[Senate Hearing 114-223]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 114-223


NOMINATIONS OF MATTHEW RHETT JEPPSON, LISA M. FAIRFAX, AND HESTER MARIA 
                                 PEIRCE

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

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                                   ON

                            NOMINATIONS OF:

   Matthew Rhett Jeppson, of Florida, to be Director of the U.S. Mint
                               __________

  Lisa M. Fairfax, of Maryland, to be a Member of the Securities and 
                          Exchange Commission
                               __________

  Hester Maria Peirce, of Ohio, to be a Member of the Securities and 
                          Exchange Commission
                               __________

                             MARCH 15, 2016
                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                 Available at: http: //www.fdsys.gov/
                 
                                 ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

99-694 PDF                     WASHINGTON : 2016 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Publishing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001
                          



















            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  RICHARD C. SHELBY, Alabama, Chairman

MIKE CRAPO, Idaho                    SHERROD BROWN, Ohio
BOB CORKER, Tennessee                JACK REED, Rhode Island
DAVID VITTER, Louisiana              CHARLES E. SCHUMER, New York
PATRICK J. TOOMEY, Pennsylvania      ROBERT MENENDEZ, New Jersey
MARK KIRK, Illinois                  JON TESTER, Montana
DEAN HELLER, Nevada                  MARK R. WARNER, Virginia
TIM SCOTT, South Carolina            JEFF MERKLEY, Oregon
BEN SASSE, Nebraska                  ELIZABETH WARREN, Massachusetts
TOM COTTON, Arkansas                 HEIDI HEITKAMP, North Dakota
MIKE ROUNDS, South Dakota            JOE DONNELLY, Indiana
JERRY MORAN, Kansas

           William D. Duhnke III, Staff Director and Counsel

                 Mark Powden, Democratic Staff Director

                    Dana Wade, Deputy Staff Director

                    Jelena McWilliams, Chief Counsel

                    Elad Roisman, Securities Counsel

                Shelby Begany, Professional Staff Member

            Laura Swanson, Democratic Deputy Staff Director

                Graham Steele, Democratic Chief Counsel

                 Elisha Tuku, Democratic Senior Counsel

             Megan Cheney, Democratic Legislative Assistant

                       Dawn Ratliff, Chief Clerk

                      Troy Cornell, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                  (ii)





















                            C O N T E N T S

                              ----------                              

                        TUESDAY, MARCH 15, 2016

                                                                   Page

Opening statement of Chairman Shelby.............................     1

Opening statements, comments, or prepared statements of:
Senator Brown....................................................     3

                                NOMINEES

Matthew Rhett Jeppson, of Florida, to be Director of the U.S. 
  Mint...........................................................     5
    Prepared statement...........................................    39
    Biographical sketch of nominee...............................    42
    Responses to written questions of:
        Senator Brown............................................    92
Lisa M. Fairfax, of Maryland, to be a Member of the Securities 
  and Exchange Commission........................................     6
    Prepared statement...........................................    52
    Biographical sketch of nominee...............................    53
    Responses to written questions of:
        Senator Crapo............................................    92
        Senator Corker...........................................    93
        Senator Kirk.............................................    95
        Senator Sasse............................................    96
        Senator Rounds...........................................   100
        Senator Schumer..........................................   103
        Senator Menendez.........................................   104
        Senator Warner...........................................   109
Hester Maria Peirce, of Ohio, to be a Member of the Securities 
  and Exchange Commission........................................     7
    Prepared statement...........................................    63
    Biographical sketch of nominee...............................    64
    Responses to written questions of:
        Senator Corker...........................................   111
        Senator Kirk.............................................   112
        Senator Sasse............................................   113
        Senator Rounds...........................................   118
        Senator Schumer..........................................   121
        Senator Menendez.........................................   122
        Senator Warner...........................................   124

              Additional Material Supplied for the Record

Charts submitted by Senator Brown................................   126

                                 (iii)
 
NOMINATIONS OF MATTHEW RHETT JEPPSON, OF FLORIDA, TO BE DIRECTOR OF THE 
    U.S. MINT; LISA M. FAIRFAX, OF MARYLAND, TO BE A MEMBER OF THE 
 SECURITIES AND EXCHANGE COMMISSION; AND HESTER MARIA PEIRCE, OF OHIO, 
        TO BE A MEMBER OF THE SECURITIES AND EXCHANGE COMMISSION

                              ----------                              


                        TUESDAY, MARCH 15, 2016

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:03 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Richard Shelby, Chairman of the 
Committee, presiding.

        OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY

    Chairman Shelby. The Committee will come to order.
    This morning, we will hear testimony on a nomination for 
the U.S. Mint and two nominations for the Securities and 
Exchange Commission. This panel of nominees, if confirmed, will 
have important responsibilities for the manufacturing and 
distribution of our currency as well as for overseeing our 
Nation's capital markets.
    The Committee will first hear from Mr. Matthew Rhett 
Jeppson, who is nominated to be Director of the United States 
Mint. He has served as the Principal Deputy Director of the 
Mint since January 15, and before that was Acting Chief 
Operating Officer of the U.S. Small Business Administration. If 
confirmed, Mr. Jeppson would be responsible for overseeing the 
manufacturing and distribution of currency as well as 
collectible coins, national medals, and other precious metals. 
Mr. Jeppson, the Committee welcomes you this morning.
    Both Ms. Fairfax and Ms. Peirce are nominated to be members 
of the Securities and Exchange Commission. Ms. Fairfax is a 
Leroy Sorenson Merrifield Research Professor of Law at the 
George Washington University Law School. Since 2009, she has 
served on the Executive Board and is the Director for Programs 
for the George Washington Center for Law, Economics, and 
Finance. She has previously served as a visiting professor at 
the Georgetown University Law Center as well as various roles 
at the University of Maryland School of Law. Ms. Fairfax has 
also previously worked at a Washington, DC, law firm. She is a 
graduate of Harvard College and Harvard Law School.
    Ms. Peirce is a Senior Research Fellow at the Mercatus 
Center at George Mason University and the Director of the 
Mercatus Financial Markets Working Group. Before joining 
Mercatus, Ms. Peirce served as Senior Counsel for securities 
issues on this Committee's staff, and prior to that, she served 
at the SEC as a Staff Attorney and Counsel to Commissioner Paul 
Atkins. Before that, she had clerked for Judge Roger Andewelt 
on the Court of Federal Claims and was an associate at a 
Washington, DC, law firm. Ms. Peirce earned her B.A. in 
economics from Case Western Reserve University and her J.D. 
from Yale Law School.
    As SEC Commissioners, Ms. Fairfax and Ms. Peirce would be 
responsible for helping the SEC fulfill its mission of 
protecting investors, maintaining fair, orderly, and efficient 
markets, and facilitating capital formation. The Committee 
welcomes you both and looks forward to the nominees' testimony.
    Before we get into that, I would like to comment on a few 
other things.
    The nominations update. Last week, the Committee voted to 
report out favorably the nomination of Adam Szubin to be Under 
Secretary of the Treasury for Terrorism and Financial Crimes.
    We currently have 16 nominations pending before the 
Committee. Of those 16 nominations, seven are privileged, which 
allows them expedited floor consideration upon Committee 
certification of the receipt of paperwork. Of those seven 
privileged nominations, the Committee has transmitted to the 
floor a certification of receipt of nomination information for 
four individuals, for nominations for Directors of the 
Securities Investor Protection Corporation, John Menendez and 
Leslie Bains, and for nominations for Members of the Board of 
Directors of the National Association of Registered Agents and 
Brokers, Raymond Farmer and Heather Steinmiller. Certifying the 
receipt of paperwork for privileged nominations effectively 
clears them for floor consideration.
    With respect to the other three privileged nominations 
before the Committee, we are awaiting a response from the 
Administration related to two additional nominees to the 
National Association of Registered Agents and Brokers and have 
not received the completed paperwork for a third nominee to 
this association.
    With respect to others pending before the Committee, I have 
scheduled a markup for April 7 for the nomination of J. Neal 
Lerner to be Inspector General of the Federal Deposit Insurance 
Corporation and Amias Gerety to be Assistant Secretary of the 
Treasury. I expect to add other nominations to this markup, as 
well, including those before us today. However, I have excluded 
them from the notice at the request of the Ranking Member at 
this time.
    Regarding the Fed nominations, as I have said before, I 
will not hold a hearing on the two nominations for members of 
the Federal Reserve Board of Governors until the President 
fulfills his duty under the law and nominates a Vice Chairman 
for Supervision. Section 1108 of the Dodd-Frank Act amends the 
Federal Reserve Act to establish this position, one of two Vice 
Chairmen, which is responsible for overseeing the Fed's 
supervisory and regulatory activities.
    I would remind you, this is no small role, given the Fed's 
unprecedented authority over our financial system granted in 
Dodd-Frank. Leaving the position vacant also deprives Congress 
of an important oversight tool, as the Vice Chairman for 
Supervision is statutorily required to testify before this 
Committee twice a year. I believe this position should have 
been filled long ago. It has now been almost 6 years since the 
enactment of Dodd-Frank. The President should obey the law and 
hold the Federal Reserve accountable for its actions.
    Senator Brown.

               STATEMENT OF SENATOR SHERROD BROWN

    Senator Brown. Thank you, Mr. Chairman, for holding today's 
hearing. Congratulations to the three of you as this process 
begins to move forward.
    Government is only as good as the people who are entrusted 
with positions of leadership. I have been clear in my 
frustration with this Committee's failure to act on the many 
nominees for whom we are responsible. We have received 19 
nominations over the past 15 months. We have acted in Committee 
on only 1 of those 19, and that one we did last Thursday. No 
other Senate committee failed to act on a nominee last year 
throughout calendar year 2015 except this one.
    While a lazy or an uninformed observer might chalk this up 
to partisan bickering or the sort of thing that happens all the 
time, that is not really the case. Do not take my word for it, 
as Casey Stengel liked to say, you could look it up.
    Posted on the Minority's Web site, this chart are 
spreadsheets of the actions of the Committee and the Senate on 
nominees over the past 15 years. The lowest share of nominees 
reported by the Committee was 81 percent, in part because three 
nominees arrived in late December. That 81 percent was during 
my first Congress, my first 2 years on the Banking Committee, 
in 2007 and 2008. There was a Democratic majority on this 
Committee and in the Senate. There was a Republican President. 
Yet, we confirmed 81 percent. That number would have been 
higher if those three nominees had not arrived so late. Our 
record to date is 26 percent, and just a few weeks ago, it was 
zero.
    The lowest rate of confirmation of nominees during this 
period, from the 107th through the 114th Congresses, the lowest 
rate of confirmations was 80 percent. Confirmation means the 
Committee acts, the Senate acts. Our record on these 19 
nominees is zero.
    We should make progress on all the nominees pending before 
the Committee, not just the nominees before us today, but those 
who have been in limbo for 200 or 400 or even 900 days.
    I know there are disagreements with President Obama's 
policies. That is natural. But he was elected the Chief 
Executive of our country twice. In fact, in the last century, 
only four Americans have received a majority of the popular 
vote twice, Dwight Eisenhower, Franklin Roosevelt, Ronald 
Reagan, Barack Obama. Only four human beings in our country 
have gotten a majority of the vote for President of the United 
States twice.
    President Obama has the right to put qualified people in 
executive positions to carry out his policies and to enforce 
the law. It would be a mistake to adopt a wholesale policy of 
holding staff hostage for supporting the views of their boss.
    That said, Mr. Chairman, I am pleased to welcome today's 
nominees. Mr. Matthew Rhett Jeppson has been nominated to be 
Director of the Mint. Ms. Lisa Fairfax and Ms. Hester Peirce 
have been nominated to be members of the SEC.
    Our first nominee exemplifies public service. He has served 
our country since 1989 in active duty in the First Marine 
Division and then in the U.S. Marine Corps Reserves. Between 
1995 and 1999 and again from 2001 through 2012, Mr. Jeppson 
held leadership positions within unified combat commands, the 
Marine Corps, and U.S. military forces in Afghanistan. In 2012, 
Mr. Jeppson joined the Small Business Administration to focus 
on veterans business development and served as Acting COO, and 
last year he became Principal Deputy Director of the U.S. Mint.
    Eight years after the financial crisis, the importance of 
the SEC in monitoring financial markets, protecting investors, 
is only more obvious. We continue to learn that markets and 
large institutions are interconnected and increasingly complex.
    Ms. Peirce has spent much of her career in public service, 
first at the SEC, then working on this Committee's Banking 
staff. At that time, Ms. Peirce saw the financial crisis 
unfold. I trust that experience will serve her well as the SEC 
finalizes Dodd-Frank rules and tackles the rest of its agenda, 
including Chair White's initiatives on mutual funds and market 
structure.
    Ms. Fairfax brings an academic's expertise combined with a 
reasoned perspective to address the complex issues facing SEC. 
Her scholarship on the duties and responsibilities of corporate 
boards will be a valuable point of view when considering 
enforcement issues and the best way to achieve accountability.
    In order to navigate an ever-changing financial market 
landscape, the SEC must work closely with other regulators here 
in the U.S. and abroad to make sure markets function well and 
that investors are protected. SEC Commissioners owe a duty to 
the public to achieve these goals. We need to ensure that SEC 
has the power and the resources to do that.
    Thank you, Mr. Chairman.
    Chairman Shelby. Thank you, Senator Brown.
    Will all the nominees rise and raise your right hand.
    Do you swear or affirm that the testimony that you are 
about to give is the truth, the whole truth, and nothing but 
the truth, so help you God?
    Mr. Jeppson. I do.
    Ms. Fairfax. I do.
    Ms. Peirce. I do.
    Chairman Shelby. Do you agree to appear and testify before 
any duly constituted Committee of the Senate?
    Mr. Jeppson. I do.
    Ms. Fairfax. I do.
    Ms. Peirce. I do.
    Chairman Shelby. You may be seated.
    All of your written testimony will be made part of the 
hearing record.
    Mr. Jeppson, we will start with you, and you sum up what 
you want to say.

STATEMENT OF MATTHEW RHETT JEPPSON, OF FLORIDA, TO BE DIRECTOR 
                        OF THE U.S. MINT

    Mr. Jeppson. Thank you, Mr. Chairman, Senator Brown, and 
Members of the Committee. I am honored to appear before you 
today.
    I would also like to thank the President for the trust he 
has placed in me by nominating me to serve as the 39th Director 
of the United States Mint.
    Since January 2015, I have had the honor of serving as the 
Principal Deputy Director of one of our Nation's oldest and 
most venerable public institutions. The Mint was established 
early on in the life of our republic; coining money is one of 
the powers the Constitution explicitly grants to Congress.
    I would like to begin my remarks by sharing how my personal 
story led me to the Mint and describing what qualifies me to 
become its next leader. Following that discussion, I will 
explain how the Mint is fulfilling its mission today and what 
we need to do to sustain the positive results we have produced 
for the American people.
    Throughout my career, I have served our Nation in a variety 
of capacities. Prior to the Mint, I was Associate Administrator 
for Veterans Business Development and later Chief Operating 
Officer at the United States Small Business Administration. In 
those roles, I am proud of the significant strides we made to 
aid Veterans seeking to start small businesses.
    Earlier in my career, I served as Director of State 
Purchasing in my home State of Florida, where I oversaw the 
implementation of a new electronic procurement system that 
saved the State government millions of dollars.
    Each of these professional experiences has shaped me in 
important ways, but my greatest source of pride is my service 
in the United States Marine Corps. My career as a Marine, from 
those early days leading Marines in combat during Desert Storm, 
to my more recent service in Afghanistan and Europe, has given 
me the deepest admiration and respect for the Corps and its 
mission.
    In January of this year, I retired from the Marine Corps 
after nearly 28 years of combined Active and Reserve service. 
Serving our Nation as a Marine has profoundly influenced who I 
am. It has given me a distinct approach to leadership and 
management which I will bring to the Mint, if I am confirmed.
    David Rittenhouse, renowned American astronomer, inventor, 
clockmaker, and close friend of George Washington, was the 
first Director of the Mint. He held a deep appreciation for 
coin design as an artistic expression of our shared values.
    Other American leaders have also taken great pride in our 
work. President Theodore Roosevelt shared Rittenhouse's belief 
that the way that we design our coins ought to reflect our 
shared heritage. He personally commissioned the redesign of 
American coinage in the early 20th century.
    Mr. Chairman, the modern United States Mint is a lean, 
vibrant, and efficient organization. When I began my service at 
the Mint, one of the first things I set out to do was visit 
each of our facilities and visit with our employees. Their 
advice and ideas have helped me set priorities for the Mint. We 
must continue to invest in our people and enable them to have 
the skills they need to accomplish our mission and meet the 
coinage needs of the United States.
    In 2016, our mission is more important than ever. Cash 
remains the most common method consumers use for payment, 
comprising 40 percent of transactions, according to a recent 
report by the Federal Reserve.
    In fiscal year 2015, we shipped more than 16 billion coins, 
an increase of 24 percent from the previous year. Bullion coin 
sales were up more than 25 percent for fiscal year 2014, with 
American Eagle Silver Bullion Coin sales at their highest since 
the program started in 1986. Numismatic earnings were up more 
than 32 percent.
    Even as our production needs have increased considerably, 
we have controlled costs. Last year, general and administrative 
costs associated with circulating coin production were down 9 
percent. The unit cost of the penny was the lowest since 2008, 
the nickel the lowest since 2009, and the dime and quarter were 
at their lowest since 2006. Thanks to these strong financial 
results, we were able to transfer more than $550 million of 
seigniorage to the Treasury General Fund, which can be used to 
reduce the cost of the interest on the national debt. We also 
generated an additional $61 million in numismatic and bullion 
earnings, which were transferred to the General Fund for 
operational use.
    Mr. Chairman, Members of the Committee, I believe the Mint 
reflects the very best of our Nation. Our motto, ``Connecting 
America Through Coins'', has real meaning. The design, themes, 
and subjects depicted on our coinage represent our shared 
values, history, aspirations, and culture.
    If I am privileged to be confirmed by the Senate as the 
next Director of the U.S. Mint, I pledge to uphold the trust 
placed in me by you and the President. I appreciate this 
opportunity to speak with you today and look forward to your 
questions.
    Chairman Shelby. Ms. Fairfax.

 STATEMENT OF LISA M. FAIRFAX, OF MARYLAND, TO BE A MEMBER OF 
             THE SECURITIES AND EXCHANGE COMMISSION

    Ms. Fairfax. Chairman Shelby, Ranking Member Brown, and 
Members of the Committee, thank you so much for giving me the 
opportunity to speak with you today. It is an incredible honor 
and privilege to appear before you as one of the President's 
nominees to be a Commissioner of the Securities and Exchange 
Commission.
    Before I begin my remarks, I would like to briefly 
introduce my family members who are here with me. I am grateful 
to be joined today by my husband, Roger Fairfax, my three 
daughters, Fatima, Regina, and Nadia, my mother, Elizabeth 
White, my mother-in-law, Charlene Fairfax, my brother-in-law, 
Justin Fairfax, and my sister-in-law, Jennifer Fairfax. I have 
a large extended family.
    [Laughter.]
    Ms. Fairfax. And I want to thank all of them, as well as 
all of my friends, for their incredible and continued support.
    I also would like to congratulate Hester Peirce, who like 
me is here today as a nominee to serve on the Commission.
    I sit before you today because I believe deeply in the 
importance of robust and healthy securities markets. I also 
believe deeply in the SEC's three-part mission to protect 
investors, maintain fair, orderly, and efficient markets, and 
facilitate capital formation. I am honored and humbled by the 
prospect of potentially serving the Nation and its investors 
alongside the Chair, the other Commissioners, and the many 
staff members who work tirelessly to support the vital work of 
the SEC.
    As a law professor, over the last 15 years, I have had the 
privilege of teaching corporations and securities law to the 
next generation of practitioners, judges, and regulators, so 
that they can understand the increasingly complex world in 
which companies must operate, markets must perform, and 
regulators must monitor.
    My teaching, along with my research and writing in these 
areas, have given me a deep understanding of the issues 
confronting the SEC, as well as a strong desire to help tackle 
those issues head-on. My research and work with organizations 
such as the American Bar Association and FINRA have taught me 
the importance of engaging a variety of different, diverse 
perspectives when seeking to develop solutions to complex 
problems. I look forward to such engagement if I am fortunate 
enough to be confirmed.
    Importantly, I believe that the SEC's three-part mission is 
more than a statement. It is a set of guiding principles that 
should shape every aspect of the agency's activities. It is 
also a set of principles that must work together.
    I believe the SEC's work must be aimed at ensuring that 
investors are protected at all times and that investors have 
confidence in the markets and the financial system. The SEC 
also has a responsibility to facilitate access to needed 
capital for all participants in the market, from the 
corporation and small business owner in need of cash and 
credit, to the individual investing to support a family, 
finance a child's education, or ensure a comfortable 
retirement. And all of these participants need assurances that 
their capital is safe and secure, which is why the SEC has a 
responsibility to maintain markets that are orderly, efficient, 
and fair. Everyone needs to play by the same rules and there 
must be strong repercussions for those who break them.
    Thank you again for the opportunity to appear before you. 
If I am confirmed, I will work tirelessly to maintain the 
confidence that the President, this Committee, and the Senate 
will have shown in me. I look forward to answering any 
questions you may have.
    Chairman Shelby. Ms. Peirce.

