairman, I yield back.
    Mr. Garrett. Thank you. The gentlelady has yielded back. 
Mr. Himes is now recognized.
    Mr. Himes. Thank you. Thank you, Mr. Chairman. And Chair 
White, let me join my colleagues in congratulating you and 
thanking you for your service chairing the Securities and 
Exchange Commission at a challenging time.
    There are two questions I wanted to ask you. As you will 
recall, on July 15th, nine of us on this committee sent you and 
the Chairman of FINRA a letter about the persistence of the 
more or less 7 percent IPO gross spread, drawing on the work of 
Professors Abrahamson, Jenkinson, and Jones, and asking both 
the SEC and FINRA to undertake a study of the consistency of 
this pricing.
    It is relevant that we were all supporters of the JOBS Act, 
and we were motivated because of course the JOBS Act, which you 
certainly lived through, was estimated to save companies $1 
million, $2 million a year in Sarbanes-Oxley compliance cost, 
and of course the average IPO of roughly $100 million, 7 
percent gross spread, that is $7 million right there. And a 
remarkably consistent gross spread.
    So, we have not heard back from either the SEC or FINRA, 
and I am wondering if we can get a sense of whether this is of 
interest to either and how we might proceed?
    Ms. White. It is a point of significant interest, I think, 
and frankly, you should be getting a letter soon. I had checked 
on the status of it, so I think there are--I will say this much 
as I understand it, and I--before you get the response--always 
study it with the staff who have been studying it.
    There is some complexity in some of the data, in terms of 
some of the cost information that kind of makes it hard to use 
it as sort of a straight line. It is 7 percent for reasons that 
aren't necessarily apparent and may vary across those that 
charge that 7 percent. Again, I don't want to get ahead of the 
letter.
    And so, there may be difficulty studying it, at least in a 
simple way, in a straightforward way. You also have interacting 
in all of the space--kind of the changes of the JOBS Act that 
were made, whether it is the IPO ramp and some of the other 
changes that have been made. So you have a lot of factors 
interacting.
    But I think you raise a very important point and concern. 
So, we will be--we should be getting back to you, certainly in 
my tenure but I think very shortly in my tenure.
    Mr. Himes. Great, thank you, I appreciate that. At the end 
of the day, we are just sort of asking for some scrutiny here. 
It may turn out that--
    Ms. White. Understood.
    Mr. Himes. --an oddly consistent pricing in a free market. 
Or it may turn out that it is not.
    Ms. White. No, absolutely.
    Mr. Himes. Great. My other question is, there were a number 
of legislative proposals to define, finally, in statute insider 
trading. I am partial to my own H.R. 1625. Responding, 
obviously, to the Second Circuit's decision in the Newman case, 
which, as you know, has led to any number of convictions being 
overturned, and some uncertainty for prosecutors.
    I have struggled to get either Justice or any of the 
regulators or anybody to say that one simple way, of course, to 
remove some of this ambiguity--and I fully understand and we 
have talked about this--that there was a vast body of case law, 
et cetera, et cetera.
    But it does seem to me that clarifying the definition, at 
least, of insider trading and giving our enforcement mechanisms 
and the judiciary some clarity there would make some sense. But 
I have struggled to get sort of an affirmative agreement from 
either the SEC or from the Department of Justice on this. And 
so, I am wondering if you can give me a perspective on that 
question?
    Ms. White. I can try. I know we have discussed this before. 
And I think yours is a very thoughtful bill. I think one of the 
concerns is the kind of various permutations of what the 
courts, the SEC, certainly we consider to be illegal insider 
trading and defining that precisely is a challenge.
    Commissions tried to do it or thought about doing it 
sometime ago by rule, as well. And again, I think we are in a 
little bit different position than the Department of Justice 
with respect to Newman, because it has less impact on our 
program because we don't--we have a lower burden of proof on 
that issue.
