November 28, 2023
The SEC’s Mission: Lawmakers Propose a Makeover
During its 89 years of existence, the SEC has operated under a 3-part mission that many of us have committed to heart:
– Protect investors
– Maintain fair, orderly, and efficient markets
– Facilitate capital formation
A bill that’s in its early stages in Congress is looking to “modernize” that mission by expressly adding the word “innovation” to 15 USC 77b and 15 USC 77c (and the corresponding provisions under the Investment Company Act), so that they would read as follows:
Consideration of promotion of efficiency, innovation, competition, and capital formation
Whenever pursuant to this chapter the Commission is engaged in rulemaking, or in the review of a rule of a self-regulatory organization, and is required to consider or determine whether an action is necessary or appropriate in the public interest, the Commission shall also consider, in addition to the protection of investors, whether the action will promote efficiency, innovation, competition, and capital formation.
The primary focus of this bill is to provide for a system of regulation of digital assets by the CFTC and the SEC, so you might think that this wording change is simply encouraging special rules for digital assets, as those in the crypto space have been urging for quite some time. But the author of this op-ed in The Hill says the change would go further than that:
Such a small change might have a monumental impact, requiring the SEC to consider whether its actions promote or harm innovation.
Greater oversight or even an SEC overhaul might be needed, but better prioritization of innovation is a good place to begin. It could moderate the SEC’s noted perceptions of hostility towards novel sectors of the economy and move the agency’s focus away from social issues outside its intended domain.
Under this reading, if the bill progresses, folks looking to rein in – or dismantle – the SEC’s ability to adopt rules & issue interpretations would get another tool in their toolbox. Maybe the SEC will become the Post Office after all?
– Liz Dunshee