 STATEMENT OF HESTER MARIA PEIRCE, OF OHIO, TO BE A MEMBER OF 
             THE SECURITIES AND EXCHANGE COMMISSION

    Ms. Peirce. Chairman Shelby, Ranking Member Brown, and 
Members of the Committee, thank you for the opportunity to be 
here today as one of President Obama's nominees for the SEC. It 
is a particular privilege to be here and to be considered along 
with Professor Fairfax.
    My desire to serve at the SEC stems from a belief that the 
capital markets unlock people's potential. Investors are able 
to build their retirement nest eggs, their downpayments, and 
their children's education funds through the capital markets. 
And vibrant capital markets are able to find and fund 
individuals and companies with ideas that can enrich our 
communities, that can enhance our Nation's prosperity.
    This belief in the value of the capital markets stems from 
lessons learned at the Peirce family dinner table, in 
classrooms at Case Western Reserve and Yale, and then from 
colleagues and mentors throughout my career. In securities law, 
I found a way to combine my undergraduate degree in economics, 
my law degree, and my childhood hobby of plotting stock prices.
    When I began at the SEC, I was a Staff Attorney in the 
Division of Investment Management, where my job was to write 
rules for mutual funds and investment advisers. After that, I 
served on the staff of Commissioner Paul Atkins. And then, 
after my 8 years at the SEC, I had the honor of serving on the 
staff of this Committee for then-Ranking Member Shelby. In all 
of these positions, I learned the important role that strong, 
carefully crafted, and well enforced rules play in maintaining 
vital capital markets and in protecting investors.
    At the Mercatus Center, I am surrounded by colleagues who 
are committed to effective regulation and to sound regulatory 
process. I have learned much from their careful scholarship. 
And I have also learned much from my colleagues on the Investor 
Advisory Committee at the SEC, where we work to educate, 
empower, and protect investors. I would welcome the opportunity 
to apply all of these lessons at the SEC to protect investors, 
to uphold the integrity of our financial markets, and to 
facilitate innovation in economic growth.
    Thank you for the honor of appearing before you today and I 
look forward to answering any questions.
    Chairman Shelby. I will direct this question to both 
nominees to the SEC. The U.S. capital markets are the envy of 
the world, and to maintain this standing, I believe that 
regulators should do everything they can to ease the regulatory 
burdens on American businesses while ensuring investor 
protection. As part of this, regulators and Congress, I 
believe, should review rules and regulations in order to 
understand their effect on the markets and the economy and to 
streamline them appropriately.
    In your opinion, how important is economic analysis as part 
of rulemaking, and second, do you agree that regulators should 
do retrospective reviews of rulemakings? What areas of security 
laws would benefit from such reviews?
    Ms. Peirce, we will start with you, go right to left.
    Ms. Peirce. I certainly believe that economic analysis is a 
very important tool in the toolbox of regulators. It is a way 
for them to identify a problem that they are trying to fix and 
then to look at alternative solutions to those problems to try 
to figure out which solution will be the most effective for 
each problem. And then to anticipate what the unintended 
consequences might be of the particular solution.
    It is also important to set out, when you adopt a 
regulation, to set out metrics to measure whether or not the 
regulation is successful in achieving those objectives, and 
that gets to your point about retrospective review, which I 
think is tremendously important. You always want to go back and 
look and see whether the rules are working as intended.
    I think one area where that is particularly called for at 
the moment is in equity market structure, where we have built 
up rules over many years, and I think a lot of folks are 
looking and saying, how well are the rules working, and that is 
an area I would like to be involved in if I were confirmed.
    Chairman Shelby. Ms. Fairfax.
    Ms. Fairfax. Thank you so much for your question. I, too, 
think that economic analysis is very important. I think it is 
important because in the context of rulemaking, we need to make 
sure that we understand the costs and benefits of rules that 
are being created, and economic analysis is one of those tools, 
as well as many others, that should be utilized to make sure 
that everyone is properly thinking through the process and 
impact of the rules that are being created.
    With regard to retrospective review, I think, absolutely, 
that it is important, as well. I think it is very important to 
think about the cost and benefit, but, obviously, you are 
regulating in the face of uncertainty and things change in the 
regulatory environment, which means that sometimes you will 
have unintended consequences of rules. Sometimes, you will have 
metrics and goals that you set and then you will realize as you 
move through the regulatory process, and certainly as the rules 
get implemented, that what you thought would occur does not, in 
fact occur. Since the purpose is to try to get things right, 
and I think looking back and understanding whether or not you 
got things right is very much important.
    Chairman Shelby. In the area of enforcement, I believe 
enforcing the law is important to maintain confidence in our 
markets and to deter misconduct. And while the SEC does not 
have criminal authority, it does have civil enforcement 
authority, which is a powerful tool.
    To both of you, can you describe your views on the SEC's 
enforcement program as well as your views on bringing actions 
against individuals and not just regulated entities, when 
appropriate. Ms. Peirce.
    Ms. Peirce. The SEC's enforcement program is a key part of 
the SEC. Many companies are trying to do the right thing and 
the compliance program's purpose is to work with those 
companies to try to enable them to comply. But, there are some 
companies and some individuals that simply do not want to 
comply with the rules, and the enforcement program is 
necessary. We need strong, clear, swift enforcement, and the 
SEC is blessed to have a tremendous staff of enforcement 
attorneys who are very talented and very experienced. And, so, 
their role is to pursue wrongdoers, and I would welcome the 
opportunity to be part of that if I were confirmed.
    And, in terms of individuals versus corporations, I think, 
too, often, it is easier to charge a corporation rather than 
going after individuals who are responsible, and presumably, if 
a corporation has done something wrong, there are individuals 
who have been engaged in that wrongdoing. And, so, I do think 
that that is an area where it is important to press forward 
even when it is difficult to charge individuals.
    Chairman Shelby. Ms. Fairfax.
    Ms. Fairfax. Thank you. I absolutely believe that 
enforcement is a priority. It instills investor confidence, it 
ensures accountability, and it deters misconduct. I also 
believe that accountability, both with respect to individuals 
and with respect to corporations, is very important and the SEC 
needs to aggressively engage in enforcement efforts.
    Chairman Shelby. To both of you, prior to the nomination 
hearing, were you asked, either of you, to support any policy, 
rulemaking, or initiative in exchange for support for your 
nomination?
    Ms. Peirce. The only pledge I made was, if I am confirmed, 
to aggressively fulfill the mission of the SEC, including 
investor protection.
    Chairman Shelby. OK. Ms. Fairfax.
    Ms. Fairfax. Yes. I was not asked that question. Thank you.
    Chairman Shelby. Mr. Jeppson, could you briefly elaborate 
on the U.S. public's demand for coins, and with the advent of 
online and card payment technologies how the Mint's production 
needs to have shifted and will continue to shift. In other 
words, what is the future of the Mint and coins in the U.S.
    Mr. Jeppson. Mr. Chairman, thank you for the question. We 
have seen that since 2009, with the improving economy, the use 
of coins has increased. We have climbed back to historic 
levels. We have risen from about five billion coins in 2009 to 
production of the circulating line at about 16.1 billion coins 
last year. This is a threefold increase. Circulating coin 
production continues to be strong. The Federal Reserve forecast 
holds us flat at about 1 billion for the, really, next 12 
months, and we believe that we will be within that 14 to 16 
billion range for the circulating lines. Production continues 
to be strong.
    On the numismatic side, we saw a big decline in 2009. We 
have managed to gain back some of that demand. We have been 
able to----
    Chairman Shelby. Is that because of the economy tanking?
    Mr. Jeppson. Yes, sir, I believe that in large part it was 
because of the economy. With collectable coins, disposable 
income plays a large role, so I believe that the economy was 
probably the single largest factor in the decline. We have 
managed to gain back some of that.
    But, we also have a demographic that is changing. So, we 
have instituted some outreach to try to broaden our appeal to a 
larger demographic of coin collectors and to make the Mint more 
accessible. We have also moved more to online sales, which has 
become the preferred method for most of our coin collectors to 
purchase coins.
    Chairman Shelby. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman.
    I want to begin by highlighting the important work that 
remains for the SEC to complete its Dodd-Frank Act rules. A 
number of rules still need to be finalized. Others have not yet 
been proposed.
    A question for both of you, start with you, Ms. Peirce. If 
confirmed, are you committed to finishing the rulemaking 
process promptly and faithfully according to the law, 
regardless of your personal views?
    Ms. Peirce. Senator, I am committed to working with Chair 
White and the rest of the Commissioners to carry out the rest 
of the agenda given to us by Dodd-Frank. I will note that 
because the Chairman does set the agenda, the ability of an 
individual Commissioner to control the timeline is sometimes 
quite difficult.
    Senator Brown. Ms. Fairfax.
    Ms. Fairfax. Yes, absolutely. I believe that completing the 
mandate under Dodd-Frank is important, so I would be committed 
to making sure we try to get that done as quickly and as 
appropriately as possible.
    Senator Brown. Thank you.
    Ms. Peirce, you in response to the Chairman's question 
mentioned pursuing wrongdoing. I want to follow up on that. The 
SEC's enforcement record shows a vast majority of cases are 
settled, and even in recent years, admissions of guilt are 
infrequent. To make matters worse, many settlements are with 
repeat offenders. How do you think settlements with admissions 
of guilt and meaningful punishments, especially for chronic 
offenders, can be achieved in enforcement cases?
    Ms. Peirce. I think that that is a very important issue, 
Senator, and I think that perhaps because it has become a 
tradition at the SEC to have settlements with neither admit nor 
deny, that is just what the expectation is from both sides. 
But, I do think that a settlement sends a stronger message if 
there is an admission of wrongdoing. And, sometimes--it is more 
costly for the SEC to pursue that because the respondent may 
say I will not do that and I want--you have to take me to 
court, either in-house court or a District Court. But, 
sometimes it is worth that price for the SEC to take that step. 
I think you mentioned repeat offenders, and I think that that 
is particularly a case where it may be worth taking the extra 
resources and applying them to get an admission of wrongdoing.
    Senator Brown. Ms. Fairfax, follow-up on enforcement 
issues. Experts say the tone at the top is important in guiding 
responsible corporate behavior. In your research, what elements 
of corporate governance promote better behavior and 
accountability?
    Ms. Fairfax. Thank you. That is a very good question. I 
think the tone at the top is extremely important. I think you 
need to have people who are able to listen to and understand a 
range of perspectives and who can work collectively to engage 
in problem solving. I do think you also need to have people 
with independence and objectivity, because that is important. 
You need to have expertise, because that is also important, and 
people with a true commitment, and understanding of a 
particular mission or a particular responsibility.
    Senator Brown. Ms. Peirce, on Friday, the National Archive 
released documents from the Financial Crisis Inquiry 
Committee's review of the causes of the financial crisis. The 
documents show lapses across the board, both at big banks and 
by the regulators, lapses in understanding risks. Previously, 
Alan Greenspan conceded he made a mistake in thinking that 
banks could manage risk to protect their firms and 
shareholders, and he has commented that incentive structures 
matter. Post-crisis regulations, in my opinion, including Dodd-
Frank, have improved risk management and will create better 
incentive structures at financial firms. Do you think these 
improvements could have happened without a change in the law, 
in the new rules?
    Ms. Peirce. I think that the financial crisis showed all of 
us that a change in the financial regulatory structure was 
necessary. It is very important to set incentives properly. One 
of the concerns that I had leading up to the crisis was that 
the incentives coming from regulations were all wrong and they 
encouraged bad behavior by financial institutions, and the 
financial institutions, frankly, followed right along and 
engaged in that bad behavior.
    And, so, changes were necessary. I do worry that some of 
the changes that we have put in place will not lead to more 
personal responsibility by people in the financial industry but 
will lead to outsourcing of risk management to regulators, and 
so I think we need to keep an eye on how the Dodd-Frank reforms 
are working. We need to ensure that they are working well, and 
if they are not, we need to make adjustments. But, certainly, 
strong and effective regulation can be helpful in directing 
behavior so that it is not harming people.
    Senator Brown. Thank you.
    Mr. Jeppson, one question for you. You mentioned the 
immense aging workforce could create gaps in manpower and 
training to make it difficult to meet high demands. What are 
the skill gaps that you--the most significant skills gaps you 
anticipate in years ahead? What kind of tools are you going to 
use, recruitment channels will you use to address staffing and 
training challenges?
    Mr. Jeppson. Yes, sir. As you highlighted, the Mint has an 
aging workforce, much like the rest of the Federal Government. 
More than 30 percent of our employee base is retirement 
eligible in the next 3 years, and they tend to stay for about 3 
years after becoming eligible for retirement.
    So, we have two tracks. First, we have begun a new training 
initiative that allows people to gain leadership and technical 
skills which will allow them to advance, and also a course 
which may enable an employee to cross-train into other areas. 
The Mint has a wide variety of skill sets, probably more so 
than any other agency, everything from our wage-grade employees 
as metal forming operators and die setters and heat treaters 
all the way to sculptors and engravers and accountants and 
designers. So, it is a very broad range, and it affects all of 
those positions. Training is a large component of that, 
preparing our people for leadership roles.
    Also, we are going to do targeted outreach around our local 
Mints to recruit people and make people aware of the 
opportunities there. We will also focus on our time to hire, so 
that when we do find those talented people, we can actually get 
them in the door in a timely fashion.
    Senator Brown. Thank you. Thank you, Mr. Chairman.
    Chairman Shelby. Senator Heller.
    Senator Heller. Mr. Chairman, thank you. I want to thank 
you and the Ranking Member for holding today's hearing.
    I appreciate the comments that have been made so far, and 
congratulations to all three and welcome your family here, 
also.
    I will probably spend most of my time talking to the two 
nominees at the SEC. I have a tremendous amount of respect for 
you, Mr. Jeppson, but in this case, we only have a few minutes.
    So, I regulated the securities industry in Nevada for 12 
years and also was a securities license. I go back to a comment 
that Arthur Levitt said when he was Chair of the SEC under 
President Clinton. He quoted, an individual's philosophic 
orientation has unfortunately become more important than their 
knowledge of securities law. And, there is some concern up 
there that people believe that qualified individuals with 
private sector experience and knowledge of the securities law 
are being overlooked. And, this is not a reflection on 
yourself. I am just trying to get to a better understanding of 
both of your qualifications. I appreciate both of your 
comments.
    I guess the question I have for both of you is what has 
been your experience in practicing securities law in the past? 
Ms. Peirce, I will start with you.
    Ms. Peirce. After clerking after graduating from law 
school, I joined a law firm in D.C. that focused on--had other 
practice areas, but my focus was on securities law. And then I 
joined the SEC, where I worked for 8 years, and then was here 
on the Committee working on securities law issues, as well. 
And, my research now is broader than just securities, but it 
does include securities, as well.
    Senator Heller. Have you ever had a securities license?
    Ms. Peirce. I have not.
    Senator Heller. OK.
    Ms. Fairfax. Thank you for your question. When I graduated 
from law school, I worked at a large law firm and my focus area 
was in corporate and securities work. I did a wide range of 
corporate and securities transactions, from public offerings to 
private placement, did what was back then something that not 
many people were aware about, securitizations. I did work with 
respect to that, as well.
    After I came out of practice, I started teaching. I have 
been teaching for over 15 years in the corporate and securities 
area, and I will say that what teaching in that area has done 
for me is given me a real breadth and depth in terms of my 
understanding of the securities market.
    I did some work with FINRA, which in terms of licensing, 
gave me a real appreciation for licensing and self-regulatory 
organizations and the mission of FINRA and how that connects to 
the broader securities market. I have done work at the ABA. In 
connection with my work there, I have worked on rulemaking with 
regard to the Model Corporations Act. So I certainly 
understand, at least from that level, what rulemaking looks 
like, and what working with diverse perspectives and figuring 
out complex solutions looks like. So, I have had a wide variety 
of experiences in that area.
    Senator Heller. Have you ever held a securities license?
    Ms. Fairfax. I have not.
    Senator Heller. You have not. Do you have any specific 
expertise in the equity markets?
    Ms. Fairfax. My research touches on the equity markets. I 
also have done teaching in that area and that is where my 
understanding of that market comes from.
    Senator Heller. Ms. Peirce, how about the fixed income 
market? Any specific expertise in that area?
    Ms. Peirce. I do not have specific expertise in fixed 
income, although I recognize that it is very important. And, I 
will note that the SEC has many people who are very 
experienced, including people who have been in industry, and if 
I were to be confirmed, my door would be open so that I could 
hear from people from all perspectives. I do think that one 
area the SEC needs to probably have more expertise in is fixed 
income. At least when I was there, there was not enough 
attention paid to that.
    Senator Heller. OK. In the Chairman's initial questioning, 
he asked about cost-benefit analysis. Can either one of you 
give me an existing regulation that you believe that the costs 
outweigh the benefits?
    Ms. Peirce. I would argue that many of the regulations 
coming out of Dodd-Frank raise questions about that. One that 
posed particularly difficult cost-benefit issues was the 
conflict minerals rule, which is very far outside the SEC's 
normal expertise. But, subsequent reports have led me to 
believe that the benefits actually may be very outweighed by 
the costs and that there may actually be a severe human cost to 
the very people that that rule was intended to help.
    Senator Heller. Thank you.
    Ms. Fairfax. I think engaging in a cost-benefit analysis is 
very important. Sitting here right now, I cannot pick out of 
the hat something that I think the costs outweighed the 
benefits, because sitting from where I am right now, while I 
have a kind of outside perspective, I have not really had the 
opportunity to hear staff concerns and concerns of all of the 
other market participants to get a real deep understanding of 
the costs and benefits of certain rules.
    I know that there are concerns raised about a lot of 
different regulations, and I would certainly, if I am fortunate 
enough to be confirmed, be interested in listening to those 
concerns and to ask, as the Chairman pointed out, about costs 
and benefits, and to the extent it turns out that the costs 
outweigh the benefits, I would be responsive.
    Senator Heller. Thank you to both of you and to all three 
of you.
    Thank you, Mr. Chairman.
    Chairman Shelby. Senator Reed.
    Senator Reed. Well, thank you very much, Mr. Chairman.
    First, Mr. Jeppson, thank you for your service as a Marine 
in Afghanistan and Iraq. I think that probably prepares someone 
for doing lots of jobs, including the one you are nominated 
for. But, thank you very much, sir.
    Let me turn my attention to the nominees to the Securities 
and Exchange Commission. Thank you very much for your 
willingness to serve. I would like to ask both of you the same 
question initially.
    Shareholder protection--investor protection--is critical to 
the SEC's mission, and not only for their protection, but also 
to ensure that there is real shareholder governance in a 
corporation. And, there are a number of issues that are 
arising. The issue of cybersecurity, the issue of climate 
change, the issue of political spending--in all of these 
shareholders should, I think, have some voice and be protected.
    And, let me ask this specifically. Starting with Ms. 
Fairfax, what is your top objective or top initiative with 
respect to shareholder protection and investor protection?
    Ms. Fairfax. Thank you so much for the question, and as my 
opening remarks, I hope, reflected, I think investor protection 
is extremely important. Obviously, it is a critical aspect of 
the SEC's mission. And, I think that everything that we do at 
the SEC, if I am fortunate enough to be confirmed, will relate 
to investor protection. I think one priority is market 
structure, and that is very much interlinked with investor 
protection. As I mentioned, I do not think you can really 
protect investors if you do not have fair, orderly, and 
efficient markets and to make sure that investors are operating 
in a structure that treats them fairly and a market structure 
that is secure.
    The other thing I think is really important is corporate 
disclosure. I think making sure that investors have the right 
information is important. We talked about what is at the crux 
of the SEC, and it is about putting a spotlight on information 
and making sure investors have information so that they can 
make appropriate decisions.
    I also, which should not come as a surprise, think that 
corporate governance issues are important, especially issues 
around the proxy apparatus and making sure that the voting 
structure works appropriately so that changes in the way in 
which shareholders vote and the matters that they vote on are 
taken into account when looking at that structure and trying to 
figure out how to move forward.
    Senator Reed. Thank you.
    Ms. Peirce, please.
    Ms. Peirce. As Professor Fairfax underscored, investor 
protection issues are important across the board of what the 
SEC does. One area that I think will see changes, positive 
changes made for investors, is the disclosure effectiveness 
review that is going on now. Trying to find the information 
that users need and present it to them in a way that they can 
use it, potentially incorporating new technologies, ensuring 
that the disclosure mechanism at the SEC is up to date in terms 
of technology, I think all of that will be very helpful for 
investors.
    In terms of my work on the Investor Advisory Committee, we 
worked on a proposal which I think has merit, as well, which is 
trying to do a better job of aggregating information about 
financial professionals and making that available to investors 
in one place, and I think that is an exciting initiative that 
the SEC would do well to work on.
    Now, I will say that perhaps when I get to the SEC, I will 
discover that there are other more pressing issues, and I want 
to keep an open door to that possibility, as well.
    Senator Reed. Thank you.
    There has been some discussion about cost-benefit analysis, 
which implies, if you are going to do it correctly, that you 
have to have access to all the costs that are relevant, which 
would imply--well, let me ask. Would the SEC, if it had that 
direction, also have the authority to go in and get the costs 
of different companies, some of which might be argued could be 
proprietary?
    Ms. Peirce. The Paperwork Reduction Act actually limits the 
ability of the SEC to go to more than nine people. So, when I 
was at the SEC, and I did work on some economic analysis when I 
was there, we were able to call three small, three medium, and 
three large companies. Now, needless to say, that leads to some 
potential gaps. One way that the SEC gets around that is to ask 
for comment that has data in it, and I think those are 
sometimes the most effective comments, the comments that bring 
data with them.
    Now, certainly, any cost-benefit analysis has assumptions 
and those assumptions need to be spelled out, and where there 
are data gaps, the agency needs to be very clear, we have a gap 
in data here, and that it is all out there and then people can 
respond to that.
    Senator Reed. I think the comment was actually very 
revealing, because there has been this mantra about we are just 
going to do cost-benefit analysis, and what you have indicated, 
first of all, is that there are only a few companies that the 
SEC can directly ask, given the present system. And, second, it 
relies upon comments which are voluntary, and so some people 
could withhold data until after the rule is promulgated, and 
then present the data as, well, this is, you know, your costs 
are not accurate. So, I think we have to be, very, very careful 
as we pursue this approach.
    The second issue is--and I think you alluded to it in terms 
of the minerals rule--it is quantifying social benefits, which 
is always a very challenging problem. So, I think, again, that 
this is something the SEC does, but we have to be very, very 
careful about the limitations, both legal limitations and 
practice limitations.
    But, thank you both. You are both bringing incredibly 
robust academic and legal backgrounds to a very demanding job 
and I thank you.
    Chairman Shelby. Senator Rounds.
    Senator Rounds. Thank you, Mr. Chairman, Ranking Member 
Brown.
    Senator Reed mentioned it, but Mr. Jeppson, I just wanted 
to also say thank you for your service to our country and I 
appreciate your offering to step up and to participate right 
now in another role.
    Most of my comments once again will be directed to our two 
nominees for the SEC position today. Professor Fairfax, I 
appreciated the time that we spent in my office. Thank you very 
much. It is great to see that you brought your family here, as 
well. I come from a large family. I have got nine brothers, one 
sister, two step-brothers, and a step-sister, so it is always 
great to see support from family members here.
    I also appreciated--we touched on a subject while you were 
in my office and I said that I wanted to bring it up today and 
provide you with an opportunity, but also to bring it out and 
to talk about it a little bit. What we talked about was--the 
topic that we discussed was the amicus brief that you signed in 
the Walmart v. Trinity case. The brief asked the court to allow 
the Trinity Wall Street Church to include a proxy statement 
which urged Walmart's board to provide oversight concerning the 
formulation of a policy, a company policy, regarding the sale 
of products that, in their words, especially endanger public 
safety and well-being, have substantial potential to damage 
Walmart's reputation, and/or would be reasonably considered by 
many offensive to the family and community values integral to 
Walmart's promotion of its brand.
    When we spoke, you said that you had concerns that what was 
written was perhaps inartful, but you signed the brief anyway. 
I hunt. I shoot at targets. I also own firearms, as many South 
Dakotans do. In 2010, the Supreme Court ruled that it is clear 
that the Framers counted the right to keep and bear arms among 
those fundamental rights necessary to our system of ordered 
liberty. This is settled law.
    The question that I have is, is do you believe it is 
reasonable to consider the sale of guns by Walmart or any other 
retailer offensive to family and community values?
    Ms. Fairfax. Yes. Thank you so much for that question. You 
are right, we discussed it before and I thank you for the 
opportunity to speak about it here today before the Committee.
    First, in signing onto that brief, it was not at all a 
signal about any position with regard to the underlying issue 
or a signal about my position with regard to one company or one 
industry. It was instead aimed at the larger corporate 
governance proposition about shareholder proposals and what 
they should look like, and making sure that shareholder 
proposals maintain that careful balance between allowing 
directors and officers the ability and the important discretion 
to set corporate policy on the one hand, and allowing 
shareholders to communicate on issues that they think are 
significant on the other.
    The other thing that I explained is, in my view, it is very 
important for boards to have the discretion to determine what 
is a significant policy and to determine what impacts their 
values and what impacts the corporation's bottom line, and it 
was my view that that was not what the shareholders were 
asking, that is, to set policy and make those decisions; but 
rather, what they were doing was communicating their desire to 
have the board engage in their oversight role and engage in the 
process where directors also were thinking about what is 
appropriate in that context.
    So, again, my signing the brief was about the governance 
principle of protecting the shareholders' ability to 
communicate on important matters, which is, of course, an 
ability that is protected by the Federal securities laws, and 
balancing that very important right with the other very 
important right of allowing boards to set policy and to think 
through, of course, in their oversight role, what things impact 
the corporation and its bottom line.
    Senator Rounds. It was the concern about whether or not it 
was the underlying issue that was of concern, because in an 
earlier brief--I also read the amicus brief that you signed in 
Burwell v. Hobby Lobby. In that case, the amicus brief you 
signed opposed Hobby Lobby's contention that the owners of 
Hobby Lobby retained their fundamental First Amendment right to 
free exercise of religion, because once they formed a 
corporation, they lose the ability to make moral adjustments.
    To me, this seemed contrary to the position that you took 
in the Walmart case. In fact, you went so far as saying that 
the court should reject Hobby Lobby's contentions because doing 
so could make the raising of capital more challenging, 
recruitment of employees more difficulty, and entrepreneurial 
energy less likely to flourish.
    My question is, is why is it OK for Walmart's shareholders 
to instruct the company's board to closely scrutinize firearm 
sales because of concerns about family and community values, 
but it is not OK for a family that owns a corporation to 
exercise their sincere religious objections?
    Ms. Fairfax. Thank you again for that question. We did not 
talk about Hobby Lobby. And, I would say, number one, with 
respect to my signing onto that brief, it was not about the 
underlying issue, but about the broader corporate governance 
issue. With regard to Walmart, that issue was about 
shareholders' ability to communicate as opposed to any kind of 
mandate. With regard to Hobby Lobby, it was actually a 
corporate governance principle about the importance of the 
separation of the corporate structure from the personal and the 
individual shareholders.
    In my view, the core component of a for-profit corporation 
is that it has a legal existence that is separate and apart 
from its independent shareholders and there are important 
benefits that stem from that idea, important tax benefits, 
important benefits with regard to limited liability. It is the 
reason why people's personal assets are not the same thing as 
the corporate assets. And, it has important benefits with 
regard to the perpetual existence of a corporation. It is why 
individual shareholders can change from day to day and even 
from minute to minute and the corporation remains the same. So, 
again, it was about that fundamental corporate governance 
principle, that the corporation has a legal existence that is 
separate and distinct from its shareholders and not the 
underlying issue that was at play.
    Senator Rounds. Thank you.
    Mr. Chairman, you have been generous with your time. I had 
some more questions, but I will yield back at this time. Thank 
you for your patience. Thank you very much for your answers.
    Ms. Fairfax. Thank you.
    Chairman Shelby. Senator Scott.
    Senator Scott. Thank you, Mr. Chairman.
    Mr. Jeppson, as everyone already stated, God bless your 
service and you do not get any questions.
    [Laughter.]
    Senator Scott. I would not complain about that ever, by the 
way, on this Committee. Lord have mercy.
    [Laughter.]
    Senator Scott. And, Senator Rounds, I did not realize that 
you have enough siblings to have a football team. That was a--
--
    Senator Rounds. A basketball team and a referee to go with 
it.
    [Laughter.]
    Senator Scott. Exactly. An unbiased referee, which would be 
nice these days.
    To the two nominees, thank you for your time and your 
willingness to serve, without any question.
    My first question is, can you give your views on how you, 
as a Commissioner, will use data to explore the advantages and 
disadvantages of a rule from the perspectives of an investor, 
the company, and the capital markets. Either may start.
    Ms. Peirce. Well, I would just start out by saying data is 
very important at the SEC and I am glad to see that there has 