    We are obviously watching very closely what happens in the 
Salman case that is before the Supreme Court on personal 
benefit. I think what I have indicated before is, we basically 
have been arguing in our case is quite a robust insider trading 
program, including in the Newman spaces that it impacts--
significant decision, but in narrowing Newman to its facts and 
pretty successful so far. The Salman decision on personal 
benefit, which is part of Newman, if that hopefully from the 
enforcement point of view, that comes out in a way that does 
provide a reaffirmation of what is required and not required to 
prove that element.
    But I think we revisit the question of either by regulation 
or by statute, do we need a clear definition of it and then 
what should that definition be? But I think right now we have 
done well, I think. Again, it is a consequential decision in 
our space, too, which we worry about in terms of Newman.
    And then if Salman comes out in a way that reaffirms what 
we expect it to, I think we think the state of insider trading 
law is such that we can continue to vigorously enforce it.
    Mr. Himes. Okay, great, thank you. And I yield back, Mr. 
Chairman.
    Mr. Garrett. The gentleman yields back. The gentleman from 
Pennsylvania, Mr. Rothfus, is recognized.
    Mr. Rothfus. Thank you, Mr. Chairman. And Chair White, I 
think that exchange you just had with my colleague, Mr. Himes, 
is a testament to your professionalism that you have had before 
this committee and the knowledge base that you bring with you 
that you have accumulated over your career. And I just want to 
commend you for that and for your more than 20 years of public 
service.
    I want to do a little bit of retrospection. I know some of 
my colleagues are focused on the next couple of months and 
potential regulations coming down the pike. I want to take a 
little bit of time to look at what FSOC has been doing. The 
FSOC, with the backing of the SEC, has wisely taken an 
activities-based approach to evaluating systemic risk in the 
asset management industry. Many of us on the committee would 
like to see this approach applied to the insurance industry, as 
well.
    Can you explain why the FSOC has applied an activities-
based approach for evaluating systemic risk to asset managers, 
but not insurers?
    Ms. White. Again, FSOC has the option to do either. And I 
think that what has been said by FSOC on the asset management 
space is that they don't rule out coming back to the 
consideration of a designation of firms in that space. But I 
did--clearly I think the pivot, as it is sort of referred to, 
in the asset management space to activities made great good 
sense in that space.
    Lots of the analysis on the insurance industry actually 
preceded my being on FSOC or at the Commission. It was very 
thorough analysis in that space. And I think FSOC is--I am, 
again, confident with respect to where it landed there.
    But I fully understand the question and the argument that 
is being made. But I think the lens through which they looked 
at the insurance industry was under clear authority to look at 
it in that particular way. And they were confident in their 
analysis there.
    So you might get it slightly--I think that is a pretty 
accurate assessment of the thinking.
    Mr. Rothfus. Also, with respect to insurance, I am a little 
curious about the SEC's role as a member of both the FSB and 
the FSOC. As you know, there are concerns about the extent to 
which the FSB's systemic risk designation process for nonbanks 
is separate and distinct from the process the FSOC uses to 
designate non-bank SIFIs.
    Fed Chair Yellen, who testified before this committee in 
September, argued against any allegations of FSB front running 
based on the assertion that G-SII SIFI designation timeline for 
MetLife and Prudential was inconsistent with that narrative. Do 
you recall whether it was the FSOC or the FSB that first 
designated these non-banks as systemically important?
    Ms. White. Again, this either precedes me or it happened 
about the time I arrived. I will get back to you. I think there 
was designation by the FSB earlier. But I am not sure of that. 
I would have to get back to you on that. The prices are 
separate. I was actually recused on some of the insurance 
companies, so I am less familiar with it.
    The SEC staff does participate extensively in FSB 
committees. If the subject matter of what is being considered 
by an FSB doesn't relate to the securities markets, we don't 
actually participate actively in those workstreams at the FSB. 
I can get back to you with what information we do have on it, 
though.
    Mr. Rothfus. You may want to follow up with that.
    Ms. White. Sure.
    Mr. Rothfus. In your role at the FSOC, have you felt any 
pressure to enact FSB policies or designations domestically?
