Waters to SEC Commissioners: The SEC Is Not Fulfilling Its Mission as Wall Street’s Cop

As Prepared for Delivery

Good morning. I want welcome back Chairman Clayton, and welcome Commissioners Jackson, Peirce, Roisman and Lee, to this important hearing on the SEC’s role in U.S. capital markets.

This is the first time since 2007 that all five Commissioners of the Securities and Exchange Commission (SEC) have testified before the Financial Services Committee. I believe that it is important for this Committee to hear testimony from each of the Commissioners, including its Chairman, because they each hold a vote on important regulatory and enforcement matters, and they each hold unique views that the Committee should be aware of.

This is especially important since the SEC is not fulfilling its mission as Wall Street’s cop. Key rules, like the Volcker rule, have been rolled back, while rules to implement other important reforms on issues like executive compensation-- which Congress enacted back in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act-- remain incomplete. Other regulations, such as the SEC’s so-called Regulation Best Interest, fail to protect retirement savers from unscrupulous financial advisers.

It is also clear that our existing securities laws are not working, and that there are loopholes in the laws that corporate insiders are taking advantage of. For example, executives are enriching themselves by buying or selling securities in their own companies during the 8-K trading gap, which is a four-day gap after a major corporate event before the company is required to notify the public and investors of that event.

Corporate executives are also using stock buybacks to line their own pockets rather than giving their workers pay raises or investing in their companies. In addition, a court decision in Kokesh v. SEC limited the SEC’s ability to recover wrongful gains from fraudsters like Bernie Madoff and return them to harmed investors.

I believe that the SEC needs stronger tools to protect investors and punish bad actors. Members of this Committee have introduced a number of bills to strengthen the Commission and our securities laws, and a number of these bills have passed this Committee or the full House. Today we will have the opportunity to hear directly from the Commissioners on these important measures.

In addition, I am very concerned about Facebook’s plan to create a digital currency, Libra, and digital wallet, Calibra. It appears that Facebook is working to create a new global financial system that is intended to rival the U.S. dollar. I, and other Democrats on the Committee, have called for Facebook to halt their plans until regulators and Congress have an opportunity to examine these issues and take action. Today, I hope to hear what steps the SEC is taking to ensure that Libra is appropriately and rigorously regulated.

I look forward to the testimony of our witnesses.

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