been more emphasis in recent years on getting good data. And, 
so, this sort of ties to something that Senator Reed asked me 
about, economic analysis. One way to get information is to ask 
companies directly, but the SEC should also be looking at other 
data sources, publicly available data sources, private data 
bases that it purchases. I think those are very important and 
can all be very useful in painting a picture of what the rule 
would look like if it were in practice compared to the existing 
state of affairs. So, I am excited that the SEC is putting more 
effort into getting good data.
    Senator Scott. Ms. Fairfax.
    Ms. Fairfax. I similarly think that it is important to have 
the rulemaking process be driven by accurate data. I will note, 
I think as Ms. Peirce has also noted, and Senator Reed has 
noted, that sometimes data can be incomplete. If I am fortunate 
enough to be confirmed as a Commissioner, I would try to find 
ways to fill gaps with regard to that data. But, sometimes data 
can be inaccurate, and so while I think it is extremely 
important to focus on data and try to make decisions where you 
have the most robust amount of data that you can, it is also 
the case that sometimes you have to engage in rulemaking where 
there are uncertainties, where the data is not there, and, 
where there is an inability to measure, the impacts of certain 
things.
    And, certainly, if I am fortunate enough to be 
Commissioner, I would try to balance the desire to get data and 
the importance of getting that data with the need to move 
timely and effectively toward a decision.
    Senator Scott. Thank you.
    Speaking of data and rulemaking, the reality of it is one 
of the questions I think Senator Heller was trying to get at, 
asking the question about whether or not either of you have had 
a securities license, it is important from an investor 
protection perspective to have worked in the field and spent 
some time. I know Mr. Heller had a Series 7 license for about a 
decade and I have had a Series 6 for about 15 years or so. So, 
understanding investor protection from having worked in the 
field and worked from the ground up is a very different 
appreciation and perspective from what perhaps others may have.
    When I think about something like the fiduciary rule that 
is being promulgated by the DOL, I think there is an 
opportunity for us to take a look at the data again, because 
the data certainly, from my perspective, concludes that the 
small investor is worse off under the current rule than they 
would be without the rule. Are you both familiar with the 
fiduciary rule?
    Ms. Peirce. I am familiar with it, although I have not read 
the proposal. I have not had a chance to read the proposal yet.
    Senator Scott. OK. It appears to me that the rule itself 
will make winners and losers of smaller investors in a way that 
is inconsistent with what is in their best interest long-term. 
Do you think it is good or not so good for the Government to 
help pick winners and losers in this area?
    Ms. Peirce. I am quite worried about the Department of 
Labor's proposal, in part because I have heard, and it is 
difficult knowing, being outside the SEC, that the SEC's input 
was not considered. And, I think the input goes to some of the 
very issues you raised. We need to understand how rules like 
this are going to affect everyday people, people who cannot 
afford to pay a lot for a financial professional but who do 
rely now on a financial professional. And, I worry that what 
will end up happening is that we are going to cut a whole 
segment of people out of getting access.
    And, so, if I were to be confirmed, I would want to talk 
with the staff at the SEC to understand what work they have 
done to try to see what would happen and what work the DOL has 
done on that front, as well.
    Senator Scott. Yes.
    Ms. Fairfax. Absolutely. I think that protecting investors 
in this space is of critical importance. I think protecting 
access to quality and appropriate advice in this area is also 
important, particularly for middle- and lower-income investors 
who clearly sometimes cannot afford a quality investment 
advisor and certainly whose resources would be significantly 
undermined, if they have investment advice that goes wrong. So, 
that is of critical importance and that means that thinking 
about how any rule like this would impact those investors is 
critically important.
    I think it is also critically important to think about 
transparency in this area, because, one of the things that we 
have figured out is sometimes the investor is sitting across 
from an investment professional and they do not realize the 
role that the investment professional is actually going to be 
playing, or the potential conflicts that might be there with 
regard to that professional.
    So, those are both priorities for me, making sure that we 
maintain access to good advice, and making sure that we reduce 
conflicts and that there is transparency. And, of course, 
keeping client needs at the center.
    I have looked, as you might imagine, at the proposals, but 
do not really have a clear understanding of what is going to 
happen at the end of the road. Certainly, if I am fortunate 
enough to be confirmed as Commissioner, I would want to know. I 
would want to talk to everyone involved to get a clear sense of 
what is happening, what the rule is going to be, and their 
thoughts about what its impact is going to be so that we can 
engage in the appropriate response.
    Senator Scott. Thank you very much for your answers. 
Certainly, with respect to the Department of Labor and their 
coordination with SEC, from my chatting with some other folks, 
that is why included the definition of collaboration differs 
from the Labor Department to the SEC from my perspective, and I 
would certainly encourage you both to take some time, if you 
are confirmed, to look deeply into it. This is one of those 
issues where you see a bipartisan collaboration happening with, 
I think it was 97 House Democrats signed a letter with serious 
concerns about the fiduciary rule and what it would do to some 
of the smallest investors, and the notion that we can figure 
out how to have no advisor and just use robo-advisors through 
technology does not appear to be in the best interest 
consistently of the smaller investor.
    Thank you.
    Chairman Shelby. Senator Schumer.
    Senator Schumer. Thank you, Mr. Chairman.
    First, I would be remiss if I did not acknowledge that the 
chart behind us shows that many nominees are awaiting 
confirmation. But, I want to thank our Ranking Member, Senator 
Brown, for pushing so hard for these nominees. And I want to 
thank our Chairman. We are making significant progress and very 
much appreciated. We appreciated the fact that Adam Szubin came 
out of Committee last week and we are looking to vote on 
several nominees right away when we return.
    These are positive steps, but there is more to be done. The 
Eximbank is paralyzed right now. It cannot--it does not have a 
sufficient number of members to make a quorum and I hope we can 
move that nominee, as well. But, in general, I want to thank 
the Chairman for his efforts in the last few weeks and hope 
that we will continue to see progress moving forward.
    Now, for my questions. This is for Ms. Fairfax and Ms. 
Peirce, and I thank you for being here today. Now, I want to 
start with this. I make no secret in the fact that I believe 6 
years ago, the Supreme Court ripped a giant hole through the 
fabric of our campaign finance system. Since that time, our 
politics has not been the same. Special interests have plowed 
hundreds of millions of dollars of dark money into our 
elections. They have created a rigged system, making it harder 
for people to elect individuals that will fight for families to 
get opportunities and to stay in the middle class.
    There is no doubt in my mind that Citizens United has had a 
corrosive effect--it is poison--on our election, our politics, 
and ultimately on our country. The SEC certainly is not 
responsible for patching that hole in our campaign finance 
system, but you can help preventing that hole from being ripped 
open even wider.
    As you know, corporations are under no obligation to 
disclose their corporate political spending to shareholders or 
the public. As a result, shareholders remain in the dark as 
executives of public corporations funnel money into our 
political system with no transparency or accountability. 
Citizens United has allowed for dark money to flood our 
airwaves and choke our democracy. It is a decision that must be 
overturned.
    But even the Justices that supported the Citizens United 
ruling did so with the assumption that the political spending 
would promptly be disclosed to shareholders and the public. 
Sadly, this has not yet happened. In my opinion, it needs to 
change.
    So, I am going to ask both nominees, Ms. Fairfax and Ms. 
Peirce, do you believe that shareholders of a company have a 
right to know about a company's corporate political spending, 
and do you believe that the SEC has a responsibility to 
investors to require that such disclosures are made?
    And let me forewarn you, if I get a mushy answer, I am 
going to seriously consider being against your nomination. I 
feel that strongly about it, even if your other criteria are 
good. The campaign finance system is killing us. I am very 
upset that the Chairman of the SEC has not gone forward with 
this. We need the new nominees to be for it, whether you are 
Democrat, Republican, liberal, or conservative. So, I am really 
serious about this and I really want an answer, not 
gobbledygook. No offense, but we get a lot of that from other 
witnesses, I hope not from you.
    Ms. Fairfax.
    Ms. Fairfax. Thank you for your question. Well, I 
unfortunately have to start with, first and foremost, there is 
a budget bill that appears to prevent rulemaking on this very 
issue and so, obviously, because I think the Commission does 
not have the freedom to ignore mandates from Congress, I 
certainly would think seriously about whether or not that is 
off the table. But, I understand that there----
    Senator Schumer. Let us just say that the budget bill does 
not apply here----
    Ms. Fairfax. OK.
    Senator Schumer. ----because I believe it does not. What 
would you do? How would you vote?
    Ms. Fairfax. OK. I think, sitting from the outside, I 
cannot know how I would vote, and I am not being gobbledygook 
and mushy, but I do think that my role is to consider the 
various perspectives around this issue, and I understand that 
this issue is one that is very much hotly contested. I 
certainly appreciate the things that you have been saying----
    Senator Schumer. I would like you to enumerate one argument 
why shareholders should not know the money that corporations, 
that the corporate board, corporate CEO, or whatever, has 
decided to give in a political campaign. Give me one argument 
against it.
    Ms. Fairfax. Sure. I will tell you the arguments that have 
been put forward. One argument that has been put forward is 
that the information is immaterial. You will hear people saying 
that is one argument----
    Senator Schumer. What is--you mean the shareholders do not 
care?
    Ms. Fairfax. Umm----
    Senator Schumer. Many do.
    Ms. Fairfax. ----for some shareholders--I think there is an 
argument about whether or not it is material----
    Senator Schumer. Do you believe it is material, Ms. 
Fairfax?
    Ms. Fairfax. I think that there is certainly an argument to 
be made that it is material. That argument stems not only from 
what shareholders want, but also, of course, from the notion 
that shareholders should be able to think through whether and 
to what extent----
    Senator Schumer. I want to hear from Ms.----
    Ms. Fairfax. ----spending is consistent with corporate 
governance.
    Senator Schumer. OK. That argument that it is immaterial 
does not cut much mustard with me, and, I think, with many 
shareholders--not all, but many.
    Ms. Peirce, would you please answer the question as 
directly as you can.
    Ms. Peirce. Well, I echo what Professor Fairfax said, that 
right now, the Congress has made fairly clear that it should 
not be a priority for the SEC. Were it to come up later, I 
would need to know what the actual text of the disclosure 
requirement was and I would want to speak with staff in the 
Division of Corporation Finance as well as other interested 
parties.
    Senator Schumer. OK. I am not satisfied with either answer. 
I am putting you folks on notice. If you think back, I am going 
to submit the question in writing and I would ask you to give 
me your answers in writing. I think in the light of day, the 
written answers, what you said, will not stand up, so you had 
better come--I hope you will come up with a better answer than 
this, because right now, I would be leaning against both of 
your nominations given your answers, OK. Thank you.
    Chairman Shelby. Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    Congratulations to all on your nominations, and I want to 
pick up where Senator Schumer just left off--not necessarily on 
his very last statement. I have not gotten to that point yet, 
but I may get there along with him.
    I believe that the issue of the disclosure of corporate 
spending is a shareholder interest, as well as a societal good. 
Adding transparency, cleaning up campaign finance, and keeping 
the elections process fair and free is incredibly important.
    Now, the information, I believe, is material to how 
shareholders decide where to invest their money and how to vote 
in corporate elections. I do not know that I--you know, I want 
to invest in a company that is going to ultimately make its 
greatest profits and that, from my perspective as one 
shareholder, to also make sure they are doing so within both 
the ambit of the law and, hopefully, as a good corporate 
citizen.
    But, I really--if I want to go spend money in a campaign, I 
will spend my money in a campaign and I will decide where it 
goes. But, I have no interest in having a corporation spend the 
money that in part is mine by virtue of my investments in 
whomever they want or whatever they want. And if they are going 
to be able to do that, fine, then at least I should know so 
that I can make decisions as an investor, so that pension funds 
can make decisions as investors as to whether or not to do 
that.
    So, last year, I reintroduced the Shareholder Protection 
Act to require public companies to disclose their political 
spending and to require a shareholder vote to approve it. It is 
pretty elemental. At least let the shareholders decide if that 
is what they want. Maybe they do. Maybe the shareholders in 
that company want to. But, at least they should have what I 
think is a commonsense solution.
    So, I know that in response to Senator Schumer's question 
you referenced the 2016 omnibus appropriations law that, 
unfortunately, included a 1-year provision to try to block the 
SEC from issuing, implementing, or finalizing a rule to require 
public companies to disclose their political spending to 
shareholders.
    When we saw that, I sent a letter to Chair White along with 
96 of my colleagues in the Senate and the House pushing the 
Commission to move forward, notwithstanding the language of the 
end-of-the-year bill because it is our analysis and those 
shared by a series of law professors throughout the country 
that this provision does not bar the SEC from moving forward to 
prepare, propose, or develop a rulemaking on corporate 
political spending. It may not be able to finally issue it, but 
there is no reason it cannot prepare itself to do so when the 
year ends.
    So, I would like to hear from you, both of you, if, in 
fact, you are confirmed as a Commissioner, what steps will you 
set in motion for the development, preparation of such a rule, 
even if the rule cannot ultimately be issued within and until 
the year expires.
    Ms. Fairfax. I would say, first, whether or not steps can 
be put in motion at the top level is a decision that the Chair 
has to make. But, at the secondary level, certainly I think 
with respect to any of these issues, it is important not to 
prejudge. I would need to, if I am confirmed, be very much 
open, and I would be open, to hearing more information about 
the debate. I will say the issue about materiality is not mine, 
or necessarily mine, but something that I have heard, and I 
think it is fair, certainly, if I am fortunate enough to get 
into the position, to then listen to the concerns on the other 
side and to think through those concerns.
    I also would agree that the devil is very much in the 
details. To that extent, what is the rule--if there is a rule, 
what will it look like, how will it take shape, what kind of 
impact will it have. Those are things certainly to think 
through and I would certainly work with my fellow Commissioners 
and staff and others who are interested, if I am fortunate 
enough to be confirmed, to think through those types of things.
    Senator Menendez. I hope, Professor, when you are listening 
to the other side, there are 1.2 million comments on this rule, 
more than any other rule in SEC history. There are a lot of 
comments that have been made in this regard. I hope that as 
Commissioners, you would not be rejecting 1.2 million voices in 
the country.
    Ms. Peirce.
    Ms. Peirce. Again, I think the appropriations language is 
clear. The Chairman has the agenda----
    Senator Menendez. What do you mean by clear? Tell me, what 
does that mean?
    Ms. Peirce. In terms of directing the Commission that that 
is not the priority for the Commission this year. Now, if the 
Chairman has a different view of what that language means, I 
would be open to hearing from her and from the General Counsel 
to understand how we could work on something like that given 
that language.
    Senator Menendez. Well, I tell you something. I think I 
have the same reservations that Senator Schumer has, and I have 
other questions on diversity disclosure and other elements of 
Dodd-Frank that I included in the law when it was written, but 
my time has expired. I hope to be able to pursue those with you 
individually and, as well, for the record.
    Thank you, Mr. Chairman.
    Chairman Shelby. Senator Warren.
    Senator Warren. Thank you, Mr. Chairman, and thank you all 
for being here today, and thank you for your willingness to 
serve.
    The job of SEC Commissioner is largely to be a watchdog, to 
make sure that the public is protected and the markets are 
honest and fair. After the financial crash of 2008 showed us 
that Wall Street was out of control, Congress passed Dodd-Frank 
to try to rein them in. And the SEC was directed to write or 
enforce dozens of rules to protect our financial systems.
    Now, Ms. Peirce, in the past few years, you have attacked 
many of those same rules. For example, you edited and 
contributed to an entire book called, Dodd-Frank: What It Does 
and Why It Is Flawed, which criticizes several SEC rules 
required by law. You wrote that the Volcker Rule, one of the 
key provisions to deal with too big to fail, quote, ``requires 
regulators and industry to pour countless hours into an effort 
that may end up impairing rather than shoring up our financial 
institutions and our markets. It is nothing to celebrate.''
    You wrote that Congress should, quote, ``perform major 
surgery,'' close quote, on Dodd-Frank to reduce its directives 
to agencies, and you argued that the SEC, quote, ``is a prime 
candidate for mandate trimming.'' You have described the CEO 
pay ratio disclosure rule and the conflict minerals disclosure 
rule, two SEC rules that are required by Congress, as, quote, 
``pointless Dodd-Frank mandates.''
    What you propose, as best I can tell from your writings, is 
less oversight of big banks, fewer efforts to rein them in, 
more chances for them to take on big risks, boost their 
profits, and if things go wrong, come crying to the Government 
for another bailout.
    Now, you are certainly entitled to your opinion and to 
express it as loudly as you want. But, the question is whether 
someone should be put in charge of enforcing laws that they 
think are unnecessary or counterproductive. You know, no one 
hires a watchdog who is not committed to enforcing the rules.
    So, I want to ask, what kind of watchdog will you make if 
you believe that parts of Dodd-Frank are, and I am quoting you, 
``pointless,'' and you think that Congress should repeal much 
of it?
    Ms. Peirce. Senator, I certainly understand your concern, 
but I wrote those comments not in the context of a regulator 
charged with implementing the rules but in the context of an 
academic researcher whose goal is to suggest a financial 
regulatory architecture that will work better at protecting 
investors and ensuring that people take responsibility for 
their own behavior.
    The reason I do not think you need to be concerned is that 
I was a regulator. I was a regulator for 8 years and I was able 
to do the job. And certainly in asking you to confirm me for 
this job, I am not asking you to confirm me to not implement 
rules, but to implement rules. And, in fact, the time that I 
spent here on the staff was very useful in teaching me the 
importance of regulators adhering to what Congress tells them 
to do.
    Now, I do not think there is anything wrong with a 
regulator saying, we are going to do this as you asked us to 
do. We do have concerns, but we are going to do this, and that 
is what I would do if I were there. I would work on 
implementing the rules as best as they could be implemented and 
pointing out where I thought there might be issues that 
Congress should look at again. But until Congress looks at 
those again, the responsibility of the agency is to enforce the 
rules.
    Senator Warren. Well, I have to say, I assume anyone who 
wants the watchdog job would say exactly that. But an SEC 
Commissioner has a lot of tools that can be used to undermine 
all of Congress' mandates. You can delay the rules. You can 
water them down. You can look the other way when it is time to 
enforce them.
    And, frankly, there will not be much that Congress can do 
about it once you are confirmed, and that is a real concern for 
me, because in April 2014, the D.C. Circuit rejected a 
challenge to the SEC's Congressionally required conflict 
minerals rule, and shortly after the court's ruling that the 
SEC could act and that Congress had required it to act, you 
took a very different view. You tweeted, just because the court 
is not stopping SEC from requiring immediate compliance with 
conflict minerals rule does not mean the SEC should not stop 
itself. Now, that sounds like you believe SEC Commissioners can 
and should ignore the law, that the watchdog should look the 
other way.
    So, I want to be absolutely clear on this. If you are 
confirmed as a Commissioner and a Congressionally mandated 
Dodd-Frank rule does not fit with your personal view of the 
SEC's mission, are you now saying that you will do everything 
in your power to effectively implement and enforce that rule?
    Ms. Peirce. Certainly, and sometimes effective 
implementation requires delaying so that companies are able to 
implement it properly.
    Senator Warren. So, the way--it sounds like you have left 
yourself a lot of room here.
    Ms. Peirce. When the SEC crafts rules, one of the things it 
does is it sets implementation periods, and it does that in a 
way to make sure that industry is going to be able to get on 
board in a way that is effective and achieves the objectives of 
the rules. And if I were to be confirmed, my goal would be to 
work with the staff of the Commission and the other 
Commissioners to figure out the most effective way to implement 
the statutory mandates given by Dodd-Frank and other statutes. 
That would be my job as a Commissioner.
    Senator Warren. Thank you.
    Congress mandated that no more than three out of five of 
the SEC Commissioners can be members of the same political 
party, and so long as that is the case, we are going to have 
Republican Commissioners and Democratic Commissioners and they 
will invariably have different views about the job. But, there 
is a big difference between disagreeing about how best to 
implement a law and actively sabotaging the law. Advice and 
consent is about making individualized good faith judgments, 
and I think your record gives the American people reason to be 
concerned about your nomination.
    Thank you, Mr. Chairman.
    Chairman Shelby. Senator Cotton.
    Senator Cotton. Thank you.
    I apologize to our nominees. I have been presiding over the 
Senate. It is a duty as much as it is an honor. The Chairman 
remembers doing that in the Reagan administration.
    [Laughter.]
    Senator Cotton. Back before he came to the right side.
    Chairman Shelby. That is right.
    Senator Cotton. Ms. Peirce, I have some questions about the 
Financial Industry Regulatory Authority, FINRA. Last year, you 
wrote a paper analyzing the structure and operations of FINRA 
with one theme being, quote, ``Although commonly perceived as a 
self-regulator, FINRA is not accountable to the industry in the 
way a self-regulator would be,'' end quote. Could you elaborate 
on that theme.
    Ms. Peirce. Certainly. FINRA has changed over time and is 
something different than what its predecessor organization was, 
and it right now has a board that has people that are not drawn 
from the industry, and so that raises concerns about what 
exactly the organization is. To whom is it accountable? Is it 
accountable to the industry? Is it accountable to the SEC? Is 
it accountable to investors? And, I think there have been 
concerns raised from each of those areas, from each of those 
constituencies, that it is not doing a good job.
    Now, certainly, if I were to be confirmed as a 
Commissioner, I would want to meet with and speak with folks 
from FINRA as well as the people at the SEC who oversee FINRA 
and see if there are areas where we can shore up the SEC's 
oversight of FINRA and work together to make sure that 
investors are being protected as they should be and that the 
organization is working as it should be.
    Senator Cotton. So, what are the implications for our 
securities markets if the regulatory entity for broker-dealers 
operators with only nominal oversight from the SEC, as you 
pointed out in the paper, less SEC oversight than the Public 
Company Accounting Oversight Board receives?
    Ms. Peirce. The implications are that we are not getting 
the kind of regulation of broker-dealers that we need, and so 
perhaps there are concerns that innovation is being slowed by 
the way FINRA is governed and that investors are not being 
protected the way they should be and that there is no ability 
for someone to say to FINRA, OK, we are going to hold you 
accountable for this decision, because it is one step removed.
    So, those are the nature of the concerns I have. Again, I 
would want to get to the SEC and talk with the people who are 
actually doing the monitoring of FINRA to better understand if 
there is more that the SEC can do to watch more closely.
    Senator Cotton. Over the last 7 years, in many industries, 
to include the financial services industry, we have seen 
considerable consolidation. Specifically among broker-dealers, 
we have seen consolidation from 7,900 back 15 years ago to only 
4,000 today. I would estimate that rising compliance costs from 
multiple regulatory initiatives is a factor in this 
consolidation. One, do you agree, and two, if so, what could 
that trend imply for municipal issuers and investors, 
particularly in small States like Arkansas?
    Ms. Peirce. Yes. I think, certainly, that small financial 
firms are feeling the press of regulation in a way that large 
firms do not. In fact, I think it was once described--
regulation was once described as a moat around the larger 
firms, protecting them. So, that is a concern that needs to be 
taken into account.
    In terms of the municipal space, certainly when you see 
smaller financial firms disappearing, I think municipal issuers 
have fewer options. So, that is a concern generally.
    Senator Cotton. And then thinking about FINRA's future 
going forward, it seems that it is kind of in this neither fish 
nor fowl category now with its relationship to the SEC, but 
also not maybe being purely a SRO anymore. Do you think it 
needs to move in one direction or the other, it needs to 
essentially be folded into the Commission or it needs to be 
returned or reconceived as a true SRO, maybe with competing 
SROs, as well?
    Ms. Peirce. Yes. As I laid out in the paper, there are 
multiple options. You could go to the route of folding it into 
the SEC. You could go to the route of trying to encourage there 
to be competing SROs. Or, you could go the route of just trying 
to reform FINRA and put in some more accountability mechanisms 
and make sure the SEC is doing its oversight properly.
    I have not formed an opinion on what the right answer is. 
To some degree, that lies with Congress and certainly not with 
the SEC. But, it would be an area that, if I were to be 
confirmed, I would want to speak with the staff who are day to 
day involved with this oversight and understand from them what 
they think the best course is and then speak with my fellow 
Commissioners, as well.
    Senator Cotton. Thank you. My time has expired, but 
congratulations to you all on your nominations and your 
willingness to serve. Mr. Jeppson, thank you in particular for 
your past service in uniform to our country.
    Chairman Shelby. Senator Donnelly.
    Senator Donnelly. Thank you, Mr. Chairman.
    Ms. Peirce, I want to tell you a little bit about what 
happened in Indiana. I know you are from Ohio. We had 2,100 
workers fired for a company that said, we are on the high end 
of expectations for earnings, that is in the middle of a $16 
billion stock buy-back, and they were fired so that the jobs 
could be sent to Mexico for $3 an hour. Among the folks fired 
were over 60 veterans who had put their lives on the line for 
our country.
    So, going a little bit more into this, the CEO from 2 years 
ago, approximately, walked away with a golden parachute of over 
$190 million in stocks and in others. The present CEO makes 
over $10 million a year. And, the savings they are going to 
have by firing all these workers who gave their heart and soul 
to the company, they say it is going to be $60 million, 
approximately. I think it is probably less. But, that is one-
third of 1 percent of the stock buy-back--one-third of 1 
percent. So, we have 2,100 workers fired for the following 
offenses: Earnings of 20 percent, great brand name, working 
hard, doing everything they can for the company, and the jobs 
sent to Mexico for $3 an hour.
    Should the SEC allow this kind of thing? You have $16 in 
stock buy-backs because they want to get the price of the stock 
up. One-third of 1 percent of that $16 billion are the workers 
who have been fired. The earnings of the company are over $7 
billion, but the stock buy-back is more than twice their annual 
earnings. Should the SEC allow this kind of thing to occur?
    Ms. Peirce. First of all, my heart certainly goes out to 
the employees who lost----
    Senator Donnelly. I understand that, but what I want to 
know is----
    Ms. Peirce. ----their jobs, so----
    Senator Donnelly. ----should the SEC allow over 60 veterans 
to be fired who are making in a two-tier wage system maybe $14 
with minimal benefits so that we can have a stock buy-back of 
$16 billion, and their wages are one-third of 1 percent of 
that?
    Ms. Peirce. So, I cannot speak to the specifics of that 
case because I only know what I just heard from you about it. 
But, I will say that the SEC has rules regarding stock buy-
backs, and this concern that you express is one that I have 
heard from others, as well----
    Senator Donnelly. Well, as a potential SEC nominee, do you 
think this should be allowed?
    Ms. Peirce. Again, it is difficult for me to assess the 
facts and circumstances of that particular case, but what I 
would say----
    Senator Donnelly. Assume they are true.
    Ms. Peirce. What I would say is that if I were to be 
confirmed as a Commissioner, I think it is an area that I would 
think merits looking at, because the volume of stock buy-backs 
is up, and so I would want to talk with the staff at the SEC 
and with my fellow Commissioners about whether the rules that 
are on the books now are working as they should.
    Senator Donnelly. Well, what does it say about a system 
where the driving factor is not your profits. The driving--
well, maybe it is, because maybe they are thinking instead of 
one-third of 1 percent of the stock buy-back, they can go to 
one-half of 1 percent of the stock buy-back. But, what does it 
say when you leave 2,100 workers behind who have given their 
heart and soul, many 20, 25 years, to that company and in 
return they are all fired so they can get $3 an hour wages in 
Mexico, and they tell you it is critical to save that $60 
million, but they are giving a $16 billion stock buy-back. Is 
not something wrong with that process?
    Ms. Peirce. Again, the number of stock buy-backs is up and 
I think it is an area that I would be interested in learning 
more about from the staff who have been looking at that at 
the----
    Senator Donnelly. Well, do you see that as destructive of 
our workers and of the people who have given their lives to 
these companies? I mean, where does--I guess, where does--in 
the SEC's mind, where do the employees, the workers, the people 
who have given their heart and soul, fit in as well as the 
stockholders? What is the balance on that?
    Ms. Peirce. The SEC's mandate relates to investor 
protection as opposed to employee protection. But, naturally, 
any company that is trying to be an effective company has to 
treat its employees well.
    Senator Donnelly. Well, apparently, I think, part of the 
stock buy-back craze has been that the workers get left behind.
    Ms. Fairfax.
    Ms. Fairfax. If you have seen some of my corporate 
governance work, you have seen that I think corporations and 
boards owe their duty to the entire corporate enterprise, and 
that means that you should be thinking about everybody and 
everything that is impacted by that enterprise, and I think, 
then, that flows into this question of corporations and how we 
think about them and what our mandate is with respect to them.
    If you are asking me the question about the particulars, 
again, I was just listening to it----
    Senator Donnelly. Yes.
    Ms. Fairfax. ----as you heard, and I would agree with Ms. 
Peirce that I know share buy-backs are up. I know there is 
significant concern about them and their impact on the 
corporation and would certainly be interested in looking at 
that issue, probing it more deeply, with an understanding that 
it should not be a zero-sum game, that it----
    Senator Donnelly. It is really breathtaking to me that 
Carrier would fire these people, that United Technologies, who 
has contracts with the U.S. Government, and what they are 
asking me to do is to go back to fired veterans and tell them, 
you have been fired, but we now want your tax dollars to be 
used to buy products from the same company that fired you. 
Something seems very, very wrong with that process, and I think 
something needs to be looked at by the SEC in the way this is 