    Ms. White. None whatsoever.
    Mr. Rothfus. I yield back, Mr. Chairman. Thank you.
    Mr. Garrett. The gentleman yields back. The gentlelady from 
Wisconsin is recognized.
    Ms. Moore. Thank you so much, Mr. Chairman, and thank you 
for your service as well. And thank you, Honorable Mary Jo 
White, for your service as well. And I wish you well in the 
future, but you are still the Chair.
    Ms. White. I certainly am.
    Ms. Moore. So we want to make sure that you use every 
single moment in your office to bring about the results that I 
think American people--we have gone through some rough times in 
this country, and one of those rough times was when our market 
funds sort of broke the bank and there were rules floated, 
rules promulgated to float the NAV.
    And since then, we have seen $64 billion in lost funds 
with--regarding that. And so, I am wondering if you sort of 
changed your mind about the efficacy of--particularly with our 
State and local governments not really having anywhere to put 
these funds that they need to keep liquid that we are already 
centralizing money in these large banks. And I am wondering if 
you have had any further thoughts about floating NAV?
    Ms. White. One answer, and it is a very important one, is 
that we at the SEC continue to review the impact of all our 
rules, and one of the things I have done since I have been 
Chair is to, as they come out of the gates, not wait 2 years or 
5 years to look at them and their impacts, so we have certainly 
been following that very closely.
    I will say that thus far the impacts that have occurred 
were largely predicted in our economic analysis. For example, 
the money market fund spaces in terms of in total is about the 
same in terms of volume size, and dollar size, but a lot of 
movement to government funds, which we predicted.
    I think the diminution on the muni funds that qualify, they 
may be subject to the retail exemption and therefore not 
subject to the NAV and obviously they are not impacted. A lot 
of that has to do with the low interest rate environment and I 
think not the money market fund rule. Clearly, the really 
significant movement has been in the prime institutional, where 
it does apply.
    And so, the answer, I think, to date--and again, we watch 
it very closely--is that the benefit of the reforms that we 
instituted we believe was the systemic risk issue that is 
obviously a large one and of great concern.
    And I think that is something that we are confident that we 
have the--confident subject to further analysis that you needed 
to have the floating NAV for. I think--possibly, watch it 
closely, you will see some return of those funds to the prime 
institutional space over time, but we have to see if that 
happens.
    Ms. Moore. Right now, it is not happening. The SEC put out 
a report in 2012 on the municipal market that included a lot of 
recommendations, including providing the SEC authority to 
directly regulate muni bond disclosures.
    Now, you have been supportive of this report in the past, 
but in light of the MCDC initiative, where several issuers were 
fined for disclosure violations, do you think we need to do 
more in Congress to move on these recommendations?
    Ms. White. I think it is a broader issue than the MCDC, 
because that was really a continuing disclosure obligation, and 
as we have obviously less direct authority in that space than 
we do for the public company sector. I think the MCDC was 
enormously effective and it obviously had--we try to carefully 
calibrate that so that we were mainly aimed, particularly for 
issuers, and really changing the conduct there and improving 
the disclosures. And so we really tried to be very measured 
there.
    The underwriters measured also but obviously, there was a 
different settlement paradigm for them. We have seen 
improvement in those disclosures, but I would not conclude that 
therefore obviates necessarily the need for greater authority 
for the SEC, and that is something that I--the staff is, again, 
it is a continuous process, but we will be looking at--and is 
looking at sort of continuously. So there may be--we may speak 
further on that in the future.
    Ms. Moore. Thank you again, and thank you again for your 
service, and I hope that you stay floating somewhere on the 
fringes so that we can have someone to call.
    Ms. White. Thank you very much. Thank you.
    Ms. Moore. I yield back, Mr. Chairman.
    Mr. Garrett. The gentlelady yields back. Mr. Tipton is 
recognized for 5 minutes.
