In the opening keynote address on June 20, 2010 at the Stanford Directors’ College at Stanford Law School in Palo Alto, California, SEC Chair Mary Schapiro discussed the SEC’s "singular" mandate to address the needs of investors, noting the increasing challenges involved in "making sure the markets are fair and efficient."
Schapiro opened her speech discussing the ways that ways the agency is adopting its regulatory approach in light of rapidly changing technology. In particular, she addressed the events involved in and the consequences of the May 6, 2010 "flash crash" and the steps the agency is taking to "minimize chances it can ever happen again." Among other things, she steps the agency is taking to propose and implement "circuit breaker" rules to protect both the markets and investors from "clearly erroneous trades."
Schapiro also discussed the ways that technology has transformed trading activities, including for example the growth in ultra high speed trading activity. These developments and the increasing presence of dark pools trading, among other things, have led the agency to launch a series of initiatives, including new rules that would give the agency much faster and more complete access to information about trading activity.
Schapiro said that she appreciates the benefits and advantages that the various technological changes offer, particular those that "make markets more efficient, reduce costs, and increase liquidity." But, she added, "when these changes have the potential to destabilize markets without significantly contributing to key market functions, we believe they deserve a second look."
Schapiro then talked about the steps the agency has been taking as part of its mandate to protect the interests of "all investors, large and small." In later remarks during the Q&A, Schapiro underscored the importance to her and the agency of this aspect of the agency’s mission, noting that the SEC has to help investors, noting that "there is not another agency that works for the interests of investors."
Among other steps the agency is taking to try to advance its goals of helping investors is to reevaluate all existing corporate filing forms and disclosure requirements in order to consider what will be most meaningful to investors and what will "elicit better disclosure." She noted that these efforts may be slowed somewhat by the current financial reforms process and the likelihood of increased agency mandates will emerge from Congress, but the process to improve investor information will continue.
The final topic Schapiro addressed are the current reform initiatives, both within the agency and in Congress, with respect to corporate governance. She emphasized the SEC’s role is not to define what constitutes good governance, but rather to ensure that its requirements encourage "accountability and meaningful communication" about how the company is governed.
For example, the SEC’s role is not to mandate a particular board structure, but to ensure that investors know why a particular board structure was selected. She also emphasized that investors should have meaningful information about director candidates’ qualifications.
Among other specific governance issues Schapiro discussed were proxy disclosures and shareholder voting process issues. She enumerated a number of voting related issues that require further discussion, including, for example, the question whether proxy advisory firms should be subject to increasing SEC oversight and how to encourage retail investors voting participation.
Schapiro concluded by noting that while there agency faces many challenges, the "higher goal is a financial marketplace where investors invest capital in dynamic companies in a growing economy."
UPDATE: The text of Schapiro’s speech has now been posted online, here.
Speakers’ Corner: I am here at Stanford Law School for the conference as an interested member of the audience as well as member of the Directors’ College faculty. Tomorrow morning, I will be participating on a panel entitled "Personal Liability Risks, Indemnification and D&O Insurance." Joining me on the panel will be my good friends Priya Cherian Huskins of Woodruff Sawyer and Chris Warrior of Beazley. Though I have official responsibilities, I hope to be able to add post blog updates during the conference.