going on.
    How do you, as a veteran, give your heart and soul to a 
company, see them make great earnings, the American promise. I 
mentioned this the last time I was here. The American promise. 
I will work hard. I will make sure this company does well. In 
return, their shareholders are going to do awesome. And in 
return, all I ask for is a halfway decent salary and a chance 
to put a roof over my head. That is the American dream, and I 
think the SEC ought to stand up for the American dream.
    Thank you, Mr. Chairman.
    Chairman Shelby. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman.
    I have a couple more questions, and I just--I appreciate 
Senator Donnelly's bringing up his constituents who have been 
so wronged by greedy management, pure and simple. And as--I 
mean, there are lots of unhappy people in this country now. 
People have a notice from election results, and I appreciate 
his talking about this. And I appreciate Senator Schumer's 
comments about money and campaigns and whether--I mean, I know 
you both want to be confirmed. Whether you--regardless of your 
personal feelings. You did not seem to want to share them very 
much. I understand that.
    But, I do hope that you listen to some of the outrage from 
this Committee and in this country. Even though maybe you 
cannot commit on things now, maybe you do not have all the 
information you need, but there are--I would just hope you 
would be more sensitive than your answers perhaps suggested, 
and Ms. Peirce, in your case, than your writings suggest in 
terms of listening to some of the inequities and injustices in 
this society. I will leave it at that.
    But, I have a couple of questions for both of you, 
starting--well, for both of you. If we go back to 2009 and you 
had a blank slate, where would you start with financial market 
reform? Ms. Peirce, why do you not start.
    Ms. Peirce. Umm----
    Senator Brown. Forgetting Dodd-Frank, give us a real quick 
outline of where you would start.
    Ms. Peirce. Sure. I think that the key theme would be 
trying to restore responsibility for mistakes to the people who 
make them. And, so, part of that, for example, in the bank 
realm, would be higher capital for banks to make sure that 
there is a cushion when there is a problem at a bank. So, that 
would be one example.
    In the securities space, for example, I think some of the 
reforms that are going on now in terms of making sure that 
disclosures are appropriate, so that when someone is looking at 
a financial firm, looking at the filings, someone can actually 
understand what is going on inside that firm.
    So, those would be a couple of the areas that I would 
address.
    Senator Brown. Do you tier capital requirements in terms of 
percentages or leverage ratios? Do you tier them so that 
JPMorgan Chase has higher capital standards than the First Bank 
of Sycamore, and you are in my home State?
    Ms. Peirce. I think simple capital ratios are appropriate. 
Whether you tier it by the size of the bank is something that I 
have not personally investigated. I mean, my inclination would 
be to say that you have a standard across the board, but, I 
would----
    Senator Brown. So, a community----
    Ms. Peirce. ----welcome the opportunity to think more about 
that.
    Senator Brown. Because that----
    Ms. Peirce. You know, I----
    Senator Brown. Does that suggest that the First Bank of 
Sycamore is a threat--poses the same threat to the stability of 
our financial system as does JPMorgan Chase or Goldman Sachs?
    Ms. Peirce. Well-capitalized, well-managed banks do not 
fail, and so I think across the board, even from the 
perspective of that small bank, I think having a good capital 
cushion is wise management. But, again, I mean----
    Senator Brown. Ms. Fairfax, where would you start?
    Ms. Fairfax. Where to start? I think, actually pulling back 
for a second it is interesting that a lot of what happened 
seemed to center around banks. So, I do think it was right to 
think about reforms in that space. Whether or not it is capital 
requirements, thinking through liquidity concerns and risk 
assessments, I think you asked me a question about board 
governance, et cetera. I think that would be linked to this 
question about incentives.
    And linked a little bit to Senator Donnelly's concern about 
people and individuals who are operating in these entities, do 
they have the appropriate incentives to think about long term 
versus short term. I think that is a very important question, 
and making sure that we have appropriate incentives, and 
looking through the rules to think about what the rules say and 
what kind of directions the rules may pull people in, I think 
it is very important.
    Transparency is critical. I think the crisis taught us that 
there was a lot actually we did not know about what was going 
on in the derivatives space, about the interconnectedness 
between certain markets. And, so, I think it is right to shine 
more light on that space and to get more information connected 
with that.
    The other thing I think we saw was that agencies and 
industries were operating in their own separate spheres and 
there was not a clear realization that what one market is doing 
would clearly have an impact on what another market is doing. 
And, so, I think thinking through collaboration and 
coordination, or at least responding to ways that we can 
collaborate and coordinate and recognize interconnectedness is 
also really important.
    Senator Brown. A real quick question, and I note Senator 
Merkley has not had a round yet and I know Senator Warren had a 
question, too.
    There is notable representation--this is for both of you, 
Ms. Peirce first--of women and minorities in management 
positions in financial services and among financial regulators. 
Tell me if you think it is important to have policies to 
improve representation of women and minorities at the SEC, and 
if you do not think so, why not. Ms. Peirce.
    Ms. Peirce. Certainly, the SEC should take advantage of the 
beautiful diversity that this country has, and I would hope 
that it does. I think if we are confirmed, we will be able to 
set an example as a board that is 80 percent female.
    Senator Brown. But, you are not suggesting any kind of 
actions to improve those numbers?
    Ms. Peirce. Numbers at the SEC?
    Senator Brown. And on regulators----
    Ms. Peirce. I am not familiar----
    Senator Brown. Regulators and staff and--at financial 
institutions.
    Ms. Peirce. Certainly----
    Senator Brown. I will give you an example. In your 
hometown, in my hometown, there is a female CEO of Key Bank. 
She is the only female CEO among, I believe, the 25 largest 
banks in the United States. Does the SEC have any--should they 
have any thoughts about helping banks move in the direction of 
better minority and women leadership position representation?
    Ms. Peirce. Well, Dodd-Frank did put in an Office of 
Minority and Women Inclusion, and so if I were to be confirmed, 
I would want to speak with that office to find out what the 
efforts are underway. I know that guidance was put out by 
multiple agencies. I believe the SEC was one of those agencies.
    Senator Brown. Ms. Fairfax.
    Ms. Fairfax. My work clearly shows that I think diversity 
inclusion is important and I think diversity inclusion matters 
in every sector of our economy. When you think about what that 
looks like on the ground, it is not clear, but certainly if I 
am fortunate enough to be confirmed, I would work to make sure 
that the SEC is a leader on this effort in terms of setting the 
tone, as Ms. Peirce said, about what our structure would look 
like, and, of course, setting the tone about the importance of 
that work through the Diversity Office that was mandated by 
Dodd-Frank and, thinking through ways in which we can set that 
tone in other industries.
    Chairman Shelby. Senator Merkley.
    Senator Merkley. Thank you very much, Mr. Chairman.
    And, just to jump right into it, I am very concerned that 
of the rules required by Dodd-Frank, a third have not been 
finalized and there is no clear timeframe. One of the rules 
that I was specifically interested in was the conflict of 
interest provision. This was the situation where, essentially, 
firms were packaging securities to sell to clients and then 
they were taking bets that those very securities they were 
selling would collapse. In other words, they were selling 
something they knew to be defective.
    And, so, the conflict of interest is just about absolutely 
stopping a predatory practice of designing a product designed 
to fail and then selling it as if it is the best thing since 
sliced bread, certainly not something a firm should be doing. 
And, yet, the law as written says for this section, not later 
than 270 days after the date of enactment, the Commission shall 
issue rules.
    Is it, Ms. Fairfax, appropriate that the SEC has failed to 
address this fundamental conflict of interest and has failed to 
follow the law written by Congress?
    Ms. Fairfax. Thank you for your question. I absolutely 
think it is important that we move to try to enact the mandates 
under Dodd-Frank. I am not, obviously, at the SEC. If I am 
fortunate to be confirmed, I will hopefully get some insights 
into what the process around the rulemaking has been and how we 
can work to get things done in a timely fashion----
    Senator Merkley. That is all very diplomatic, but when 
Congress says, you shall do something at the SEC, and you are 
here to be a Commissioner at the SEC, do you take that 
instruction in the law seriously and would you work hard to 
say, yes? And, I realize the Chair sets the agenda, so you do 
not have full power over this, but would you work hard as a 
Commissioner to say, we here on the SEC should follow the law?
    Ms. Fairfax. Absolutely. I think the Commission should 
follow the law and the Commission should try to work to comply 
with whatever time commitments are there within the law.
    Senator Merkley. Ms. Peirce, do you think the SEC should 
follow the law?
    Ms. Peirce. Yes.
    Senator Merkley. Do you find it somewhat embarrassing that 
when the law says 270 days and we are now 6 years later, that 
that is not just a--that is just not a little bit of a miss, 
but that is a complete and utter systemic failure?
    Ms. Peirce. I think that the SEC would agree that that is a 
miss. They have had many rulemakings, and so I know that there 
has been a lot of competition for the rulemaking resources, but 
it is a miss.
    Senator Merkley. So, you would use your position to say, 
let us do what Congress asked, and sometimes that means, if you 
will, that a rule is not going to go through 10,000 
reiterations. It is going to get done and out and field tested, 
and then we can all come back to it later and say, well, does 
it need to be improved or not, but that when Congress says it 
shall be done, you believe it should be done?
    Ms. Peirce. Yes. I mean, the SEC does have to adhere to the 
Administrative Procedure Act in proposing and adopting 
regulations, which does sometimes take some time.
    Senator Merkley. Thank you.
    I am going to turn to the issue of whether owners of 
companies have a right to know how that company is spending 
their money, the owners' money, on political activity. Ms. 
Fairfax, do the owners of companies have a right to know how 
the company is spending their money on political activities?
    Ms. Fairfax. Thank you so much for your question, and just 
to get back, because I know Senator Brown was also concerned 
about this issue, as are, I understand, many others. On the 
issue of disclosure around political spending, I talked about 
initially what I know were concerns on the other side. I 
certainly am fully cognizant of the concerns that you are 
raising, that this is something that investors have really 
asked about, that certain investors absolutely believe it is 
material, and certainly to the extent what they are saying is 
that they believe it is material, both in terms of the type of 
information they want to know, but also in terms of thinking 
through whether or not spending is occurring in a way that is 
consistent with the corporation's best interest, then I think 
that is something that, obviously, we need to be taking into 
account and thinking through how best to respond.
    Senator Merkley. Ms. Peirce, is spending other people's 
money and not informing them on political speech, is that still 
on speech?
    Ms. Peirce. A corporation has the ability to spend money 
without checking every time it spends with its shareholders. 
Obviously, its goal is to increase the value of the 
corporation. And, the rules in terms of disclosure are rules 
that apply across the board to all types of issues, including 
the issue that you raise.
    Senator Merkley. But, there is no rule for disclosure in 
this area and the SEC has refused to do it. Is it not a valid 
interest of an owner to know how political speech is being 
conducted with their money?
    Ms. Peirce. Again, as Professor Fairfax noted, there are a 
lot of people who have expressed an interest in that, and if 
that issue were to come up at the SEC, it is one that I would 
certainly look at and listen to the concerns raised by folks 
who have raised them.
    Senator Merkley. You would listen to people, but you do not 
have any opinion on whether a company spending your money--you 
are a stockholder--on political speech without your permission 
is OK? No opinion on that?
    Ms. Peirce. In terms of the SEC's role, the SEC's role is 
to get information to investors so that they can make their 
investment decisions, and that is the lens through which I 
would view this.
    Senator Merkley. So, it has often been argued that an 
individual who disagrees with the political spending of the 
company can just sell their stock, that it is an easy exit. 
But, how can that individual use that easy exit ramp if they 
never get information about how that company is spending money 
on political speech? Is it not essential to have that 
information in order for the exit ramp, or the on ramp, to be 
utilized?
    Ms. Peirce. Again, I think that the issue of political 
spending should be viewed through the same lens that other 
disclosure issues are in terms of other things that the company 
is spending its money on.
    Senator Merkley. Thank you, Mr. Chairman.
    Chairman Shelby. Senator Warren, do you have further 
questions?
    Senator Warren. I do. Thank you, Mr. Chairman.
    So, I want to focus on this question about who makes 
decisions. Ms. Peirce, your writings suggest that you believe 
that the SEC's purpose is to empower investors to make their 
own informed decisions. For example, in 2014, you wrote that, 
quote, ``The SEC's approach too often entails making decisions 
for investors rather than providing them a framework within 
which to make their own choices.''
    In 2013, SEC Chair White gave a speech in which she said 
that the SEC should review corporate disclosure requirements 
with an eye toward eliminating disclosures that the SEC did not 
think were helpful to investors, and you praised that decision 
in an article, writing that Chair White's speech, quote, 
``recognizes that too much disclosure can harm the investors 
for whom it is purportedly designed.''
    So, I want to sort this out, because it looks like to me 
your positions are directly contradictory. You want the SEC to 
empower investors to make their own choices and you do not want 
the SEC to make choices for them. So, why would you want the 
SEC to be the one to decide that certain information is not 
relevant to investors?
    Ms. Peirce. I think often in the area of disclosure, we 
want to look at the presentation and the balance and make sure 
that information that is important to investors is not lost in 
a mountain of information.
    Senator Warren. Well, thank you, Ms. Peirce, but that is 
not my question. My question is not whether or not you want to 
get it organized in a way that makes sense for people. My 
question is why you would want to cut out information if 
investors think that it is important to them.
    Ms. Peirce. I think the goal is, and certainly what my 
understanding of what the SEC is doing through the Disclosure 
Effectiveness Review, is to try to find out what users of 
financial statements, what investors who are using financial 
statements to make decisions, what information they need, how 
investors----
    Senator Warren. Wait, what information you think they need 
or what information they think they need?
    Ms. Peirce. What the SEC is trying to do is it is trying to 
get information from all of the relevant investors and trying 
to get as much feedback as it can in making those 
determinations. It is actively reaching out----
    Senator Warren. Well, good. Then, let me ask a question 
that is a follow-up here. If the investor community wants fewer 
disclosures, that makes perfect sense to me. I completely get 
that. But, investors like getting those disclosures. That seems 
like a pretty good indication that investors find that 
information relevant to the decisions they make.
    So, would you oppose eliminating any disclosures that the 
investor community wants to keep?
    Ms. Peirce. Yes. I would like to understand who the 
investor community is and I would like to understand, you know, 
that is important when you are trying to figure that out. You 
are trying to figure out who has expressed the opinions that 
they want the information, and certainly----
    Senator Warren. But, ultimately, what you are driving for, 
driving toward, is if the investors want the information, then 
you would say, let us not eliminate it, is that right?
    Ms. Peirce. SEC disclosure is intended to provide the 
reasonable investor the information she needs to make her 
investment decision.
    Senator Warren. OK. But, you have said, let us let the 
investors make the decisions. So, now, let me ask the question 
the other way. If a million investors want the SEC to require 
public companies to disclose corporate political contributions 
because those investors believe that it is relevant information 
for their investing, will you support them, assuming that the 
contributions are material to the company's finances?
    Ms. Peirce. Again, the company should be making disclosures 
of material items.
    Senator Warren. Well, but I am asking you the question 
about who decides what is important to investors. So, if a 
million investors, or, let us pick another number, exactly 1.2 
million investors, say it is relevant to me as an investor to 
have this piece of information, that is, what corporations are 
spending in the political realm, would you support them in 
that? After all, you said you thought it was important that the 
SEC not make decisions for investors, but rather that you 
provide a framework for which they could make their own 
decisions.
    Ms. Peirce. If a particular disclosure requirement comes up 
while I am at the Commission, if I am confirmed, I would 
certainly look at the letters that came in as well as other 
people who----
    Senator Warren. You are going to be there a long time, 
because there is already, I think, 1.2 million letters. You 
know, if the SEC wants to impose fewer restrictions on 
investors' decisions, then those investors need robust 
disclosures so they can make their own informed decisions, and 
you just cannot have it both ways on this one.
    I want to raise one other question, and I will be quick on 
this one, Mr. Chairman. After the Enron accounting disaster, 
Congress created the Public Company Accounting Oversight Board, 
or PCAOB. The PCAOB oversees accounting firms to ensure that 
they are not misleading investors and that the public have--not 
misleading investors or the public about the financial 
condition of the companies that they are auditing.
    The SEC oversees the PCAOB and appoints its five members, 
including the chairman. The term of the current chairman has 
expired--it expired in October of last year--and SEC Chair 
White recently announced the SEC will decide on the next chair 
as soon as the two vacancies on the Commission are filled.
    Now, when it created the PCAOB, Congress required that the 
SEC select its members to serve on the board who are, quote--
and I want to read this--``prominent individuals of integrity 
and reputation who have a demonstrated commitment to the 
interests of investors and the public and an understanding of 
the responsibilities for and nature of the financial 
disclosures required of the issuers under the securities laws 
and the obligations of accountants with respect to the 
preparation and issuance of audit reports with respect to such 
disclosures.'' Demonstrated commitment to the interests of 
investors and the public.
    So, my question is, Professor Fairfax, if you are confirmed 
as an SEC Commissioner, will you oppose the appointment of a 
PCAOB chairman who does not meet those legal requirements?
    Ms. Fairfax. So, certainly, I think that my role, if I am 
fortunate enough to be confirmed as Commissioner, is to follow 
the law----
    Senator Warren. So, you only need one word here.
    Ms. Fairfax. [Laughter.] The answer is, to the extent that 
I come to a reasoned judgment that it is the case that someone 
before me may not be qualified by whatever the criteria within 
the law is, then I do think it is my obligation to not confirm 
that person.
    Senator Warren. So, if they do not have a demonstrated 
commitment to the interests of investors and the public, you 
are a no?
    Ms. Fairfax. Again, I will follow the law, and to the 
extent that those----
    Senator Warren. It is there.
    Ms. Fairfax. ----are the things I am supposed to be looking 
for, then that will----
    Senator Warren. We already did our part.
    Ms. Fairfax. ----impact my decision.
    Senator Warren. All right. Ms. Peirce, how about you?
    Ms. Peirce. If that issue comes up, I will follow the law 
in applying it.
    Senator Warren. Thank you. It is important for this board 
to function as intended and I look forward to the SEC following 
Congress' direction and appointing a highly qualified 
individual to serve as the PCAOB's chairman.
    Thank you, Mr. Chairman.
    Chairman Shelby. Senator Merkley, you have another 
question.
    Senator Merkley. Yes. I think I have one last question, Mr. 
Chairman. Thank you, Mr. Chairman.
    So, it has been 3 years since the Volcker Rule was 
finalized, and last year, the rule went into effect. The 
challenge is that it--the Volcker Rule sought to distinguish 
between proprietary trading, which was banned, and market 
making, which is not. The basic common explanation of the 
difference is between when you bet on a warehouse full of 
something, that is proprietary trading. When you have a retail 
outlet with a few loaves of bread for the customer, that is 
market making.
    And, so, there is a boundary necessary to distinguish 
between the two for both the benefit of the companies and the 
benefit of the regulators. However, the final rule did not 
include specific parameters for enforcement and compliance and 
this lack of clear guidance makes it difficult, not for just 
those in Congress or the public to understand, but for those in 
the industry and for the regulators. What are the metrics that 
are going to be applied? What are the quantitative thresholds 
that would determine whether or not a bank is engaged in 
proprietary trading, or even what are the proper steps that 
must be initiated if a bank is to be found noncompliant?
    For enforcement of this boundary, this boundary must be 
absolutely clear. Would you, Ms. Fairfax, do everything 
possible in your role as an SEC Commissioner to make that 
boundary between proprietary trading and market making clear?
    Ms. Fairfax. It is a very good question. Obviously in order 
to enforce the laws about something, you have got to know 
exactly what they apply to. Volcker obviously just took effect, 
and so thinking about what its impact is is important and how 
we manage its impact. I do think, if I am fortunate enough to 
be confirmed as Commissioner, I will work with the staff and 
other parties to try to make sure that we are clear on that 
line, and you are right, it is important both for purposes of 
the industry to understand where that line is and also for 
purposes of regulators to understand, how best to monitor 
whether or not people are stepping over that line.
    Senator Merkley. Ms. Peirce this concern, which is 
important to the financial firms and to the regulators so that 
they all know the rules of the game, do you support a clear 
definition, understanding, boundary, between market making and 
proprietary trading?
    Ms. Peirce. Yes. I think it's important to write clear 
rules that enable people to behave, knowing that they are in 
compliance with the law, and then for the enforcers to know how 
to enforce the rule.
    Senator Merkley. Do you anticipate that you would 
contribute to the conversation about how to make this boundary 
clearer for the sake of all involved?
    Ms. Peirce. Yes. I certainly would welcome the opportunity 
to work with the staff, who have been looking at this in 
detail, and with my fellow Commissioners if I were to be 
confirmed.
    Senator Merkley. Thank you.
    Chairman Shelby. We thank all of you for your appearance 
here today. We will try to get the Committee together as soon 
as we can and try to move you to the floor and go from there, 
your nominations.
    There has been a lot said here today about following the 
law. That is important. But, I hope that the President will 
follow the law, the Dodd-Frank Act, which Senator Warren had a 
lot of influence in. It has been nearly 6 years, and he could 
appoint a member of the Board of Governors to be the Vice Chair 
of the Fed that we could have some interaction and some dialog 
with on regulatory affairs, both ways. He has not done that 
yet. I hope he will follow the law, and I hope you will follow 
the law.
    Thank you very much.
    [Whereupon, at 12:04 p.m., the hearing was adjourned.]
    [Prepared statements, biographical sketches of nominees, 
responses to written questions, and additional material 
supplied for the record follow:]
              PREPARED STATEMENT OF MATTHEW RHETT JEPPSON
                    To Be Director of the U.S. Mint
                             March 15, 2016
    Thank you, Mr. Chairman, Senator Brown, and distinguished Members 
of the Committee. I am honored to appear before you today. Thank you 
for your time--and I would like to thank President Obama for the trust 
he has placed in me by nominating me to serve as the United States 
Mint's 39th Director.
    Although they were not able to be here with me today, I want to 
acknowledge my wife Renee and our children--Holly, Heidi, Hayden, and 
Hans.
    Before I outline some of the initiatives I would prioritize if I 
have the privilege of being confirmed as the next Director of the 
United States Mint, I would like to share with the Members of the 
Committee a little about my background and how my professional 
experiences have prepared me for the position.
    My life and career have not always followed a conventional, 
predictable path. I moved to Florida from Utah when I was 16 and 
graduated from the University of Florida with a degree in history. 
After college I was commissioned in the United States Marine Corps, 
where I served as an infantry officer.
    My service as a Marine--from those early days leading Marines in 
combat, breaching into Kuwait during Desert Storm, to my service as the 
Deputy Director of Operations for United States Forces in Afghanistan--
developed in me a profound love of the Corps and its Marines. They are 
truly are my brothers and sisters. In January, I retired from the 
Marine Corps with nearly 28 years of combined active and reserve 
service. These years of service have influenced who I am, shaped how I 
interact with my colleagues, and imbued in me an approach to leadership 
and management that I believe will be an asset to the United States 
Mint if I am confirmed. A constant thread throughout my career has been 
a focus on, and commitment to, individuals and how they fit into the 
larger organization--from the Marine on the ground to the Mint employee 
on the manufacturing floor making coins.
    During my last deployment to Afghanistan, I served as Deputy 
Director of Operations for United States forces leading up to and 
during the troop surge in 2009 and 2010. These were enormous, complex 
military operations that gave me valuable skills for leading the United 
States Mint's workforce of approximately 1,700 dedicated men and women 
here in Washington and at five facilities across the country--
Philadelphia, West Point, Fort Knox, Denver, and San Francisco.
    Mr. Chairman, in the early 1990s, my life and career took an 
unexpected turn when my father, who was running a small construction 
business, became seriously ill and I assumed responsibility for running 
the business for a number of years. I was young at the time and faced a 
steep learning curve. But I felt like it was my duty to my family to 
see it through while my Dad recovered. The experience gave me valuable 
skills that help me relate to employees at the United States Mint 
across our facilities, who range from marketing specialists to graphic 
designers, sculptors, die setters, press operators, IT specialists, 
financial analysts, engineers, police officers, human resources 
specialists, and other functions.
    Later, I served as Florida's Director of State Purchasing. While 
overseeing $12 billion in State contracts, we developed a new 
electronic procurement system and modified the way we bought goods and 
services, saving the State millions of dollars by leveraging technology 
to make the State more efficient and accountable.
    Before coming to the United States Mint, I was the Acting Chief 
Operating Officer at the United States Small Business Administration 
(SBA), overseeing all aspects of the agency's disaster relief and risk 
management efforts, personnel, facilities, information technology, and 
equal opportunity programs.
    I was also proud to serve as the Associate Administrator for 
Veterans' Business Development at SBA for 2 years, helping Veterans 
conceive, fund, start, build, and grow their own businesses. I assumed 
responsibility for an office that was facing major challenges at the 
time. With the help of my team, we transformed the office, making it a 
model of cooperation for SBA by using public-private partnerships 
between educational institutions and corporations to leverage scarce 
resources and make enormous strides for Veterans seeking to start small 
businesses.
    Mr. Chairman, since January 2015, I have had the honor of serving 
as the Principal Deputy Director of one of our country's oldest and 
most venerable public institutions. Congress established the United 
States Mint early in the life of our republic in 1792; making coins is 
one of the explicit powers given to Congress by Article I of the 
Constitution. We have a rich history and important role in the 
financial and commercial fabric of our country.
    David Rittenhouse--renowned American astronomer, inventor, 
clockmaker and close friend of George Washington--was the first Mint 
director. Rittenhouse believed that coin design was a form of art. And 
President Theodore Roosevelt, who personally commissioned the redesign 
of American coinage early in the 20th century, believed that coin 
design should reflect our history, values, and heritage. The beliefs of 
Rittenhouse and President Roosevelt live on today in our employees and 
in the products we offer.
    Nearly 225 years after its founding, the modern United States Mint 
is a vibrant, efficient, and lean organization. General and 
administrative costs in fiscal year 2015 decreased by 9 percent 
compared to fiscal year 2014 and 46 percent compared to fiscal year 
2009. And although circulating coinage operations grew to meet 
increased Federal Reserve Bank demand, we decreased the overhead costs 
at our manufacturing facilities by 4 percent compared to fiscal year 
2009.
    In fiscal year 2015, the United States Mint returned $550 million 
in circulating seigniorage--the difference between the face value and 
cost of producing circulating coins--to the Treasury General Fund. In 
fact, the Federal Reserve's demand for circulating coinage is at its 
highest level since 2006. This tells us that coins are still very 
relevant and that our mission at the United States Mint is as important 
as ever.
    To meet the public demand, we are recruiting more talented and 
hard-working professionals to join our ranks, including military 
Veterans, and investing more in their training, development, and 
advancement. Veterans currently make up 35 percent of our workforce 
across the Mint. Since I became the Mint's Principal Deputy Director, 
we are continuing to exceed our goal that 40 percent of all new hires 
be Veterans.
    All of this progress over the last 5 years is a testament to the 
commitment of our employees, as well as the leadership of Secretary Lew 
and Treasurer of the United States Rosie Rios. I assure you that I 
intend to remain on this sound financial path if confirmed as the 
Mint's next Director.
    Mr. Chairman, when I came to the agency in January 2015, the first 
thing I wanted to do was to hear from our employees about their jobs--
what they appreciate, what they would like to change about the 
organization, and how I could help. I set out to visit each facility 
and meet face-to-face with as many employees as I could. Their advice 
and ideas helped me set priorities for the bureau, such as helping all 
our employees get the training they need to advance their careers. This 
investment in human capital will not only address the demographic 
challenges associated with an aging workforce but will also help us to 
continue to meet the increased demand for coinage.
    Soon after I came to the Mint, it became apparent that our 
employees would be better served if all our human resources functions 
were aligned under the Workforce Solutions Department at headquarters, 
allowing the sharing of resources and development of technical 
expertise. This realignment led to benefits such as HR Solution 
Centers--small teams of experts who foster knowledge management and 
create consistency across the organization.
    Mr. Chairman, to satisfy the Nation's demand for numismatic coins, 
it is important that we take advantage of every opportunity to improve 
the experience of the American consumers who buy our products while 
exercising prudent stewardship of the public resources that are 
entrusted to us. As a part of our commitment to embracing a culture of 
continuous improvement in all aspects of our operations, we have 
invested in two significant technological innovations that are already 
showing positive results for our customers and our mission. First, in 
July 2015, we launched a new mobile app--MyUSMint--a first for the 
bureau. It allows smart phone users to learn about Mint history and 
order our products from their phones. The app provides an important new 
method for the public to interact with the Mint. It netted nearly 
$550,000 in sales within its first few weeks of operation and has 
received a very high user rating.
    The new online catalog and order management system deployed in the 
fall of 2014 was a much-anticipated overhaul of a 14-year-old legacy 
system. This new system includes:

    an enhanced customer experience with advanced 
        functionality;

    a more responsive Web site;

    improved order tracking and issue resolution;

    better order status transparency; and

    improved access to the product catalog from all types of 
        devices

    This new, end-to-end solution offers cost and processing 
efficiencies and greater opportunities to capitalize on retail and e-
commerce industry best practices. As of March 7, the new system had 
processed more than $548 million in sales and shipped approximately 6.8 
million products to customers.
    Both of these technological innovations have presented unique 
opportunities to better engage with our customers and the general 
public. We are changing as an organization to better serve our 
customers and using modern technology such as sophisticated robotics 
for packaging and enhanced manufacturing processes at the plants to 
improve our operations and invest in our employees and their safety.
    Mr. Chairman, the United States Mint is a lean, cost-effective, 
transparent organization. We accomplish our core mission to produce 
circulating coins, precious metal bullion coins, and collector coins 
and medals to meet the needs of the Nation and protect our national 
precious metals reserves. If I am confirmed as the Mint's next 
Director, I pledge to continue meeting that core mission.
    I believe the United States Mint reflects the very best of our 
Nation. Our motto--Connecting America Through Coins--has real meaning, 
since the designs, themes, and subjects depicted on our coinage 
represent our shared values, history, and culture--who we are and what 
we believe to be important as a country.
    If I have the privilege of earning the Senate's confirmation as the 
next Director of the United States Mint, I pledge to all of you that I 
will fulfill my responsibilities with pride and integrity. I will never 
forget that I serve the public and will always strive to uphold the 
trust placed in me by the President of the United States and the 
Members of this Committee. I also look forward to working with this 
Committee, the Senate as a whole, and the House of Representatives to 
serve the American people.
    It has truly been an honor to serve with my colleagues at the 
United States Mint for the past 14 months. I thank you all, once again, 
for your time, interest, and consideration. I appreciate the 
opportunity to speak with you today and look forward to your questions.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                 PREPARED STATEMENT OF LISA M. FAIRFAX
        To Be a Member of the Securities and Exchange Commission
                             March 15, 2016
    Chairman Shelby, Ranking Member Brown, and Members of the 
Committee, thank you so much for giving me the opportunity to speak 
with you today. It is an incredible honor and privilege to appear 
before you as one of the President's nominees to be a Commissioner of 
the Securities and Exchange Commission.
    Before I begin my remarks, I would like to briefly introduce my 
family members who are here with me. I am grateful to be joined today 
by my husband, Roger Fairfax, my three daughters, Fatima, Regina, and 
Nadia, my mother Elizabeth White, my mother-in-law Charlene Fairfax, my 
brother-in-law Justin Fairfax, and my sister-in-law Jennifer Fairfax. I 
have a large extended family and want to thank all of them, as well as 
all of my friends, for their incredible and continued support. I also 
would like to congratulate Hester Peirce who, like me, is here today as 
a nominee to serve on the Commission.
    I sit before you today because I believe deeply in the importance 
of robust and healthy securities markets. I also believe deeply in the 
SEC's three part mission to protect investors, maintain fair, orderly, 
and efficient markets, and facilitate capital formation. I am honored 
and humbled by the prospect of potentially serving the Nation and its 
investors alongside the Chair, the other Commissioners, and the many 
staff members who work tirelessly to support the vital work of the SEC.
    As a law professor, over the last 15 years I have had the privilege 
of teaching Corporations and Securities Law to the next generation of 
practitioners, judges, and regulators, so that they can understand the 
increasingly complex world in which companies must operate, markets 
must perform, and regulators must monitor. My teaching, along with my 
research and writing in these areas, have given me a deep understanding 
of the issues confronting the SEC, as well as a strong desire to help 
tackle those issues head on. My research and work with organizations 
such as the American Bar Association and FINRA have taught me the 
importance of engaging a variety of diverse perspectives when seeking 
to develop solutions to complex problems. I look forward to such 
engagement if I am fortunate enough to be confirmed.
    Importantly, I believe that the SEC's three-part mission statement 
is more than a statement; it is a set of guiding principles that should 
shape every aspect of the agency's activities. It is also a set of 
principles that must work together.
    I believe the SEC's work must be aimed at ensuring that investors 
are protected at all times, and that investors have confidence in the 
markets and the financial system.
    The SEC also has a responsibility to facilitate access to needed 
capital for all participants in the market, from the corporation and 
small business owner in need of cash and credit, to the individual 
investing to support a family, finance a child's education, or ensure a 
comfortable retirement.
    And all of these participants need assurances that their capital is 
safe and secure, which is why the SEC has a responsibility to maintain 
markets that are orderly, efficient, and fair. Everyone needs to play 
by the same rules, and there must be strong repercussions for those who 
break them.
    Thank you again for the opportunity to appear before you today. If 
I am confirmed, I will work tirelessly to maintain the confidence that 
the President, this Committee, and the Senate will have shown in me. I 
look forward to answering any questions you may have.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



               PREPARED STATEMENT OF HESTER MARIA PEIRCE
        To Be a Member of the Securities and Exchange Commission
                             March 15, 2016
    Chairman Shelby, Ranking Member Brown, and Members of the 
Committee, I am honored to appear before you today as one of the 
President's nominees to serve as a member of the U.S. Securities and 
Exchange Commission. It is a particular privilege to be considered for 
the SEC together with Professor Lisa Fairfax.
    My desire to serve at the SEC is motivated by the conviction that 
the capital markets help unlock people's potential. Investors build 
their retirement nest eggs, their downpayments, and their children's 
college funds. Vibrant capital markets find and fund individuals and 
companies with brilliant ideas that can enhance people's lives and the 
Nation's prosperity.
    My belief in the capital markets' ability to enrich our communities 
is built on lessons I have learned at the Peirce family dinner table, 
in classrooms at Case Western Reserve and Yale, and from mentors and 
colleagues throughout my career.
    In the field of securities law, I found a natural way to combine my 
undergraduate degree in economics, my law degree, and my elementary 
school hobby of plotting stock prices. I wrote rules for investment 
companies and investment advisers as a staff attorney in the SEC's 
Division of Investment Management. I then worked for Commissioner Paul 
Atkins. Following my time at the Commission, I had the honor of working 
for then Ranking Member Shelby on the staff of this Committee. In all 
of these roles, I learned the importance of carefully crafted and well 
enforced laws and regulations in maintaining strong capital markets.
    At the Mercatus Center at George Mason University, my colleagues 
share my passion for high-quality regulation and sound regulatory 
process. I have learned much from their careful scholarship.
    Another set of lessons--this time about how to use regulation 
effectively to educate, protect, and empower investors--has come from 
my fellow members of the SEC's Investor Advisory Committee.
    I would welcome the opportunity to apply these lessons to protect 
America's investors, preserve the integrity of our financial markets, 
and facilitate innovation and economic growth.
    Thank you for allowing me to appear before you today. I look 
forward to answering your questions.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                   FROM MATTHEW RHETT JEPPSON

Q.1. For more than 30 years, Congress has required that the 
Mint use only gold or silver mined within the U.S. in the past 
12 months in any gold or silver coins, medals, or bullion. I 
support sourcing materials from U.S. companies, but I am 
concerned that the arbitrary time window and limitation to 
newly mined metals unnecessarily restricts the Mint's 
acquisition processes and undermines the Mint's efforts to 
produce the highest quality products in the most cost-effective 
way.
    As Director of the Mint, would you consider acquiring metal 
for bullion from mines and other U.S. sources, including 
recycled metal facilities, if permitted by Congress, provided 
quality was maintained?

A.1. Yes. Currently, provisions in sections 5112 and 5116 of 
title 31, United States Code, require that any gold and silver 
purchased by the United States Mint (Mint) be from domestic 
natural deposits and that it be acquired within 1 year after 
the month in which the ore from which it was derived was mined.
    The Mint's Office of Procurement, working in close 
collaboration with our Manufacturing Department, ensures that 
all of the gold and silver that the Mint purchases meets the 
Mint's stringent quality requirements, which cover such factors 
as purity and the grain size of the metal. If the law were 
changed to allow the Mint to purchase gold and silver from 
other U.S. sources, the Mint would consider all possible 
bullion blank sources permitted by law, including those from 
recycled metal facilities that would meet the Mint's quality 
requirements.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO
                      FROM LISA M. FAIRFAX

Q.1. I am interested in learning more about the policy issues 
raised in the amicus brief you signed in the Trinity Wall 
Street v. Walmart case. It is my understanding that the 
Trinity's shareholder proposal sought to have the Walmart board 
of directors address policies that could shape what products 
are sold at Walmart, such as high capacity rifles.
    Where do you draw the line on shareholder proposals that 
seek to shape social policy and the ordinary business 
operations of a company?

A.1. My signing of the amicus brief in this case did not signal 
my taking any position on the underlying issue, or on a 
particular company or industry. Instead, my signing reflected 
my belief in the broader corporate governance principle that 
shareholder proposals must continue to strike a careful balance 
between boards and shareholders. Consistent with this balance, 
I believe that the appropriate line for shareholder proposals 
is one that allows boards and managers the discretion to 
oversee corporate affairs and implement day-to-day policies, 
but that also gives shareholders the ability they have been 
granted under Rule 14a-8 of the Securities and Exchange Act to 
communicate with the board regarding issues of significance.

Q.2. In its decision in 2015 the Third Court used a two-part 
test: (1) whether the proposal focuses on a significant policy; 
and (2) if so, whether that policy transcends the company's 
ordinary business operations.
    What is the practical effect of this two-part test on the 
SEC ordinary business exclusion?

A.2. I have not had the opportunity to assess the practical 
impact of the Third Circuit's test on the ordinary business 
exclusion. However, in a 1988 Release, the SEC explained that 
proposals under Rule 14a-8(i)(7) relating to ordinary business 
matters that focus on ``significant social policy issues . . . 
would not be considered to be excludable because the proposal 
would transcend the day to day business matters.'' As a general 
matter, therefore, a test examining whether a proposal focuses 
on significant policy issues, and whether such issues transcend 
ordinary business matters, appears consistent with SEC guidance 
on this matter. I also understand that, following the Third 
Circuit's opinion, the SEC staff has reaffirmed its view that 
shareholder proposals focusing on significant policy issues are 
not excludable under Rule 14a-8(i)(7) because such proposals 
would transcend day-to-day business matters. The SEC staff also 
has reiterated that it would continue to apply the SEC's prior 
interpretative approach under Rule 14a-8(i)(7) when considering 
whether proposals are excludable.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR CORKER
                      FROM LISA M. FAIRFAX

Q.1. If you are confirmed as a Commissioner and the SEC Chair 
presents a rule being developed for your consideration, how 
would you go about forming a position on the rule? If the rule 
presented addresses a regulatory principle you fundamentally 
disagree with, would that change your approach?

A.1. If confirmed, and a rule is presented for my 
consideration, I would form my position by gathering as much 
information as I could to learn about the issues in the rule. I 
also would form my position by listening to the views of 
investors, corporations and their advisors, my fellow 
Commissioners and the SEC staff, and others with expertise and 
experience relevant to the rulemaking effort. My approach would 
remain the same for any rulemaking effort, and thus would not 
change based on the regulatory principle addressed by the rule.

Q.2. Can you envision an instance in which you would vote in 
favor of a rule that does not comport with your ideology but 
fits with the SEC's mission?

A.2. Yes, if I am confirmed as Commissioner, my rulemaking 
efforts will not be dictated by my personal preferences or 
interests, but instead by the extent to which a rule is 
mandated by Congress and is otherwise consistent with the SEC's 
three-part mission.

Q.3. Do you believe there are circumstances in which the SEC 
should not implement and enforce statutorily required rules? If 
so, what are those circumstances?

A.3. I believe the SEC has an obligation to follow the law, and 
that the SEC must do its best to implement and enforce mandated 
rules in a manner that is responsible and consistent with the 
SEC's mission. While it may be appropriate for the SEC to voice 
concerns when it appears that a particular rule may be 
inconsistent with the SEC's mission or otherwise unworkable, I 
do not believe this negates the SEC's obligation to follow the 
law.

Q.4. What role do you believe the SEC should play in increasing 
corporate board diversity?

A.4. I believe the SEC has a responsibility to ensure that 
shareholders receive material information about a company and 
its operations. I understand that there are competing views 
about the impact of board diversity, including evidence 
indicating that diverse boards may behave similarly to 
nondiverse boards. However, I also understand that there are 
investors who believe that board diversity has a material 
impact on a corporation's governance, decision making, and 
bottom line. For such investors, disclosure about a 
corporation's diversity practices and current status enables 
them to make more informed voting and investment decisions. 
Thus, I support SEC efforts to provide shareholders with 
sufficient information on this issue.

Q.5. How do you view the SEC's role in overseeing the U.S. 
equity market structure? What changes, if any, do you believe 
should be made?

A.5. I believe maintaining and enhancing the high quality of 
the U.S. equity markets is critical to the SEC's mission. 
Markets have undergone sweeping changes from manual markets to 
the current environment in which trades occur at high 
frequencies in a diversity of trading venues. While these 
changes may be beneficial, they also raise important questions. 
I believe it is imperative that the SEC have a deep 
appreciation for the current structure of our equity markets so 
that it is in the best position to oversee those markets. If 
confirmed, it would be a top priority for me to continue the 
SEC's engagement in efforts that comprehensively review the 
equity markets. It also would be a priority for me to monitor 
and work on the process for developing and implementing a 
consolidated audit trail. I believe that establishing a 
consolidated audit trail will significantly enhance the ability 
to oversee and analyze trading activity, and enforce the rules. 
While there is potential for reform in a variety of other 
areas, I believe the results of the SEC's review will provide 
important insights about how such reform efforts should take 
shape. If confirmed, I would look forward to those results, and 
to working diligently toward needed reforms with the SEC staff 
and other interested parties.

Q.6. How would you approach consideration of a rule brought up 
by the Chair that attempts to increase capital formation?

A.6. If confirmed, my approach for consideration of any rule 
would be to gather as much information as I could about the 
issues in the rule, and to listen to the perspectives and 
concerns of those interested in, and impacted by, the rule. 
Facilitating capital formation is one of the three components 
of the SEC's mission. Therefore, if I am confirmed, I believe 
an essential aspect of my work would be to actively consider 
ways in which the SEC can facilitate access to capital for all 
market participants. I also believe that the SEC should work to 
advance each aspect of its three-part mission. Thus, if I am 
asked to consider a rule related to capital formation, I also 
would carefully consider how the rule impacts investors and the 
markets.
                                ------                                


         RESPONSES TO WRITTEN QUESTIONS OF SENATOR KIRK
                      FROM LISA M. FAIRFAX

Q.1. There is no question that in the decade since Regulation 
NMS was adopted, U.S. trading markets have evolved 
considerably. I am pleased to see the Commission considering 
alternatives to the current structure, such as the 
implementation of the Tick Size Pilot program for smaller 
companies that is anticipated this fall. However, there are 
many structural items in need of review or consideration: 
access fees, market fragmentation, market data, and trade-at 
proposals to name a few. Should you join the Commission, will 
you commit to follow through on Chair White's pledge to look 
holistically at the equity markets and move toward needed 
reforms?

A.1. I believe maintaining and enhancing the high quality of 
the U.S. equity markets is critical to the SEC's mission. If 
confirmed, it would be a top priority for me to continue the 
SEC's engagement in efforts that comprehensively review the 
equity markets, and to work diligently toward needed reforms.

Q.2. Each of the current SEC Commissioners, in addition to 
former Commissioners Gallagher and Aguilar, have publicly 
called for the Commission to focus on completion of rules 
governing the security-based swap market, as mandated by Title 
VII of the Dodd-Frank Act. While I share concerns about the 
structure and benefits of Title VII, I also agree that 
continuing to delay these rulemakings only perpetuates market 
uncertainty. Given that the CFTC completed its rules 2 years 
ago, do you view the completion of Title VII rulemakings as a 
priority for the Commission?

A.2. Yes, I believe completing the rulemaking mandates under 
Dodd-Frank or otherwise mandated by Congress should be a top 
priority for the Commission.

Q.3. When questioned about the Department of Labor's fiduciary 
proposal, you indicated that protecting access to quality and 
appropriate advice is important, particularly for middle and 
lower income investors. Given that investor protection is 
paramount to the SEC's mission, how should the SEC act to 
preserve access to quality, affordable investment advice if the 
DOL's final rule results in the crowding out of such access for 
low- and middle-income investors? Do you believe that the rule 
as currently proposed would affect these investors' ability to 
access advice?