    Mr. Tipton. Thank you, Mr. Chairman, and thank you for your 
service as well, Chair White. Thank you for taking the time to 
be here. I would like you to be able to expand maybe a bit, if 
you would, on the sandbox regulatory framework in regards to 
innovation being able to provide access to capital. And is it 
your sense that the SEC should take the lead in developing 
regulations for the financial technology center and encourage a 
flexible regulatory structure to allow for experimentation and 
innovation within the FinTech world?
    Ms. White. There are several questions in that. I think I 
am supportive of the SEC asserting its jurisdiction in spaces 
that we are in. I think it is important to do that. We are 
doing that in consultation, coordination, and cooperation in 
the Treasury markets, as well. I think we do a good job in 
those spaces, so I think we should be asserting our authority 
there. I also think that where we come out is yet to be seen on 
various issues which is as it should be, I think.
    And I had mentioned earlier that I had set up a FinTech 
working group some time ago to, among other things, task them 
to come up with recommendations as to how the SEC should 
proceed, clearly, having the lens of this innovation is 
exciting and can yield tremendous benefits so we don't want to 
be stifling in what we do. We obviously have to be concerned 
about protecting investors in everything that we do, as well. 
So, I think we have the right group working on it. I think we 
have the right mindset working on it, so--
    Mr. Tipton. Yes, I was a little concerned when Comptroller 
Curry had made a few comments that seemed to indicate it is a 
little more of a one-size-fits-all, so I was heartened to hear 
your comments a few moments ago saying that one-size-fits-all 
is not the best path, oftentimes--
    Ms. White. Yes, again, just to be clear, at the end of the 
day we have to make sure investors are protected in whatever we 
do, but I think it is something that we have to really look at 
with fresh and open eyes and an open mind.
    Mr. Tipton. Going a little bit to some of the forums that 
you held earlier, and understanding you're gathering the 
recommendations from those forums, what was your sense of what 
the big challenge is that small businesses are really facing?
    Ms. White. There are a lot of challenges that small 
businesses face, which I think all of the regulators need to be 
very focused on, and I think we are at the SEC. You obviously 
have a lot of startups in the spaces that we are looking at, 
whether it be automated advice--I think one of the--well, I was 
watching one of the panels--one of the predictions is that we 
are going to have more consolidation of automated advice 
givers, also known as robo-advisors, but they would like that 
to drop from the lingo that is out there.
    And you worry a bit about those smaller, maybe high-quality 
advice-givers that may find it too difficult to really sort of 
penetrate the market space. We clearly are of the view that 
registered advisors, whether they are automated providers or in 
part automated providers of advice, are subject to fiduciary 
duty rule, and have to comply with those obligations.
    But I think one of the things we are doing in our national 
exam program, that is a priority for our exam program to see 
sort of across the industry, how they are carrying out their 
responsibilities. And what we try to do from that kind of exam 
is then to share kind of the learning, frankly, and hopefully 
that helps some of the smaller outfits, but you can't tell yet. 
I think it is a little too early to predict.
    Mr. Tipton. And you may not be able to fully speak to this 
because I know you are reviewing the recommendations, but did 
you have a sense coming back from the private sector that being 
able to have flexibility to be able to streamline when we are 
talking one-size-fits-all, the multiple costs that are 
associated with redundancy and regulations, if that was 
something that the private sector was really wanting to be able 
to encourage?
    Ms. White. I think the private sector encourages it. I 
think whichever sector I am in, this makes sense. Sometimes 
one-size-fits-all in a certain range, but most often, if you 
have the ability to do it, you want to tailor regulation to the 
particular problem.
    Mr. Tipton. And just kind of a final--you wear a couple of 
hats, but with the FSOC that you sit on, would you support the 
Fed's attempt to usurp the SEC's jurisdiction as a regulatory 
agency over the capital markets?
    Ms. White. No, I would not, but I don't think they are 
trying to do that, at least since I have been here.
    Mr. Tipton. Okay. Great. Thank you so much, and thanks for 
your service.
    Thank you, Mr. Chairman. I yield back.
    Mr. Garrett. Thank you. The gentleman yields back.
    The gentleman from Maine. It is Maine, right?
    Mr. Poliquin. Yes, Mr. Chairman, it is Maine.
    Ms. White. I am coming to Maine. I am coming to Maine.
    Mr. Garrett. Everyone is going to Maine after--
    Ms. White. I knew he was going to ask me.
    [laughter]
    Mr. Garrett. We can restart the clock and give him an 
additional 30 seconds to speak about Maine.
    Mr. Poliquin. I would appreciate that very much, Mr. 
Chairman. Thank you, and I thank Chair White very much for 
being here. Your retirement from your great service to our 
country, and thank you very much, also does provide an 
opportunity for you to vacation more, and Maine, as you know, 
is vacation land, and it is also a great place to buy a second 
home, and we would love to invite you to be a taxpayer up 
there, too, Chair White. So, either way would be just great 
but--
    Ms. White. Now you are going a little too far.
    [laughter]
    Mr. Poliquin. I did want to cover three issues very quickly 
with you today, Chair White, if I can. And we have talked about 
a couple of these already but of course, your mission that you 
folks pursue over there very aggressively, and I appreciate it, 
is to make sure our small investors have the information they 
need to make the conscious decisions, the important decisions, 
to prepare for their retirement nest egg or college savings or 
what have you.
    Now, you folks in rule 30e-3 made a decision not to move 
forward with this rule and I am very grateful. Thank you very 
much. And for two reasons in my case, Chair White. Number one, 
we have a highly rural district in Maine's Second District, and 
there are a lot of folks who are not connected to broadband. We 
have a problem with cell phone coverage in many parts of our 
district. Now, there are 60 million Americans who live in rural 
districts. In addition to that, there are about 46 million who 
are seniors 65 years and older who have a hard time navigating 
the internet.
    So it is critically important to make sure that our senior 
savers, and savers and investors in rural districts, have the 
information that is so critical to make the decisions they 
need. Now, also, in full disclosure Chair White, we make that 
paper in Maine. That very fine paper that these mutual fund 
reports are printed on is made up at Twin Rivers and Madawaska, 
way up along the Canadian border, 600 terrific jobs, and I 
advocate for them all the time.
    Now, I know a lot of the Wall Street firms want to forgo 
the costs of buying paper and printing on the paper and sending 
it out to investors. However, our investors need this 
information if they have no other way to get it. So I am 
pleased and grateful that you have not moved forward on rule 
30e-3 that would make it more difficult for our seniors to 
receive this information on paper.
    So my question to you, Chair White, is why don't you just 
redraw the rule?
    Ms. White. What I said--we have discussed it, I know--at 
the time was, we actually adopted the rest of the proposal for 
investment company reporting was--that we got extensive 
important comments along the lines that you have just made, 
that I directed to the staff to study further, and then come 
back to the Commission, basically targeting year-end to come 
back to the Commission with a recommendation after that was 
done.
    We were looking at who is paying the bills, to try to get 
better cost data. So that undertaking is quite actively 
proceeding, and it is something that I think, again, the 
comments were well taken, and needed further study. I can't 
tell you where the Commission comes out ultimately or precisely 
when.
    Mr. Poliquin. The decision will be made, if I understand 
you correctly, you expect by the end of the year before you 
move on to your--
    Ms. White. Again, I have spoken publicly--I did at the open 
meetings, that we were targeting year-end for that.
    Mr. Poliquin. Okay. Let's move on, if I can, to a separate 
topic. We don't have a lot of time to deal with the role of 
FSOC when it comes to asset managers, and I know a couple of 
questions have already been asked about this, Chair White. You 
and I may disagree on this, but if we both run pension 
management firms and I say that my performance is better than 
yours, then your clients will come to my shop, but the assets 
are holdover here at French Hill's custodian bank. So, if your 
firm gets in trouble, it represents no systemic risk to the 
economy.