A.3. I believe that an appropriate fiduciary duty rule for 
broker-dealers rule is essential for ensuring that investors 
are protected. I also believe that any rule in this area must 
ensure that investors have access to quality, affordable 
investment advice that adequately considers their needs. It is 
also important that investment advice is transparent and free 
from inappropriate conflicts of interests. I have not seen the 
final version of the Department of Labor rule and thus I cannot 
speak to the impact it may have on investors' ability to access 
advice. However, I understand that concerns have been raised 
about the extent to which the DOL rule would limit access to 
quality investment advice, particularly for lower- and middle-
income investors. I also understand that the SEC consulted with 
the DOL staff about these and other concerns. I believe this 
kind of consultation and coordination is critical, and will 
help to ensure that issues involving investor access and 
protection are considered. I also believe that if a DOL rule is 
finalized and implemented, the SEC should continue to 
coordinate with the DOL to monitor the rule's impact, and that 
the agencies should work together to determine appropriate 
responses if concerns emerge. I also recognize that, consistent 
with Section 913(f) of the Dodd-Frank Act, the SEC staff has 
studied this issue, and the SEC has begun its own rulemaking 
efforts in this area. I believe that the SEC's efforts must be 
mindful of any DOL rule, and that the SEC must attempt to 
minimize any conflicts, confusion, or inconsistencies, while 
also ensuring that any rule it develops is consistent with the 
goals of protecting investors and ensuring their ability to 
access appropriate investment advice. If confirmed, I look 
forward to engaging on this effort at the SEC, coordinating 
with DOL on their efforts, and working to make certain that 
unnecessary costs or burdens are not imposed on investors or 
other market participants.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SASSE
                      FROM LISA M. FAIRFAX

Q.1. In your opinion, under what circumstances might it be 
appropriate for national securities regulations to preempt blue 
sky laws? Why?

A.1. As an initial matter, determining the appropriateness of a 
regulation seeking to preempt blue sky laws requires 
consideration of whether such preemption is consistent with 
governing legal and statutory principles. Beyond such 
consideration, I believe whether any SEC regulation (including 
a regulation aimed at preempting blue sky laws) is appropriate 
depends upon whether such regulation is consistent with the 
SEC's three-part mission. Thus, if a regulation calling for 
preemption is not consistent with investor protection, the 
maintenance of fair, orderly, and efficient markets, and the 
responsibility to facilitate capital formation, then such 
preemption is not warranted.

Q.2. Does anything need to be done to improve the use of cost-
benefit analysis at the SEC? If so, will you commit to 
advocating for taking these steps?

A.2. Consistent with SEC guidance on this issue, I believe that 
carefully analyzing the potential economic consequences of a 
proposed rule (including its costs and benefits) is a critical 
aspect of sound rulemaking. I understand that the SEC has made 
efforts to enhance its economic analysis of rulemaking, 
including reviewing its cost-benefit approach, hiring 
economists, and engaging in more expanded economic analysis 
when necessary. I believe it is important to continually 
monitor this effort to ensure that economic analysis is 
appropriately tailored to each rulemaking effort. If confirmed, 
I will commit to working with the SEC staff, particularly the 
Division of Economic and Risk Analysis, to ensure that SEC 
guidance in this area is appropriate, and that adjustments are 
made when necessary.

Q.3. I'd like to ask you more about the SEC's mission ``protect 
investors, maintain fair, orderly, and efficient markets, and 
facilitate capital formation.''
    What factors should dictate the SEC's rulemaking schedule?
    Does the SEC's rulemaking schedule reflect the right 
balance between focusing on these three missions? If not, how 
would you change it?

A.3. I believe that the SEC's three-part mission should 
represent a set of guiding principles that shape every aspect 
of the SEC's work, including its rulemaking schedule. I also 
believe that those principles must work together, and that 
every effort should be made to focus on all three of those 
principles when engaging in rulemaking. I understand that much 
of the SEC's recent rulemaking agenda has been dictated by the 
need to comply with the Congressional mandates under the Dodd-
Frank Act. If confirmed, I would work to ensure that the SEC 
diligently and responsibly completes these mandates as well as 
work to ensure that rulemaking reflects an appropriate balance 
of its three-part mission.

Q.4. Former SEC Commissioner Dan Gallagher has said that 
``issues specific to small business capital formation too often 
remain on the proverbial back burner. This lack of attention 
doesn't just harm small business; it also harms investors and 
the public at large.'' Do you agree?

A.4. Because I am not employed at the SEC, I am not privy to 
the manner in which specific issues have been prioritized. 
However, I do agree that small businesses are important to 
investors and play a critical role in our economy. I also agree 
that the SEC must pay appropriate attention to the capital 
formation needs of small businesses.

Q.5. Will you commit to actively pursuing the ``capital 
formation'' mission as a Commissioner? If so, how? For example, 
should the SEC do more to encourage public IPOs? Should the SEC 
do more to scale regulations for smaller firms?

A.5. Facilitating capital formation is one of the three 
components of the SEC's mission. Therefore, if confirmed, I 
will commit to actively considering ways in which the SEC can 
facilitate access to capital for all participants in the 
market, including smaller firms which play a critical role in 
job growth. I believe that considering ways in which the SEC 
can bolster the public IPO market is important. I also believe 
it is important to consider ways to facilitate responsible 
capital formation through private placements and other innovate 
sources.
    I believe the SEC must consider how any rule impacts 
different market participants, and make appropriate 
adjustments. This means that the SEC must consider whether and 
to what extent regulations should be adjusted in order to take 
into account their impact on smaller firms. Prior SEC rules 
have been adjusted to accommodate the special concerns of 
smaller firms and, if confirmed, I would expect the SEC to 
continue making such adjustments when appropriate.

Q.6. I'd like to ask about the SEC's use of Administrative Law 
Judges:
    Under what circumstances is it appropriate for the SEC to 
send cases to Administrative Law Judges?
    Do you have constitutional concerns with ALJs?
    Is there a risk that ALJs have an improper pro-SEC bias?

A.6. I believe that enforcement is essential to the SEC's 
mission, and is necessary to protect investors, maintain 
investor confidence, and ensure that capital formation occurs 
under market conditions that are fair. It, therefore, is 
important that investors have confidence that the SEC is fairly 
enforcing the laws. On the one hand, I understand that process 
and fairness concerns have been raised about the SEC's use of 
Administrative Law Judges. I believe that the SEC must be 
mindful of those concerns and find appropriate ways to respond 
to them. The SEC must be especially mindful of the issue of 
bias, both real and perceived. Thus, I support the decision to 
make a careful determination about the kind of cases being sent 
to ALJs as well as the decision to reiterate the process and 
rationale for sending cases to ALJs. I also support the 
decision to enhance the evidentiary rules for ALJs. Each of 
these actions brings greater transparency to the process and, 
if confirmed, I would continue the effort to do so. On the 
other hand, I do believe it is appropriate to make use of ALJs. 
Many agencies use ALJs for reasons of efficiency, greater 
expertise, and shorter timelines for resolution. Moreover, ALJ 
decisions can be appealed to Federal courts. In light of these 
benefits and Federal court review, it makes sense for the SEC 
to use ALJs in appropriate circumstances so long as the SEC is 
mindful of the concerns and risks associated with such use and 
takes steps to appropriately address them.
    On the issue of constitutional concerns, I am not a 
constitutional law scholar, but I am mindful that such concerns 
have been raised and that courts have resolved the issue in 
different ways. Because this is an issue that is still being 
resolved in court, I do not think it is appropriate for me to 
comment further.

Q.7. I'd like to obtain more information about your approach to 
securities regulations.
    Is there a risk that regulations can give large incumbent 
firms a competitive advantage over smaller farms? If so, what 
can be done to mitigate this risk?

A.7. I believe regulations can impact different market 
participants differently, and thus there is a risk that 
regulations can impact smaller firms differently. The SEC 
should take steps to understand any potential differences in 
order to account for them in the rulemaking process. I believe 
the best way to account for these differences, including with 
respect to smaller firms, is to carefully consider the 
potential impact of a regulation by getting input from firms, 
their advisors, and other interested parties. In addition, the 
SEC must be willing to make adjustments to account for any 
problematic impacts. Prior SEC rulemaking efforts have sought 
to assess the impact on smaller firms. Moreover, the SEC has 
made adjustments to rules in order to accommodate the special 
concerns of smaller firms. If confirmed, I would expect the SEC 
to continue making such adjustments when appropriate.

Q.8. Is it ever appropriate for the SEC to engage in ``merit 
review'' of investment choices, where the SEC would elevate its 
evaluation of a particular investment over the evaluation of a 
private investor?

A.8. The Federal securities laws are not based on merit review, 
but rather are based on the notion that investors are best 
protected when they are provided with clear and effective 
disclosure, and can make informed investment choices. From this 
perspective, the SEC should focus on ensuring that investors 
have access to appropriate information so that they can make 
their own evaluations.

Q.9. Is it appropriate--in the words of Chair White--to 
``effectuate social policy or political change through the 
SEC's powers of mandatory disclosure''?

A.9. While I recognize that disclosure can and does have an 
impact on market participants, I believe that the purpose of 
disclosure is to provide shareholders with information 
necessary to make informed voting and investment choices.

Q.10. Is there a danger that disclosure requirements become so 
voluminous that they become unhelpful to investors? If so, what 
can be done to avoid this problem?

A.10. Disclosure should be clear and aimed at ensuring that 
investors have sufficient information to make informed 
decisions. One challenge for disclosure requirements is 
determining what constitutes ``sufficient'' information, 
particularly given the potential for too little information as 
well as the potential that information may be too voluminous 
for investors to appropriately digest. I understand that the 
Chair has asked for a comprehensive review of existing 
disclosure rules, and I believe that insights gained from that 
review will help determine areas of concern and how best to 
respond.

Q.11. I'd like to explore your views on ``accredited 
investors.''
    Should the SEC consider expanding the definition of 
``accredited investor'' beyond mere investor income and assets 
to also include investor expertise, such as possessing a 
graduate degree in a related field?
    How should the SEC strike the balance between investor 
protection and investor freedom when it comes to the definition 
of accredited investor?

A.11. I believe that the SEC should consider changes to the 
current accredited investor definition. The definition is 
essential for investor protection because it seeks to determine 
which investors can best fend for themselves, and thus which 
investors should be subject to different regulatory approaches. 
I understand that, consistent with the Dodd-Frank Act, the SEC 
staff has issued a report reviewing the definition of 
accredited investor and analyzing various approaches for 
modifying that definition. I also understand that the SEC has 
issued a request for public comments on the report. If 
confirmed, I would welcome the opportunity to review the report 
with the Chair, my fellow Commissioners, and the SEC staff to 
gain a better appreciation for the recommended approaches. I 
also would look forward to reviewing the comments of 
shareholders, companies, and other market participants on this 
critical issue. Such input will be important for determining 
how best to respond to the report, and how best to fashion an 
accredited investor definition that strikes the appropriate 
balance between protection and flexibility by helping to 
identify investors who have sufficient sophistication and 
experience to assess whether an investment is appropriate for 
them.

Q.12. The marketplace online lending ecosystem has grown 
significantly as of late. Would you recommend changes to how 
the SEC approaches this field? For example, should the SEC 
contemplate creating a broad safe harbor for marketplace online 
lenders, which scales registration requirements to reflect 
their unique business model?

A.12. Marketplace online lending has grown in significance and 
has become increasingly complex. Such lending has the laudable 
goal of facilitating a more efficient and cost-effective 
borrowing process, and thus has the potential to significantly 
expand access to capital, particularly to underserved segments 
of the market. I believe it is important for the SEC to 
consider how best to approach the marketplace in order to 
balance the goal of facilitating innovative methods of 
accessing capital with the goal of investor protection. I 
believe it would be premature to recommend changes related to 
the marketplace without first ensuring that the SEC has an 
appropriate understanding of the current status and impact of 
the marketplace. To this end, it makes sense for the SEC to 
engage with participants in the marketplace and other 
interested parties to gain insight about the impact and 
efficiency of different approaches to the field.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS
                      FROM LISA M. FAIRFAX

Q.1. The New York City Public Advocate recently wrote the SEC 
asking that it examine publicly traded gun manufacturers with 
an eye towards charging them with fraud for not disclosing 
information about gun-related deaths.
    Similar questions have been raised about oil companies and 
climate change. In fact, Attorney General Lynch recently said 
that the Department of Justice considered prosecuting climate 
change skeptics.
    The idea that the Government would consider prosecuting 
political opponents is chilling and has no place in our 
political system.
    The SEC should be about safeguarding markets, protecting 
investors, and helping to foster capital formation.
    Attempts to settle political scores that should be decided 
at the ballot box have no place on the SEC's agenda.
    Can you assure me that you will not pursue or support any 
attempts to politicize corporate disclosure rules--whether for 
gun control, climate change or any other issue which should be 
properly decided by Congress?

A.1. I believe that effective disclosure is fundamental to our 
Federal securities laws and is critical to the SEC's three-part 
mission. If confirmed, I can assure you that my work related to 
disclosure will not be guided by any political agenda, but by 
the goal of complying with the law and ensuring that disclosure 
is consistent with the SEC's three-part mission.

Q.2. One of the best tools we have to make sure that 
regulations are fair and make sense is cost-benefit analysis.
    A cost-benefit analysis allows regulators to clearly 
examine the benefits of a rule and weigh them against the 
damages caused by the proposed rule.
    If a statute is silent on the use of cost-benefit analysis, 
do you believe the Commission can conduct a cost-benefit 
analysis or can it only conduct an analysis if the statute 
explicitly includes that requirement?

A.2. I believe that carefully analyzing the potential economic 
consequences of a proposed rule is a critical aspect of sound 
rulemaking. Therefore, I believe that even without any 
statutory requirement, the SEC's rulemaking efforts should 
involve consideration of potential economic consequences, 
including the potential costs and benefits of any rule. I 
appreciate that it may be difficult to sufficiently measure the 
costs and benefits of a rule. However, I do believe that the 
Commission should make reasonable efforts to determine the 
probable costs and benefits of a proposed rule, or explain why 
such a determination cannot be made.

Q.3. Rather than creating punitive rules which increase 
compliance costs, what can you do, if you are confirmed, to 
incentivize regulated entities and investors to make better 
decisions?

A.3. I believe that regulation works best when it relies on a 
range of approaches when seeking to encourage entities and 
investors to make appropriate decisions. Thus, I also believe 
that in addition to relying on enforcement, the SEC also should 
consider approaches (including market-based policies) that are 
aimed at incentivizing market participants. If confirmed, I 
would be interested in assessing current incentives and their 
impact. I also would be interested in exploring ways to develop 
incentives that would encourage market participants to act in 
the best interests of companies and their shareholders.

Q.4. Last year, the New York City pension system issued 
numerous shareholder proposals on proxy access. Many of these 
proposals were centered on energy companies and their purpose 
was not to improve governance but to push an agenda on climate 
change.
    Two recent reports by the Manhattan Institute have shown 
that public pension funds that engage in politically motivated 
corporate governance fights have lower returns forcing tax 
payers to foot the bill, while union sponsored shareholder 
proposals are concentrated in industries or businesses targeted 
in organizing campaigns.
    What role should the SEC undertake as a gate-keeper to make 
certain that shareholder proposals and director elections are 
correlated to the interests of a corporation and its investors, 
rather than a political or social agenda?

A.4. I do believe that the SEC has a responsibility to be a 
gatekeeper and monitor activity related to both shareholder 
proposals and director elections. On the one hand, the SEC 
should take efforts to ensure that parties do not abuse the 
shareholder proposal process. The Federal securities laws 
already have a system in place under the no-action process that 
enables the SEC to monitor the shareholder proposal process and 
intervene where appropriate. I understand that there have been 
concerns about the workability of that system. If confirmed, I 
would be interested in working with the SEC staff and other 
interested parties to assess the shareholder proposal process 
and determine if reforms are needed. On the other hand, the SEC 
should pay close attention to director elections because such 
elections have a significant impact on the corporation and its 
investors. I understand that there have been a number of 
changes to the election process at public companies, such as an 
increase in declassified boards and an increase in the number 
of companies adopting majority voting. I also understand that 
there has been an increase in the number of proxy fights within 
the last few years. The SEC should monitor these and other 
developments related to director elections to understand their 
impact, and to make certain that the election process is fair, 
and that parties are not engaging in actions that negatively 
impact the corporation and its investors.

Q.5. The Labor Department's proposed Fiduciary rulemaking will 
radically alter the market for individual retirement savings.
    Many commentators believe that rather than protecting 
investors, it will price many middle class retirement savers 
out of the market for investment advice.
    Can you envision circumstances in which a retirement saver 
of more modest means could benefit from the personalized advice 
of someone who knows them and their circumstances but who is 
not qualified as a fiduciary?

A.5. I understand that the Labor Department has proposed a 
fiduciary duty rule for broker-dealers. I also understand that, 
consistent with the study required by Section 913(f) of the 
Dodd-Frank Act, the Chair has asked the SEC staff to develop a 
uniform fiduciary rule for brokers-dealers and investment 
advisors. I believe that the goal of any rulemaking effort in 
this area should be to ensure that investors, particularly 
lower- and middle-income investors, have access to quality 
affordable investment advice, and that such advice considers an 
investor's particular needs and circumstances.

Q.6. In December 2015, the SEC voted to propose rule 18f-4, 
which would regulate the use of derivatives by registered 
investment companies. This rule attempts to regulate the use of 
derivatives to protect investors and reduce systemic risk, but 
I am concerned that it goes farther than intended and will 
alter the commodities futures market by setting arbitrary 
portfolio limitations for derivatives.
    The rule appears to incentivize funds to overweight 
portfolios with stocks and bonds and move away from trading 
commodities.
    What is your view on the regulation of simple, diversifying 
derivatives?

A.6. I understand that proposed rule 18f-4 has three main 
elements--limitations on portfolio leverage, asset segregation 
requirements, and derivatives risk oversight. I also understand 
that the purpose of the proposed rule is to reduce leverage 
risks associated with derivatives and achieve a more standard 
treatment of derivatives transactions. I believe that the 
financial crisis revealed the need to enhance transparency with 
respect to derivatives, and pay closer attention to risks 
associated with derivatives transactions. I also believe that 
derivatives pose both benefits and risks for investors and the 
market. Any regulatory effort in this area must carefully 
consider how best to account for risks without disadvantaging 
investors and other market participants. If confirmed, I look 
forward to reviewing the comments to the proposed rule, 
engaging market participants to better understand the potential 
risks and benefits of the rule, and working with the SEC staff 
and other interested parties on the most appropriate path 
forward.

Q.7. Do you believe that proposed rule 18f-4, will limit the 
average investor's ability to access diversifying assets? If 
so, why? If not, why not?

A.7. In proposing rule 18f-4, the SEC acknowledged that the 
proposed rule could have a significant impact on certain funds, 
potentially requiring them to significantly alter their 
investment strategies. This raises the possibility that the 
proposed rule also could impact investors' access to certain 
funds and their assets. If confirmed, I look forward to 
reviewing the comments on this proposed rule in order to work 
with the SEC staff and other interested parties on determining 
the most appropriate path forward.

Q.8. Are you concerned that this rule could harm rather than 
protect investors because it incentivizes registered investment 
companies to concentrate their assets in equities rather than 
derivatives?

A.8. The proposed rule raises several questions and concerns. I 
believe the goal of public comments is to address those 
questions and concerns so that any final rulemaking can 
appropriately account for them. If confirmed, I would work with 
my fellow Commissioners and the SEC staff to ensure that any 
final rule appropriately considers and addresses concerns 
related to investor protection, as well as any other concerns 
raised by the commentators or other interested parties.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHUMER
                      FROM LISA M. FAIRFAX

Q.1. Ms. Fairfax, do you believe that information related to a 
company's corporate political spending should be considered 
material to prospective investors and/or shareholders?

A.1. I understand that there have been an extraordinary number 
of commentators to the rulemaking petitions submitted to the 
SEC, as well as a significant number of shareholder proposals 
on this issue, expressing the belief that such information is 
material. Several corporations also have voluntarily agreed to 
provide shareholders with corporate political spending 
information based, at least in part, on the belief that the 
information is material. I believe many of these commentators, 
shareholders, and corporations advance strong arguments that 
the information is material because it allows investors to 
assess whether such spending is beneficial and consistent with 
the corporation's best interests. However, I also understand 
that many others question whether information related to 
corporate political spending is material not only because the 
amount of money spent may be small in comparison to the 
corporation's total assets or expenditures, but also because 
shareholders have rejected the vast majority of shareholder 
proposals on this issue. I also recognize that many have 
concerns about such disclosure that extend beyond the question 
of materiality.
    Although I do believe that corporate political spending 
disclosure is an important issue that deserves thoughtful 
consideration, I do not believe I should prejudge any issue 
without the benefit of full engagement. However, if confirmed, 
and so long as it is not prohibited by law, I would engage with 
shareholders, corporations and their advisors, the SEC staff, 
and interested stakeholders so that I can thoughtfully and 
fully consider this issue. My consideration would focus on 
assessing the various views expressed during this engagement to 
determine if such information should be deemed material in 
light of prevailing understandings of materiality. As part of 
this assessment, I would examine whether such information 
aligns with the materiality test articulated by the Supreme 
Court in TSC Industries v. Northway, which focuses on whether 
there is a substantial likelihood that a reasonable investor 
would consider information important, and whether information 
would alter the investor's ``total mix'' of information. I also 
would consider whether the information is consistent with SEC 
guidance on materiality, which relies on the Supreme Court's 
formulation, and assesses both quantitative and qualitative 
factors to determine if the information would influence the 
investment decision of a reasonable investor.

Q.2. Do you believe that the SEC should consider whether 
investors should be entitled to information disclosing a 
company's corporate political spending?

A.2. Given the overwhelming amount of comments and attention to 
the rulemaking petitions on this issue, and so long as it is 
not prohibited by Congressional mandate, I believe the SEC 
should continue to engage investors and other interested 
stakeholders to determine whether, and to what extent, 
investors should be entitled to information about a company's 
corporate political spending.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
             SENATOR MENENDEZ FROM LISA M. FAIRFAX

Q.1. What actions will you take as Commissioner to bring much-
needed accountability and transparency for shareholders to 
ensure that public companies disclose how they use corporate 
resources for political activities?

A.1. As an initial matter, I believe in the importance of the 
SEC following the law and to the extent that the law prevents 
the SEC from finalizing, issuing, or implementing rules, 
regulations, or orders on this issue, the SEC must comply. 
However, given the overwhelming amount of comments and 
attention to the rulemaking petitions on this issue, and so 
long as it is not prohibited by the law, I also believe the SEC 
should continue to engage investors and other interested 
stakeholders to determine whether, and to what extent, 
investors should be entitled to information about a company's 
corporate political spending.

Q.2. Given the record input from securities experts, 
institutional and individual investors, and members of the 
public on this rulemaking petition--more than 1.2 million 
comments, more comments submitted than any other rulemaking in 
the SEC's history--where would this rulemaking fall in your 
list of priorities, and how will you advocate that the 
Commission prioritize its development and proposal?

A.2. Although it is the Chair's responsibility to set the SEC's 
agenda, in light of the input from investors and stakeholders 
on this issue, and so long as it is not prohibited by the law, 
if confirmed, I believe it would be appropriate for me to 
engage the Chair and my fellow Commissioners on this issue to 
ensure that such input has been fully considered in the process 
of setting the SEC's priorities.

Q.3. Can I have your commitment that if confirmed as 
Commissioner, you will do everything within your power to move 
this rulemaking forward?

A.3. As noted above, I intend to comply with the law. To the 
extent the SEC is permitted to engage in rulemaking on this 
issue, I will certainly do everything that I can to move any 
rulemaking effort forward.

Q.4. The fiscal year 2016 omnibus appropriations law 
unfortunately included a 1-year provision to block the SEC from 
issuing, implementing, or finalizing a rule to require public 
companies to disclose their political spending to shareholders. 
Immediately following the enactment of this law, I sent a 
letter to SEC Chair White, along with 96 of my colleagues in 
the Senate and House, pushing the Commission to move forward 
notwithstanding the language contained in the end-of-year 
spending bill. It is our analysis and understanding, which is 
notably shared by Harvard Securities Law Professor John Coates, 
that the provision in the omnibus does not bar the SEC from 
moving forward to prepare, propose, or develop a rulemaking on 
corporate political spending. To that end, I fully expect the 
SEC to host public roundtables, solicit additional stakeholder 
feedback, and do everything within its power to develop a 
proposal on this issue. If confirmed as Commissioner, what 
immediate steps will you take to set in motion the development, 
preparation, and proposal of this critical rulemaking?