    That being said, and also, Chair White, the fact that you 
folks have already adopted a new more aggressive series of 
rules to make sure you aggressively examine our asset 
management community, and you folks are the primary regulator 
for pension fund managers and folks who run college savings 
plans, why don't you just recommend, if I may suggest to FSOC, 
that you take the potential designation of asset managers as 
too-big-to-fail just right off the table. Do you need it 
anymore?
    Ms. White. I do think this is enormously important to 
safeguard our financial system, to have FSOC here, if not 
continuously address risks, emerging risks, possible risks down 
the pike. So, taking things off the table, you really are sort 
of charged with continually looking at it.
    Having said that, clearly there is a significant pivot to 
activities which made sense. We have obviously done rulemaking 
since then, but I think FSOC's effort says they certainly to 
date are complementary of what we are doing at the SEC, not 
contradictory.
    Mr. Poliquin. That concern I have, Chair White, is that of 
course, if any asset manager that represents no systemic risk 
to the economy is so designated, there will be a whole layer 
upon layer of new regulations that will drive up the cost and 
drive down the rate of return of our small investors trying to 
save for college or their retirement. So that is why it would 
be terrific if we could use your influence during the last 
couple of months you are with us to make sure they get the 
message over there at FSOC, and I really appreciate it.
    And again, congratulations, we will be looking forward to 
welcoming you to Maine whenever you find that to be the right 
time. Thank you, Mr. Chairman, I yield back my time.
    Mr. Garrett. The gentleman yields back. Mr. Hill is now 
recognized for 5 minutes.
    Mr. Hill. I thank the Chair, and I thank you, Chairman 
Garrett, for your service in this Congress as chairman of our 
Capital Markets Subcommittee. You have done an outstanding job. 
Chair White, it is a pleasure to see you, and as someone who 
has testified before Congress before, I always thank you for 
your forthright testimony. It is a relative statement compared 
to many who come before us. Sometimes the bar is relatively low 
to step over. But I really do appreciate your effort to be 
responsive to the committee in a timely way.
    The market structure topic, we have talked about that 
before. And this is something in the first term I have had in 
Congress over the past 2 years that has concerned me because we 
have some 50 trading platforms and we have added recently a new 
exchange. And when the Commission published its list of rules 
that would be reviewed pursuant to the regulatory flexibility 
act, it included Regulation NMS. And have you--where are you on 
your commitment to fully vet and review that rule?
    Ms. White. NMS, as I mentioned before, as least as I look 
at our market structure work, it is both things that we know 
now we think at least should be fixed, and it is a 
comprehensive review of all the relevant issues. Obviously, one 
of the biggest relevant issues is NMS itself, and that is 
something that is both is something that is the subject of our 
MSAC committee's work and also the SEC's comprehensive review.
    There are a lot of pieces to that. One of the reasons we 
want to be data-driven in the market structure work is that we 
don't--sort of, we do have the safest, most reliable markets in 
the world and strongest I think, and we don't want to do 
something would have unintended consequences. But in terms of 
examining NMS from the ground up, it is very much on the table 
to do.
    Mr. Hill. When do you think the Commission will review 
their work and make a proposal there?
    Ms. White. With respect to NMS itself? I can't really 
predict the precise timing, I guess it may be up to somebody 
besides me, but in terms of actually when it will be before the 
Commission. But I am sure it will be--well, I shouldn't say I 
am sure, but I would expect it to remain front and center going 
forward.
    Mr. Hill. So this issue between trading venues and 
exchanges is a related topic. I think it all relates to us 
having the most competitive markets and having the most 
competitive particularity equity markets. I noted that former 
Commissioner Gallagher gave a speech not long ago where he 
talked about should exchanges remain self-regulatory 
organizations, SROs, in your work, as you head out, have you 
got and developed a personal view on that?
    Ms. White. That is something, we continue to say, that is 
also, I will say, in one of our subcommittees that is very 
focused on it, we continue to do work on it, I haven't formed a 
view on it, other than I think there are significant questions 
raised.
    Mr. Hill. I want to switch gears briefly, and it is 
something that I think Congress has reaffirmed over the past 
years, and certainly the Commission has, and that is the issue 
that for equity research, one can use so-called soft dollar 
Commissions to pay for investment research. Is that still the 
position of the Commission? And under 20 AD, for example?
    Ms. White. There is not a prohibition on that, right?
    Mr. Hill. Yes. But I hear that in Europe, they are headed 
in a different direction, under their 2014 proposal they put 
out called markets and financial instruments directive. 
Couldn't that create a real disparity for U.S. investment 
banking and research firms for their clients in Europe versus 
their clients in the United States?
    Ms. White. It certainly has that potential. One of the 
things that struck me, certainly in the first week I entered 
the door, was just how much we need to be coordinating with 
international regulators for--certainly among the reasons, the 
ones you are just teeing up right now because, and it is 
something we do consider when we decide our own policies as 
well.
    You are looking at, how do you coordinate two different 
systems? Who is at an advantage and a disadvantage? And so, it 
is something we continue to discuss with them in various forms, 
actually.
    Mr. Hill. Would it be something you would be willing to 
write a letter to the European securities regulators and 
caution them about? Because of the disparate treatment that our 
investment research companies--
    Ms. White. I think I would need a little further briefing 
on that from the staff as to exactly, at least in their view, 
how they sync together or don't. But certainly if I was of that 
view, after that, I certainly wouldn't hesitate. I might not do 
it by letter, but--
    Mr. Hill. You have time. It doesn't take place until 2018.
    Ms. White. I do have time.
    Mr. Hill. But in 2017, you know how firms work well in 
advance of deadlines, and I think it could put American 
companies at severe disadvantage. Thanks for taking a look at 
it for me. I yield back, Mr. Chairman.
    Ms. White. Thank you.
    Mr. Garrett. The gentlemen yields back.
    And I think Mr. Barr is going to have the last word on this 
entire matter.
    Mr. Barr. I would like to join my colleagues in also 
thanking our chairman of the Capital Markets Subcommittee for 
his leadership. And, Chair White, thank you for your service as 
head of the Commission and for sharing your expertise and your 
insights in helping us with our oversight responsibilities over 
the Commission, over these last several years.
    I want to focus on the part of the Commission's statutory 
mission to maintain fair, orderly, and efficient markets and 
facilitate capital formation. Following up on the questions 
from my colleague, Mr. Royce, regarding fixed-income markets, 
as you know, significant attention has been devoted to 
liquidity concerns in fixed-income markets, both in the U.S. 
and globally.
    And when you last testified, I believe, in front of our 
committee and when you were asked about the regulatory impact 
on liquidity and illiquidity that we are witnessing in fixed-
income markets, I think you testified that there is no question 
that there are concerns about the liquidity in fixed-income 
markets, but that you could not identify the culprit. And we 
have heard similar testimony from the Treasury Secretary, who 
denies that regulations, bulk or risk retention, Basel III can 
be pinpointed to blame here.
    And yet, we continue to see, since your last appearance in 
front of our committee, evidence of regulatory impacts on 
liquidity. On September 27th, former Treasury Secretary Hank 
Paulson commented that the Volcker Rule solved a problem that 
was not a problem. We have much less liquidity in the markets. 
It has become much harder for financial institutions to provide 
liquidity. That is his testimony.
    And then you had a CEO of one of the world's largest 
electronic market makers announcing that his firm would no 
longer invest in certain bond exchange-traded funds because of 
underlying securities that become too hard to trade. And then 
on October 7th, the value of the British pound plummeted from 
about $1.26 to $1.18 in a matter of minutes during trading in 
Asia, with some electronic platforms recording trades below 
$1.15. The Wall Street Journal attributed this extreme 
volatility in part to a lack of currency traders in the foreign 
exchange markets.
    So given some of these more recent developments, have you 
been able to determine whether regulations, the Volcker Rule, 
risk retention, or Basel III are in fact impacting this 
illiquidity?