A.4. I understand that the omnibus law limits the SEC on this 
issue. If confirmed, I would be interested in engaging with the 
SEC staff, including the Office of the General Counsel, to 
understand their analysis of the Congressional mandate, to work 
with the Chair, my fellow Commissioners and the SEC staff to 
make an assessment regarding what is allowed by the mandate, 
and to ensure that SEC actions are consistent with that 
mandate. So long as it is not prohibited, I believe the SEC 
should continue to engage investors and other interested 
stakeholders to determine whether, and to what extent, 
investors should be entitled to information about a company's 
corporate political spending. If it is determined that the law 
allows for other actions, I certainly would be open to 
exploring those actions, carefully considering the range of 
concerns being raised, and working with the Chair, my fellow 
Commissioners, the SEC staff and other interested parties to 
determine the best path forward.

Q.5. On the issue of corporate board diversity, to what extent 
is having a wide range of perspectives represented in the 
boardroom critical to effective corporate governance?

A.5. I believe the composition of the corporate board has an 
impact on effective corporate governance. I understand that 
there are differing views about the connection between board 
diversity and corporate governance. Some have questioned such a 
connection, maintaining that the available data is mixed. 
Others believe that diversity in the boardroom can enhance the 
quality of a board's decision making and monitoring roles, 
thereby impacting corporate governance and the corporation's 
bottom line. This belief is based on the view that diverse 
groups may have a wider variety of approaches to analyzing and 
assessing information, increasing the potential for broader 
perspective and a broader range of solutions to complex 
problems.

Q.6. In your opinion, does corporate board diversity allow for 
boards to better anticipate and consider the concerns and 
perspectives of all of their key constituencies?

A.6. I understand that there are competing views about the 
impact of board diversity, including evidence indicating that 
diverse boards may behave similarly to nondiverse boards. 
However, such evidence also suggests that under appropriate 
circumstances, a diverse board with a range of experiences may 
have an enhanced ability to anticipate and consider the 
concerns and perspectives of a diverse group of investors, 
clients, customers, and other key constituencies.

Q.7. As you know, the SEC adopted a rule change in 2009 to 
require publicly traded companies to disclose more information 
on director selection and diversity. However, many, including 
myself, have expressed concerns that the current rule is 
inadequate, and that investment advisors and shareholders need 
more comprehensive information to make informed investment and 
voting decisions. An enhanced diversity disclosure, in my view, 
would be one step to help promote sociodemographic diversity on 
corporate boards.
    In your view, how does the disclosure of specific details 
about the diversity of corporate boards assist shareholders in 
making informed investment and voting decisions?

A.7. For shareholders who believe that board diversity has an 
impact on a corporation's governance, decision making, and 
bottom line, disclosure about a corporation's diversity 
practices and current status helps such shareholders assess the 
corporation and make more informed voting and investment 
decisions.

Q.8. Can you explain how the SEC's decision not to define 
diversity in its 2009 rule undermines the value of the 
information provided by the current disclosure?

A.8. I understand that the SEC's diversity disclosure rule did 
not define diversity in order to allow companies the ability to 
define diversity in ways they consider appropriate. I also 
understand that there were different views on the benefit of 
such an approach. Some commentators agreed that corporations 
should have the discretion to define diversity based on their 
own business model and specific needs. In contrast, others 
expressed concern that the failure to define diversity would 
undermine the utility of disclosure, particularly if the 
disclosed information did not indicate the factors a company 
considered in assessing diversity. While there are competing 
views about the impact of board diversity, there are investors 
who believe that board diversity has a material impact on a 
corporation's governance, decision making, and bottom line. For 
such investors, disclosure on this issue enables them to make 
more informed voting and investment decisions. Existing 
evidence about the current diversity rule suggests that while 
some companies provide information about how they define 
diversity, other companies do not. Based on that evidence, I 
believe that there may be reason for concern about the rule's 
approach, and its ability to provide the type of information 
investors need to make informed decisions. If confirmed, I 
would be interested in working with the SEC staff and other 
interested parties to explore this issue and determine how best 
to proceed.

Q.9. If confirmed as Commissioner, will you commit to 
strengthening the quality of required disclosures on the 
consideration of diversity in the board selection process?

A.9. I understand that the Chair has expressed concern that the 
existing diversity rule may not provide investors with 
sufficient information. In light of those concerns, the Chair 
has instructed the staff to review existing company disclosures 
in order to determine whether the SEC should require companies 
to provide more specific details about their diversity 
practices. If confirmed, I look forward to learning about the 
status of that review, and I will certainly commit to working 
with the SEC staff and other interested parties to determine 
how best to ensure that investors receive sufficient 
information on this issue.

Q.10. In the aftermath of the Great Recession, many reported 
that excessive executive compensation schemes provided some of 
the fuel for the crash. I worked to include a provision in the 
Wall Street Reform Act to require publicly listed companies to 
disclose in their annual SEC filing the ratio of their CEO's 
total compensation to their median worker's compensation. In 
August, after 5 years of delays, I was pleased to see the SEC 
finally took the step to clear the way for the CEO-to-Worker 
Pay Ratio. This information is especially important in a day 
and age in which executive compensation has skyrocketed. A 2014 
study by the Economic Policy Institute found that chief 
executive pay, as a multiple of a typical worker's pay, 
increased exponentially from an average of 20 times in 1965 to 
almost 300 in 2013.
    In your opinion, how will this information inject 
transparency and promote fairness in corporate America?

A.10. I believe that the Federal securities laws should promote 
clear, concise, and understandable disclosure on executive 
compensation. Such disclosure allows investors to evaluate 
whether a company's pay practices are consistent with corporate 
objectives, provide appropriate incentives for executives, and 
have a positive impact on corporate performance and the 
corporate enterprise. I understand that opinions differ on the 
value of the pay ratio rule. I also recognize that many believe 
the rule may enhance compensation disclosure by providing more 
transparency about pay structure, providing shareholders with a 
different metric for analyzing compensation, and increasing 
shareholder's ability to engage with companies about the nature 
and impact of pay packages.

Q.11. If confirmed as Commissioner, will you commit to ensuring 
this rule is properly implemented? Will you work to ensure that 
provisions included by the Commission to facilitate compliance 
do not inadvertently open up loopholes for companies looking to 
evade this requirement?

A.11. If confirmed as Commissioner, it would be a priority for 
me to ensure the appropriate implementation of all the 
Commission's rules and to monitor that implementation to 
determine whether such rules are having their intended effect. 
If confirmed, I also commit to working with the Chair, my 
fellow Commissioners, the SEC staff, and other interested 
parties to develop appropriate responses when issues of concern 
emerge. I understand that, in response to costs and other 
concerns, the pay ratio rule provides companies with 
significant flexibility. If confirmed, I would work with the 
Chair, my fellow Commissioners, the SEC staff, and other 
interested parties to ensure that such flexibility achieves its 
desired result.

Q.12. Another critical provision included in the Wall Street 
Reform Act is the ``say on pay'' requirement to give 
shareholders the right to an advisory vote on companies' 
executive pay policies. Please discuss the value of this 
requirement, and to what extent you believe it enhances 
shareholders' ability to influence corporate pay practices?

A.12. It is my understanding that ``say on pay'' was designed 
to give shareholders the ability to have a voice in company pay 
practices. Like other proposals, ``say on pay'' sparked 
differing opinions about its benefits and drawbacks. However, I 
do believe that existing evidence suggests that under the 
appropriate circumstances such a vote adds value. To be sure, 
some questioned the ability of an advisory vote to impact pay 
practices. Others questioned the benefit of enabling 
shareholders to influence pay practices because shareholders 
may have limited information, or shareholders might encourage 
companies to adopt ``one-size-fits-all'' pay packages that 
might not be appropriate for every company. My understanding is 
that some of these concerns persist.
    Nevertheless, many investors believe that ``say on pay'' 
has been valuable, particularly to the extent that it has 
focused corporate attention on better aligning pay practices 
with corporate objectives, and has increased engagement between 
corporations and shareholders about compensation issues.

Q.13. What additional steps should the SEC take to address 
excessive executive compensation structures?

A.13. I believe that executive compensation issues are 
important, and that providing shareholders with information 
about such issues allows them to assess whether a company's pay 
practices are aligned with corporate objectives. There have 
been a number of changes with respect to executive compensation 
practices over the last few years, including the SEC's most 
recent rulemaking on pay ratios. I believe that the SEC should 
assess the impact of these rules to determine whether they are 
individually and collectively having their desired impact. I 
also believe it is important for the SEC to complete the 
rulemaking mandates under the Dodd-Frank Act, including those 
related to executive compensation. If confirmed, I would work 
diligently on this effort, and would welcome the opportunity to 
work with the Chair, my fellow Commissioners, the SEC staff and 
interested parties to monitor developments in this area, and 
determine if additional reforms or changes are needed.

Q.14. As a member of the SEC's Investor Advisory Committee, can 
you speak to the value of a broker-dealer fiduciary duty, and 
explain what exactly needs to be done to eliminate the 
regulatory gap that allows broker-dealers to offer investment 
advice without being subject to the same fiduciary duty as 
other investment advisers?

A.14. I believe that an appropriate fiduciary duty rule for 
broker-dealers is essential for ensuring that investors are 
protected, that investors have access to advice that adequately 
considers their needs, and that such advice is transparent and 
free from inappropriate conflicts of interests. I understand 
that, historically, broker-dealers and investment advisers have 
been regulated differently. I also understand that concerns 
have emerged about the impact of this difference on investors, 
particularly as lines have begun to blur between services 
provided by broker-dealers and those provided by investment 
advisers. I believe that those concerns deserve a thoughtful 
attention and an appropriate response. As required by Section 
913(f) of the Dodd-Frank Act, the SEC staff studied this issue 
and made recommendations designed to better protect investors 
and decrease investor confusion. The SEC staff's two primary 
recommendations were that the SEC engage in rulemaking to 
develop a uniform fiduciary rule for brokers-dealers and 
investment advisors, and that the SEC consider harmonizing 
certain regulatory requirements of broker-dealers and 
investment advisers. Consistent with this recommendation, the 
Chair has asked the SEC staff to begin work on developing a 
uniform fiduciary duty rule. If confirmed, I look forward to 
learning about the status of this effort and working with the 
Chair, my fellow Commissioners, the SEC staff, and other 
interested parties to ensure that it moves forward in a 
diligent and responsible manner.

Q.15. If confirmed as Commissioner, will you commit to 
prioritizing this rulemaking?

A.15. If confirmed, it would be a priority for me to ensure 
that SEC efforts in this area move forward in a diligent and 
responsible manner.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
                      FROM LISA M. FAIRFAX

Q.1. Unelected Directors: The Committee on Capital Markets 
Regulation recently conducted a study examining the frequency 
with which corporate directors resign or decline to stand for 
re-election after failing to receive a majority of shareholder 
votes. The study finds that 85 percent of directors who 
received less than a majority of votes were still board members 
2 years after the vote--so called ``unelected directors.'' To 
protect the integrity of the shareholder vote in the face of 
the unelected directors problem, would you be supportive of a 
Commission regulation requiring, at a very minimum, that 
corporate boards disclose the specific reasons that an 
unelected director remain on the board despite the failure to 
receive a majority of shareholder votes?

A.1. I believe that voting in director elections is a 
fundamental shareholder right, and that such voting serves an 
important accountability function. I understand that there are 
studies indicating many instances in which directors have 
failed to receive a majority vote, but nevertheless remain in 
their positions. I also recognize that there may be appropriate 
reasons for maintaining a director (for example when the 
underlying reason for targeting a director has been 
appropriately addressed). However, shareholders may not know 
those reasons. It would be premature for me to support a rule 
without fully exploring an issue with the SEC staff and other 
interested parties. It also would be premature for me to 
support a rule without knowing the specific details, and 
potential impact, of the rule. However, if confirmed, I not 
only would be open to becoming more fully informed about this 
issue, but I also would welcome the opportunity to work with 
the Chair, my fellow Commissioners, the SEC staff and other 
interested parties to determine the most appropriate response 
to this issue, including rulemaking if necessary. If confirmed, 
my goal on this issue would be to determine how best to ensure 
that the shareholder vote is meaningful and appropriately 
impacts director elections and board composition.

Q.2. Standardized Data Formats: The SEC has adopted 
standardized data formats for some corporate filings, such as 
the financial statements contained within quarterly and annual 
Exchange Act reports, but most filings are still expressed as 
outdated paper documents. In 2013, the Investor Advisory 
Committee called on the SEC to adopt standardized formats for 
all corporate filings. The Investor Advisory Committee said the 
Commission should prioritize forms that would improve the 
transparency of corporate governance if they were expressed as 
standardized data, instead of documents. The Investor Advisory 
Committee specifically cited the portions of the proxy 
statement on Schedule 14A that relate to executive compensation 
and shareholder votes, and voting results disclosed by mutual 
funds in Form N-PX. Do you agree that such filings should be 
transformed from documents into standardized data?

A.2. I believe the SEC has a responsibility to ensure that 
disclosures are as clear and effective as possible. I 
understand that the SEC is making efforts to determine how best 
to adopt standardized data formats. On the one hand, I believe 
that standardized data formats have the potential to positively 
impact disclosure, particularly by making disclosed information 
easier to review, retrieve, and analyze. On the other hand, I 
understand that concerns have been raised about the usage, 
costs, and quality of data stemming from such formats. If 
confirmed, I would welcome the opportunity to learn more about 
the status of SEC efforts in this area in order to find the 
best path forward.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR CORKER
                    FROM HESTER MARIA PEIRCE

Q.1. If you are confirmed as a Commissioner and the SEC Chair 
presents a rule being developed for your consideration, how 
would you go about forming a position on the rule? If the rule 
presented addresses a regulatory principle you fundamentally 
disagree with, would that change your approach?

A.1. I would seek to understand the problem Chair White was 
trying to solve, speak with the staff developing the proposal 
and the economists conducting the economic analysis of the 
proposal, and discuss the matter with my fellow Commissioners. 
I would also work with my own staff to review available data, 
relevant academic articles, and white papers. As appropriate, I 
also would seek input from experts, including investors, people 
in the regulated community, and academics. If the rule embodies 
a regulatory principle with which I disagree, I would follow 
the same course, but also would work with others at the 
Commission to identify alternative, more effective approaches 
to achieving the proposed rule's objectives. The key with any 
rule is to identify the problem that needs to be solved and 
figure out the best way to solve it.

Q.2. Can you envision an instance in which you would vote in 
favor of a rule that does not comport with your ideology but 
fits with the SEC's mission?

A.2. If I am confirmed, my job will be to implement the SEC's 
mission of protecting investors, facilitating capital 
formation, and maintaining fair, orderly, and efficient 
markets. There are different approaches to fulfilling that 
mission, and I will strive to work with my colleagues on the 
Commission and on the staff to best fulfill that mission. In a 
multi-member body, compromise is often necessary to reach 
consensus. Therefore, I can envision voting for a rule that is 
consistent with the SEC's mission, but is not the approach I 
would take if I were solely responsible for crafting the rule.

Q.3. Do you believe there are circumstances in which the SEC 
should not implement and enforce statutorily required rules? If 
so, what are those circumstances?

A.3. As an administrative agency, the SEC is charged with 
implementing and enforcing the laws that Congress writes. 
Recognizing that there may be circumstances in which a 
particular law is not appropriately applied, Congress has 
granted the SEC broad exemptive authority in its key statutes 
when such relief is necessary or appropriate in the public 
interest and is consistent with the protection of investors. 
The SEC may, for example, employ its general exemptive 
authority to respond to the unique challenges faced by small 
companies, changes in technology, or innovations.

Q.4. How would you approach consideration of a final rule 
dealing with Section 956 of Dodd-Frank, regarding the 
disclosure and prohibition of certain executive compensation 
structures at financial institutions?

A.4. With respect to the final rule implementing Section 956 of 
Dodd-Frank, which is a multi-agency rule, among other things, 
if confirmed, I would speak with colleagues at the other 
regulatory agencies and would review the comment letters. I 
would also consult the relevant staff at the Commission, 
including the staff of the Division of Economic and Risk 
Analysis, and my fellow Commissioners and seek feedback from 
outside experts, as appropriate. A rule that deals with 
compensation requires extreme care, as compensation is highly 
fact-and-circumstance specific. A properly designed 
compensation arrangement is an appropriate and effective way to 
encourage employee excellence, but improperly crafted 
compensation can harm employees, shareholders, companies, and 
the broader economy. Regulators need to achieve the statutory 
objective of ending the use of harmful compensation 
arrangements, while being mindful of the difficulty of 
establishing one-size-fits-all requirements with respect to 
compensation arrangements across a range of different types of 
firms.
                                ------                                


         RESPONSES TO WRITTEN QUESTIONS OF SENATOR KIRK
                    FROM HESTER MARIA PEIRCE

Q.1. In your testimony, you indicated that retrospective review 
is particularly important with respect to regulations governing 
equity market structure. There is no question that in the 
decade since Regulation NMS was adopted, U.S. trading markets 
have evolved considerably. I am pleased to see the Commission 
considering alternatives to the current structure, such as the 
implementation of the Tick Size Pilot program for smaller 
companies that is anticipated this fall. However, there are 
many structural items in need of review or consideration: 
access fees, market fragmentation, market data, and trade-at 
proposals to name a few. Should you join the Commission, will 
you commit to follow through on Chair White's pledge to look 
holistically at the equity markets and move toward needed 
reforms?

A.1. If I were to join the Commission, I would welcome the 
opportunity to work with Chair White and the rest of the 
Commission on a holistic review of equity market structure. 
Based on the results of that review and consistent with the 
Commission's mission and other Commission priorities, I would 
work toward crafting, testing, and implementing any needed 
reforms.

Q.2. Each of the current SEC Commissioners, in addition to 
former Commissioners Gallagher and Aguilar, have publicly 
called for the Commission to focus on completion of rules 
governing the security-based swap market, as mandated by Title 
VII of the Dodd-Frank Act. While I share concerns about the 
structure and benefits of Title VII, I also agree that 
continuing to delay these rulemakings only perpetuates market 
uncertainty. Given that the CFTC completed its rules 2 years 
ago, do you view the completion of Title VII rulemakings as a 
priority for the Commission?

A.2. I view the completion of Title VII rules as a priority for 
the Commission. The impetus to complete these rules 
expeditiously to fulfill the statutory mandate and provide the 
market with needed certainty should be paired with a careful 
approach to the design and implementation of the rules.

Q.3. The Department of Labor is expected to finalize its 
proposed rule amending the definition of ``fiduciary'' under 
the Employee Retirement Income Security Act (ERISA) any day 
now. I am deeply concerned about the potential consequences 
this rule may have on investors, particularly of low and 
moderate incomes. As has been widely reported, the United 
Kingdom's similarly intentioned Retail Distribution Review 
(RDR) resulted in as many as 11 million consumers losing access 
to ongoing investment advice, as firms moved to minimum account 
thresholds of $50,000 or more. \1\ This effect would directly 
harm those investors that the rule purports to help. Are you 
concerned that the implementation of the rule as currently 
proposed will result in decreased investor options?
---------------------------------------------------------------------------
     \1\ Wall, Emma, ``10 Million Find Advice Too Expensive'', 
Morningstar, Aug. 28, 2014, http://www.morningstar.co.uk/uk/news/
128424/10-million-find-advice-too-expensive.aspx.
---------------------------------------------------------------------------
    Additionally, at the heart of the debate surrounding the 
DOL's proposed rule is the question of jurisdiction. Do you 
believe that any such rule amending the definition of fiduciary 
investment advice should originate at the SEC as directed by 
Section 913 of the Dodd-Frank Act?

A.3. I am concerned by the claims of some commenters that the 
Department of Labor's proposed rule--although seeking to 
protect investors--could have unintended adverse consequences 
on investors' access to financial services. Ensuring that 
investors have access to the financial services they need is 
one component of investor protection, which, in turn, is a key 
part of the SEC's mission. If confirmed, I will work with the 
SEC staff to understand how DOL's rule would affect the 
investors the SEC is charged with protecting.
    As your question notes, Section 913 of the Dodd-Frank Act 
authorizes the SEC to establish and define a standard of 
conduct for financial professionals providing personalized 
investment advice. Section 913 reflects Congressional 
recognition of the need for careful regulation to guard against 
unintended consequences and the SEC's long experience and 
expertise in this area. The Department of Labor, in exercising 
its authority under the Employee Retirement Income Security Act 
to finalize its fiduciary rule, should draw on the SEC's 
expertise and coordinate its actions with those of the SEC.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SASSE
                    FROM HESTER MARIA PEIRCE

Q.1. In your opinion, under what circumstances might it be 
appropriate for national securities regulations to preempt blue 
sky laws? Why?

A.1. The blue-sky laws have played an important role in the 
development of our securities markets and continue to serve 
investors. Nevertheless, as our markets become more national in 
scope, preemption may be appropriate in some circumstances. 
Specifically, preemption may be warranted if it is authorized 
by statute, appropriate Federal investor protections are in 
place, and State blue sky protection would be duplicative. The 
SEC, for example, recently determined to preempt State 
securities registration (but not antifraud) laws in connection 
with the subset of newly permitted so-called Regulation A+ 
offerings that the Commission predicted would be ``national in 
character.'' In doing so, the SEC cited a concern that the cost 
of complying with multiple State laws ``may deter issuers from 
using amended Regulation A, which could significantly limit the 
impact of the exemption as a tool for capital formation.'' The 
SEC and State regulators should work closely with one another 
on investor protection and capital access issues. If I were to 
be confirmed, I would consult the North American Securities 
Administrators Association, along with my fellow Commissioners 
and Commission staff, in considering whether preemption is 
appropriate in specific circumstances.

Q.2. Does anything need to be done to improve the use of cost-
benefit analysis at the SEC? If so, will you commit to 
advocating for taking these steps?

A.2. Since the SEC staff issued its March 2012 guidance on the 
use of economic analysis, the SEC appears to have placed a 
greater emphasis on both generating high-quality economic 
analysis and using it to help shape its rules. If I were 
confirmed, I would have a better view of how the SEC is 
conducting economic analysis, whether that analysis is being 
used, and whether the problems identified by courts and 
academics in the past have been resolved. Among other things, I 
would work to ensure that the agency is using economic analysis 
to clearly identify the problem a regulation is intended to 
solve, assess the benefits and costs of alternative solutions 
against a common baseline, and identify metrics in advance for 
retrospectively assessing the success of a regulation at 
solving the problem.

Q.3. I'd like to ask you more about the SEC's mission ``protect 
investors, maintain fair, orderly, and efficient markets, and 
facilitate capital formation.''
    What factors should dictate the SEC's rulemaking schedule?

A.3. The SEC's rulemaking schedule should be dictated by 
statutory mandates, market and regulatory developments, and 
resource constraints. To the extent possible, the Commission 
should adopt rules in conformance with the timelines set by 
Congress. The Commission also must seek to ensure that its 
rulemaking agenda is responsive to new developments in 
technology, emerging threats to investors, innovations, 
economic growth, disruptive market events, and regulatory 
changes that might necessitate companion changes in SEC rules. 
Although the Chair sets the rulemaking schedule, if confirmed, 
I would be pleased to work with her on balancing the SEC's need 
to be responsive to statutory mandates with the imperative of 
keeping pace with developments in the markets.

Q.4. Does the SEC's rulemaking schedule reflect the right 
balance between focusing on these three missions? If not, how 
would you change it?

A.4. Without being at the Commission and having access to 
relevant nonpublic information, it is difficult to know whether 
the rulemaking schedule properly balances the three missions. 
That said, I am concerned that the heavy statutorily mandated 
rulemaking schedule of the last several years has distracted 
the agency from bread-and-butter rulemakings in each of the 
SEC's three mission areas. Ensuring that SEC and market 
infrastructures are working effectively, modernizing corporate 
disclosure, and streamlining access to capital are some of 
these issues. If I were to be confirmed, I would not be able to 
control the agenda, as the SEC Chair exercises that authority. 
However, I would work with Chair White and my fellow 
Commissioners to identify issues that warrant space on the 
rulemaking agenda.

Q.5. Former SEC Commissioner Dan Gallagher has said that 
``issues specific to small business capital formation too often 
remain on the proverbial back burner. This lack of attention 
doesn't just harm small business; it also harms investors and 
the public at large.'' Do you agree?

A.5. Commissioner Gallagher correctly identified small business 
capital formation as an area that could benefit from greater 
SEC attention. The JOBS Act helped to change that by directing 
the SEC to prioritize capital formation, including small 
business capital formation. The SEC responded with a number of 
changes that are likely to ease small companies' ability to 
raise capital. The SEC should monitor those changes to see 
whether they are working as intended and pursue additional 
rulemaking that enables investors to safely participate in 
funding the growth of small companies and benefits investors, 
companies, and the economy as a whole.

Q.6. Will you commit to actively pursuing the ``capital 
formation'' mission as a Commissioner? If so, how? For example, 
should the SEC do more to encourage public IPOs? Should the SEC 
do more to scale regulations for smaller firms?

A.6. If I were confirmed, I would pursue all elements of the 
SEC's mission, including facilitating capital formation. Before 
committing to specific avenues, I would want to consult with 
investors, small companies, my fellow Commissioners, the staff, 
the SEC's Advisory Committee on Small and Emerging Companies, 
and others with interest, experience, and expertise in small 
business capital formation. The Advisory Committee and the 
annual Government-Business Forum on Small Business Capital 
Formation have made a number of recommendations, which warrant 
consideration. Among the areas the SEC should consider for 
further reform are identifying and removing unwarranted 
obstacles to IPOs and appropriately scaling regulation for 
small firms, while continuing to maintain investor protection.

Q.7. I'd like to ask about the SEC's use of Administrative Law 
Judges:
    Under what circumstances is it appropriate for the SEC to 
send cases to Administrative Law Judges?

A.7. Congress has authorized the SEC to use administrative law 
judges (ALJs) in a number of circumstances, but has allowed the 
SEC considerable discretion in forum selection. In exercising 
this discretion, the SEC should follow a consistent set of 
guidelines that provides a clear, predictable framework for 
agency staff, potential subjects of enforcement actions, and 
the general public and ensures appropriate accountability. The 
SEC's existing guidance looks at factors such as the types of 
relief available and the relative costs of bringing actions. If 
I were to be confirmed, I would like to work with my fellow 
Commissioners and the enforcement staff to determine whether 
the factors outlined in the staff guidance are appropriate and 
whether additional guidance from the Commission is warranted.

Q.8. Do you have constitutional concerns with ALJs?

A.8. Congress has authorized the SEC to use ALJs. In a number 
of ongoing challenges, respondents have raised constitutional 
concerns. These concerns are best considered and decided by 
Article III judges. If I am confirmed, I will work to ensure 
that the SEC responds appropriately to any constitutional 
issues identified by courts.

Q.9. Is there a risk that ALJs have an improper pro-SEC bias?

A.9. An ALJ, like any other arbiter, is responsible for 
assessing in each matter whether she is able to be objective or 
should recuse herself. If an ALJ fails to behave properly, a 
respondent can raise these concerns during the appeals process. 
If I were confirmed, I would take allegations of bias 
seriously. There are avenues to investigate such allegations. 
For example, the SEC's Office of Inspector General recently 
looked into some specific allegations of ALJ bias and ``did not 
develop any evidence to support the allegations of improper 
influence.'' \1\ If future bias allegations arise, the OIG 
could be called on to assess their validity. More generally, 
the Commission is currently revisiting the rules applicable to 
administrative proceedings. This is an important initiative to 
ensure that administrative proceedings are fair and effectively 
test the validity of the facts and legal violations identified 
by the staff. If confirmed, I will be very interested to review 
the comments the Commission has received in response to the 
proposed changes.
---------------------------------------------------------------------------
     \1\ Office of Inspector General, SEC, Report of Investigation Case 
#15-ALJ-0482-I, 21 (Jan. 21, 2016), available at https://www.sec.gov/
oig/reportspubs/Final-Report-of-Investigation.pdf.

Q.10. I'd like to obtain more information about your approach 
to securities regulations.
    Is there a risk that regulations can give large incumbent 
firms a competitive advantage over smaller farms? If so, what 
can be done to mitigate this risk?

A.10. Regulators must be mindful of the risk that regulations 
can give incumbent firms a competitive advantage over smaller 
firms. The notice-and-comment rulemaking process under the 
Administrative Procedure Act helps to mitigate this risk by 
ensuring that all interested members of the public have an 
opportunity to identify potential unintended consequences of 
the regulation. By issuing a concept release prior to drafting 
a proposed rule, the agency can spot potential harm to small 
firms early. Economic analysis and Regulatory Flexibility Act 
analysis--both of which can help the agency identify 
competitive harm and craft solutions that are sensitive to the 
impact on small entities--are important mitigating tools. The 
SEC also can use its exemptive authority to ease 
disproportionate burdens on small firms.

Q.11. Is it ever appropriate for the SEC to engage in ``merit 
review'' of investment choices, where the SEC would elevate its 
evaluation of a particular investment over the evaluation of a 
private investor?

A.11. Absent a contrary directive from Congress, the SEC's role 
is to provide the investor with the information she needs to 
make a careful decision, rather than to override her evaluation 
of an investment through regulatory merit review.

Q.12. Is it appropriate--in the words of Chair White--to 
``effectuate social policy or political change through the 
SEC's powers of mandatory disclosure''?

A.12. The role of SEC-mandated disclosure is to ensure that 
investors have the information they need to evaluate investment 
opportunities. Under the securities laws, the purpose of SEC 
disclosure is not to achieve social or political ends.

Q.13. Is there a danger that disclosure requirements become so 
voluminous that they become unhelpful to investors? If so, what 
can be done to avoid this problem?

A.13. Properly designed disclosure requirements benefit 
investors by getting them the information they need to make 
investment decisions. It is important to remember that 
investors also bear the cost of disclosure mandates. First, 
company (and thus shareholder) resources are devoted to making 
legally compliant disclosures. Second, the disclosure of 
immaterial items can obscure material ones. Accordingly, the 
SEC needs to carefully craft and periodically revisit 
disclosure mandates. The SEC's ongoing Disclosure Effectiveness 
initiative is a useful undertaking to answer the question of 
whether the SEC's disclosure mandates are getting the 
information to investors that they need in the form they need 
it. If I am confirmed, I look forward to working with 
colleagues at the SEC to further this initiative and, in 
conjunction with each potential new disclosure mandate, to 
consider whether and how investors will use the information.

Q.14. I'd like to explore your views on ``accredited 
investors.''
    Should the SEC consider expanding the definition of 
``accredited investor'' beyond mere investor income and assets 
to also include investor expertise, such as possessing a 
graduate degree in a related field?

A.14. The SEC is undertaking a statutorily mandated review of 
the scope of the accredited investor standard, and the staff 
recently issued a report on the review. One of the issues 
covered by the report is the feasibility of assessing an 
investor's sophistication using metrics other than wealth or 
income. If confirmed, I look forward to reviewing the report, 
comments collected by the SEC in its review of the definition, 
and other relevant materials such as the Government 
Accountability Office's report on ``Alternative Criteria for 
Qualifying as an Accredited Investor''. I also look forward to 
working with SEC staff and my fellow Commissioners in 
revisiting the accredited investor definition and considering 
whether it should be expanded beyond income and net worth. 
Among the considerations that will inform my view are how 
investors would be affected by any changes and whether a 
particular change would help to open capital formation to 
groups and regions of the country that have previously been 
excluded by the existing income and net worth metrics. The 
ultimate goal is to ensure that investors are adequately 
protected, while facilitating capital formation and allowing 
investors access to a range of investment opportunities.

Q.15. How should the SEC strike the balance between investor 
protection and investor freedom when it comes to the definition 
of accredited investor?

A.15. Investor protection and investor freedom go hand-in-hand. 
Precluding an investor from an investment may protect the 
investor from losses in that particular investment, but may 
harm the investor's ability to build her portfolio in the 
manner she judges best. Economic analysis of any changes can 
help the SEC to strike the proper balance. In the context of 
accredited investors, for example, the SEC needs to assess how 
any change in the definition will affect the size and 
composition of the pool of accredited investors. To help to 
strike the balance, the SEC also should seek input from 
investor groups and continue its efforts to collect and analyze 
relevant data.

Q.16. The marketplace online lending ecosystem has grown 
significantly as of late. Would you recommend changes to how 
the SEC approaches this field? For example, should the SEC 
contemplate creating a broad safe harbor for marketplace online 
lenders, which scales registration requirements to reflect 
their unique business model?

A.16. If I am confirmed, I look forward to working with my 
colleagues to look at how well jurisdictional divisions and SEC 
registration requirements have worked in this context, 
particularly as the industry has grown and changed over the 
years since its inception. If the current regulatory framework 
is not working, is imposing costs without proportionate 
benefits, or is uncertain in its application, the SEC should 
consider a range of alternatives, including a safe harbor or a 
rule specifically designed for these types of offerings. The 
SEC should work with other regulators active in this space to 
ensure that rules are effective, but not duplicative. As with 
other areas, the key is ensuring that investors are protected 
and able to obtain the information they need without imposing 
an undue burden on capital formation.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS
                    FROM HESTER MARIA PEIRCE

Q.1. The New York City Public Advocate recently wrote the SEC 
asking that it examine publicly traded gun manufacturers with 
an eye towards charging them with fraud for not disclosing 
information about gun-related deaths.
    Similar questions have been raised about oil companies and 
climate change. In fact, Attorney General Lynch recently said 
that the Department of Justice considered prosecuting climate 
change skeptics.
    The idea that the Government would consider prosecuting 
political opponents is chilling and has no place in our 
political system.
    The SEC should be about safeguarding markets, protecting 
investors, and helping to foster capital formation.
    Attempts to settle political scores that should be decided 
at the ballot box have no place on the SEC's agenda.
    Can you assure me that you will not pursue or support any 
attempts to politicize corporate disclosure rules--whether for 
gun control, climate change or any other issue which should be 
properly decided by Congress?

A.1. The SEC's mission is to protect investors, facilitate 
capital formation, and maintain fair, orderly, and efficient 
markets. If I were to be confirmed, I would be committed to 
ensuring that the SEC focuses exclusively on this mission. In 
fulfilling this mission, a key role of the SEC is making sure 
that investors have the information they need to make 
investment decisions. I would work to ensure that corporate 
disclosure is designed for this purpose, not for political 
ends.

Q.2. One of the best tools we have to make sure that 
regulations are fair and make sense is cost-benefit analysis.
    A cost-benefit analysis allows regulators to clearly 
examine the benefits of a rule and weigh them against the 
damages caused by the proposed rule.
    If a statute is silent on the use of cost-benefit analysis, 
do you believe the Commission can conduct a cost-benefit 
analysis or can it only conduct an analysis if the statute 
explicitly includes that requirement?

A.2. A cost-benefit analysis is an essential tool for the SEC 
as it seeks to identify the problem it is trying to solve, 
alternate solutions to the problem, and the costs and benefits 
associated with each potential solution. If a statute is silent 
with respect to cost-benefit analysis, the SEC--in furtherance 
of sound rulemaking and the Commission's commitment to identify 
real problems and solve them effectively--can and should 
perform such an analysis.

Q.3. Rather than creating punitive rules which increase 
compliance costs, what can you do, if you are confirmed, to 
incentivize regulated entities and investors to make better 
decisions?

A.3. An important function of the SEC, as a regulatory agency, 
is to assist regulated persons that want to comply with the law 
in doing so. The SEC's large compliance program works with 
regulated entities to help them identify problems and implement 
effective solutions. When well-intentioned registrants know 
that they can come to the SEC for guidance in getting things 
right, they will make better decisions and investors will be 
better protected. With respect to investor decision making, the 
SEC's Office of Investor Education and Advocacy works with 
investors to educate them and encourage them to ask question 
and receive satisfactory, credible answers before investing. 
Investor education thus serves to empower investors to make 
better decisions. Another way to aid investors is to ensure 
that they have access to accurate ongoing disclosures about 
their investments and comprehensive, current information about 
the financial professionals with whom they work.

Q.4. Last year, the New York City pension system issued 
numerous shareholder proposals on proxy access. Many of these 
proposals were centered on energy companies and their purpose 
was not to improve governance but to push an agenda on climate 
change.
    Two recent reports by the Manhattan Institute have shown 
that public pension funds that engage in politically motivated 
corporate governance fights have lower returns forcing 
taxpayers to foot the bill, while union-sponsored shareholder 
proposals are concentrated in industries or businesses targeted 
in organizing campaigns.
    What role should the SEC undertake as a gate-keeper to make 
certain that shareholder proposals and director elections are 
correlated to the interests of a corporation and its investors, 
rather than a political or social agenda?

A.4. The SEC staff reviews shareholder proposals when companies 
ask whether they can exclude them from their proxies without 
facing an SEC enforcement action. In making such a no-action 
request, the company identifies a reason for the exclusion that 
corresponds with one of the bases for exclusion in SEC rule 
14a-8, which otherwise requires that proposals be included in 
the proxy. If I were to be confirmed, I would welcome the 
opportunity to work with the SEC staff and my fellow 
Commissioners to take a close look at the shareholder proposal 
process and determine whether adjustments to the rule or 
additional guidance are needed in light of the changing volume 
and nature of such proposals.

Q.5. The Labor Department's proposed Fiduciary rulemaking will 
radically alter the market for individual retirement savings.
    Many commentators believe that rather than protecting 
investors, it will price many middle class retirement savers 
out of the market for investment advice.
    Can you envision circumstances in which a retirement saver 
of more modest means could benefit from the personalized advice 
of someone who knows them and their circumstances but who is 
not qualified as a fiduciary?

A.5. Over the years, investors have worked with financial 
professionals subject to a variety of conduct standards. Many 
of these investors have been served well by financial 
professionals who are not fiduciaries.

Q.6. In December 2015, the SEC voted to propose rule 18f-4, 
which would regulate the use of derivatives by registered 
investment companies. This rule attempts to regulate the use of 
derivatives to protect investors and reduce systemic risk, but 
I am concerned that it goes farther than intended and will 
alter the commodities futures market by setting arbitrary 
portfolio limitations for derivatives.
    The rule appears to incentivize funds to overweight 
portfolios with stocks and bonds and move away from trading 
commodities.
    What is your view on the regulation of simple, diversifying 
derivatives?

A.6. The SEC's recently proposed rule 18f-4 under the 
Investment Company Act would change the way registered 
investment companies can use derivatives. If confirmed, I would 
discuss the proposal with my fellow Commissioners and relevant 
staff and review the comments, the white paper prepared by the 
Division of Economic and Risk Analysis, and other relevant 
materials before formulating a position on the rule. An 
appropriate regulation will balance the important role that 
derivatives can play in a portfolio with other investor 
protection concerns.

Q.7. Do you believe that proposed rule 18f-4 will limit the 
average investor's ability to access diversifying assets? If 
so, why? If not, why not?

A.7. For the stated purpose of protecting investors, proposed 
rule 18f-4 would limit the ability of registered investment 
companies to use diversifying assets, which in turn would 
affect investors' investment options. In finalizing the rule, 
the Commission will have to consider whether the proposed 
restrictions are appropriately calibrated to achieve the 
intended objectives without undue adverse consequences for 
investors. As part of that consideration, the SEC should 
consider the comment letters it has received and economic 
analyses conducted by the Division of Economic and Risk 
Analysis and submitted to the SEC as part of the notice-and-
comment process. Economic analysis will be key in understanding 
how average investors would be affected by such a rule.

Q.8. Are you concerned that this rule could harm rather than 
protect investors because it incentivizes registered investment 
companies to concentrate their assets in equities rather than 
derivatives?

A.8. In connection with any rule that places limitations on 
investment company holdings, it is important to understand how 
investors will be affected. In addition to exploring the 
potential benefits of the rule, if I were confirmed, one 
question I would ask in connection with this rule is whether 
and to what degree it could harm investors by limiting the 
flexibility of registered investment companies to select and 
pursue investment strategies. The proposing release asks 
commenters to respond to many questions that are potentially 
relevant in this context, such as ``To what extent do 
commenters anticipate that proposed rule 18f-4 could lead funds 
to modify their investment strategies or decrease their use of 
derivatives?'' and ``If funds would have to restructure their 
portfolios to comply with the risk-based portfolio limit, how 
would they do so?'' If confirmed, I look forward to reviewing 
comments as I seek to understand how registered investment 
companies would respond to the rule and thus how investors 
would be affected.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHUMER
                    FROM HESTER MARIA PEIRCE

Q.1. Ms. Peirce, do you believe that information related to a 
company's corporate political spending should be considered 
material to prospective investors and/or shareholders?

A.1. The materiality of information related to an issuer's 
corporate political spending depends heavily on the facts and 
circumstances. An analysis of materiality needs to consider 
both quantitative and qualitative factors, such as the size of 
the expenditure, the size of the corporation, and the 
corporation's other disclosures. As the Supreme Court has 
stated, for information to be material, ``there must be a 
substantial likelihood that the disclosure of the omitted fact 
would have been viewed by the reasonable investor as having 
significantly altered the `total mix' of information made 
available.'' \1\ Securities law has developed standard metrics 
for assessing quantitative and qualitative materiality, which I 
would use in assessing materiality with respect to corporate 
political spending.
---------------------------------------------------------------------------
     \1\ TSC Industries v. Northway, 426 U.S. 438, 449 (1976).

Q.2. Do you believe that the SEC should consider whether 
investors should be entitled to information disclosing a 
---------------------------------------------------------------------------
company's corporate political spending?

A.2. Broad SEC consideration of this issue might occur in 
response to rulemaking petitions the SEC has received on the 
issue. Section 707 of the Consolidated Appropriations Act of 
2016, however, includes the following limitation on the use of 
SEC funds:

        None of the funds made available by any division of 
        this Act shall be used by the Securities and Exchange 
        Commission to finalize, issue, or implement any rule, 
        regulation, or order regarding the disclosure of 
        political contributions, contributions to tax exempt 
        organizations, or dues paid to trade associations.

    By including this language, Congress seems to have 
foreclosed the issue for this year. If I am confirmed and if 
the Chair places the issue on the agenda after this 
Congressional limitation has expired, I would consider the 
issue. My consideration would include reviewing relevant 
rulemaking requests and comment letters and discussing the 
issue with the Chair, my fellow Commissioners, and SEC staff 
with expertise in corporate disclosure.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
           SENATOR MENENDEZ FROM HESTER MARIA PEIRCE

Q.1. The issue of corporate political spending is quite simply 
about materiality and transparency for investors. Demand for 
this information by public investors has increased steadily in 
recent years, as has support for such a rulemaking from former 
SEC Chairs and Commissioners. In fact, former SEC Chairs 
William Donaldson and Arthur Leavitt wrote to Chair White in 
May of last year, and said that the Commission's failure to 
act, ``flies in the face of the primary mission of the 
Commission, which has since 1934 been the protection of 
investors.''
    Do you agree with former SEC Chairs Donaldson and Leavitt 
that shareholders--those that actually own the wealth of 
corporations--should be informed of political spending 
decisions made with their money?

A.1. Your question highlights transparency and materiality--two 
considerations that drive the SEC as it works to ensure that 
investors have the information they need to make investment 
decisions. An analysis of materiality needs to consider both 
quantitative and qualitative factors such as the size of the 
expenditure, the size of the corporation, and the corporation's 
other disclosures. As the Supreme Court has stated, for 
information to be material, ``there must be a substantial 
likelihood that the disclosure of the omitted fact would have 
been viewed by the reasonable investor as having significantly 
altered the `total mix' of information made available.'' \1\ 
Securities law has developed standard metrics for assessing 
quantitative and qualitative materiality, which, if confirmed 
and if the issue is raised, I would use in assessing 
materiality with respect to corporate political spending.
---------------------------------------------------------------------------
     \1\ TSC Industries v. Northway, 426 U.S. 438, 449 (1976).

Q.2. In your opinion, do diverse boards have the ability to 
engage in richer and ultimately more effective discussion and 
---------------------------------------------------------------------------
debate than those boards that are less diverse?

A.2. Diversity on boards allows people of different 
backgrounds, expertise, and experience to contribute to 
decision making. Entities in the public and private sector have 
benefited from drawing on diverse talent who bring to the table 
different ways of analyzing and solving problems.

Q.3. Do you agree that a boardroom composed of directors of 
diverse backgrounds is less likely to practice what can be 
dangerous ``groupthink''?

A.3. Boards that are made up of inquisitive individuals with a 
diversity of backgrounds, expertise, and experience have the 
advantage of being able to consider decisions from multiple 
perspectives. An environment that welcomes people of diverse 
mindsets is therefore likely to be more resistant to 
``groupthink.''

Q.4. In your opinion, what value do directors of diverse 
backgrounds bring to board discussions?

A.4. There is an academic literature (some of which is written 
by my fellow nominee, Professor Lisa Fairfax \2\) that delves 
deeply into the nuances of this topic. In my opinion, directors 
of diverse backgrounds bring to bear on decisions their unique 
personal, academic, intellectual, and professional experiences 
and distinctive approaches to problem-solving. As noted above, 
considering issues from multiple perspectives makes it more 
likely that the full range of challenges and opportunities will 
be identified and addressed timely and effectively.
---------------------------------------------------------------------------
     \2\ See, e.g., Lisa M. Fairfax, ``Board Diversity and Corporate 
Performance: Filling in the Gaps: Board Diversity Revisited: New 
Rationale, Same Old Story?'', 89 N.C.L. REV. 855 (2011).

Q.5. In your opinion, do investors have the tools necessary to 
make an informed choice about whether they prefer to work with 
a broker-dealer operating under a suitability standard or an 
---------------------------------------------------------------------------
investment adviser who is a fiduciary?

A.5. It is important that investors understand the nature of 
their relationship with their financial professionals. The SEC 
should continue working to eliminate investor confusion in this 
area. To answer the question of whether investors currently 
have the tools they need to make an informed choice about 
working with a broker-dealer operating under a suitability 
standard or an investment adviser who is a fiduciary, I would 
want to review the latest relevant work of the SEC's Divisions 
of Investment Management and Trading and Markets, Office of 
Investor Education and Advocacy, and Investor Advocate. If 
confirmed, I also would want to consult with the staff who have 
been studying the issue, seek feedback from the Investor 
Advisory Committee, review relevant outside studies by investor 
groups, academics, and others, and discuss these issues with my 
fellow Commissioners. If I am confirmed and I find that 
investors do not have enough information to make informed 
decisions about their financial professionals, I would work 
with my fellow Commissioners and the staff to devise an 
appropriate solution.

Q.6. Do you see any reason why we should not have a uniform 
standard that includes broker-dealers? If confirmed as 
Commissioner, will you support such a rulemaking?

A.6. Before developing a position on the propriety of a 
rulemaking that imposed a uniform standard, I would need to see 
what the specific proposed standard is and analyze it in the 
context of the existing standards applicable to investment 
advisers and broker-dealers. Investor protection--including 
ensuring access to financial professionals for investors at all 
levels--is an essential consideration in any such analysis. If 
confirmed and presented with a proposed uniform standard, I 
would want to discuss this with my fellow Commissioners and 
consult the staff--including those who work directly with 
investors--to understand how the rulemaking would affect 
investors.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
                    FROM HESTER MARIA PEIRCE

Q.1. Unelected Directors: The Committee on Capital Markets 
Regulation recently conducted a study examining the frequency 
with which corporate directors resign or decline to stand for 
re-election after failing to receive a majority of shareholder 
votes. The study finds that 85 percent of directors who 
received less than a majority of votes were still board members 
2 years after the vote--so called ``unelected directors.'' To 
protect the integrity of the shareholder vote in the face of 
the unelected directors problem, would you be supportive of a 
Commission regulation requiring, at a very minimum, that 
corporate boards disclose the specific reasons that an 
unelected director remain on the board despite the failure to 
receive a majority of shareholder votes?

A.1. The Committee on Capital Markets Regulation and at least 
one investor group have made recommendations to the SEC 
regarding directors remaining on boards after failing to 
receive a majority vote. If confirmed, I would welcome the 
opportunity to review these recommendations, the Committee on 
Capital Markets Regulation study, and other relevant studies 
and data to understand--along with my fellow Commissioners and 
informed by the SEC staff--whether there is a need for a 
Commission regulation and, if so, whether a disclosure approach 
is appropriate. As with other issues in this area, an important 
consideration is the roles that State corporate law and SEC 
regulation play in building effective corporate governance that 
enables companies to operate efficiently and ensures 
accountability to shareholders.

Q.2. Corporate Disclosures: The SEC uses outdated documents, 
instead of standardized data, to collect most corporate 
disclosures. This means companies must file the same 
information multiple times, and investors must hunt through 
documents for relevant information (or pay aggregators to do it 
for them). The U.S. Chamber of Commerce has called on the SEC 
to consider a ``company file'' approach, in which companies 
would electronically update material information, rather than 
filing redundant documents. Last summer, Senator Crapo and I 
asked the SEC to work toward transforming its whole corporate 
disclosure system from documents to standardized data, which is 
a necessary first step for the ``company file'' to be possible. 
Do you believe that the SEC should modernize the corporate 
disclosure system in this manner?

A.2. An important undertaking for the SEC is to eliminate 
redundant disclosures by companies and ensure that investors 
have ready access in a usable format to the information they 
need to make informed investment decisions. The SEC's ongoing 
Disclosure Effectiveness initiative is a valuable step in 
identifying what the SEC can do to achieve these objectives. If 
confirmed, I look forward to working with my fellow 
Commissioners and the SEC staff on this initiative and related 
efforts to improve corporate disclosure. Discussions within the 
SEC and with people who prepare and use corporate disclosures 
will help me to determine how the SEC should modernize 
disclosure. As you have emphasized, any such approach should 
incorporate technology as a tool for maximizing the value of 
corporate disclosures. If carefully undertaken, the continuing 
move toward standardized data offers great promise for 
companies and investors.
              Additional Material Supplied for the Record
                   CHARTS SUBMITTED BY SENATOR BROWN



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]