    Ms. White. The answer to that is, no, we don't have the 
evidence to make that finding. I think there are also some 
differences of opinion as to whether you have actually had the 
deterioration in liquidity that you are basically--a number of 
market participants are noting from the data that we have 
available.
    One of the things that--because I sort of constantly go 
back to the staff and say, here is what the data looks like, we 
report quarterly to this committee and several of us 
regulators, primary liquidity, secondary liquidity, in the 
corporate bond markets. And whereas you clearly have some 
deterioration if you use the measure of dealer inventories, the 
other measures really seem to be holding pretty constant.
    We obviously had some impact from Brexit, but that seemed 
to recover. And so one of the things that is possible in terms 
of, why are there two different views out there is most of 
liquidity measures are based on completed transactions. Now, 
there can be transactions that don't get completed because you 
don't have an available buyer or seller. And so it is kind of a 
speculative thought, I suppose. But it could be that some of 
what isn't being measured is actually transactions not being 
consummated as opposed to ones that may take a while to 
consummate.
    So there still is a different--the bottom line is, no, we 
don't see that impact in the data and we don't see the 
deterioration that others see in the data that we have.
    Mr. Barr. But there is evidence out there. So for example, 
when the CEO of Blackstone says when they passed Volcker, there 
were 25 firms making markets in junk-bonds, guess how many 
there are now? Five. From twenty-five to five. Triumph? You 
decide. What happens when things get difficult and the market 
now just locks up? That is not healthy for capital markets, and 
this is happening all over. It affects all markets and 
liquidity is coming down because we mandated that to make the 
world safer. But this does not make the world safer. This is 
encouraging the world to be--this is not encouraging the world 
to be safe, because when people need to sell and there isn't 
liquidity, what happens? Your reaction to that?
    Ms. White. I think that is the dealer inventory metric I 
was just talking about. But under Volcker, you also have the 
market maker exception, so that you can have banks basically 
acting as market makers that still permit it. So that can be a 
source of liquidity.
    But look, just sort of stepping back, these are significant 
concerns. And we study it globally, we are studying it 
domestically, we are studying it getting all the available data 
that we can and--and really staying on top of it. But our 
economists at the SEC are actually directed to report to 
Congress, I think in May of 2017, of the impact of regulations 
collectively on corporate bond liquidity. That is part of what 
they will be reporting on.
    Mr. Barr. My time--
    Ms. White. It is a hard thing to do, a hard thing to ferret 
out also, and a hard thing to measure.
    Mr. Barr. My time has expired, and you are exiting your 
post, but I would encourage your successors at the SEC to 
continue to evaluate that particularly in their role as a 
member of FSOC.
    Thank you. I yield back.
    Mr. Garrett. There are a lot of other Members out in the 
other chambers who are just waiting to come in at this last 
minute.
    [laughter]
    Because I was that told you, unlike many other witnesses 
who come before us, do not have a hard stop date. So it is just 
going to keep--no, it is not.
    Ms. White. I just might as well sleep here right now, if it 
is okay.
    Mr. Garrett. So that concludes today's hearing. And let me 
once again say thank you for your service. Someone made the 
comment, and I don't think it was meant to come out that way, 
they said they thank you for your service and it is relative to 
the others here. And it is very true that the bar for the other 
people here is pretty low. But you certainly have greatly 
exceeded that by the breadth of your expertise and your 
dedication to public service in this position specifically.
    So I personally thank you for what you have done, although 
I will say at the very beginning with a ``but,'' but on those 
areas that we disagree on.
    Ms. White. I understand. And thank you for your service, as 
well.
    Mr. Garrett. Thank you.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place her responses in the record. Also, 
without objection, Members will have 5 legislative days to 
submit extraneous materials to the Chair for inclusion in the 
record.
    And with that, this hearing is adjourned.
    [Whereupon, at 12:46 p.m., the hearing was adjourned.]

                            A P P E N D I X



                           November 15, 2016
                           
                           
                           
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