SEC Chairman Gary Gensler on Tuesday discussed his agency’s proposed rule package aimed at bolstering U.S. equities markets, its oversight of cryptocurrency firms and intermediaries, and the latest on Regulation Best Interest.
In December, the SEC issued four proposals related to equities markets with varying levels of complexity and controversy. The package includes one proposal to lower trading increments and access fees on exchanges; one to broaden the entities subject to a disclosure rule, which requires a market center that trades stocks to make public monthly electronic execution reports that include uniform statistical measures of execution quality; one to require that certain retail equity orders be exposed to open auctions; and one to establish a best execution standard for brokers, dealers, government securities brokers, government securities dealers and municipal securities dealers.
“The four proposals address separate items, but we last had an update of our equities markets in 2005, 18 years ago, and a lot’s changed,” Mr. Gensler said at the Financial Industry Regulatory Authority’s annual conference. “I think these are an important set of initiatives.”
After noting that FINRA already has a best execution rule on the books, Robert Cook, president and CEO of FINRA, a self-regulatory organization under the SEC that oversees U.S. broker-dealers, asked why the SEC is proposing its own. Mr. Gensler said FINRA’s rule is fragmented and that “it’s far too important an area — best execution — that the official sector, the SEC, doesn’t have a rule of its own.”
On cryptocurrency, Mr. Gensler said most crypto tokens are securities and should be registered with the SEC. So, too, should the platforms housing these tokens, Mr. Gensler added.
“The intermediaries need to come into compliance if they’re handling securities and most of them … whether they call themselves an exchange or a lending platform, they’re handling securities,” he said. “You have a field that’s largely non-compliant with time-tested laws that protect the investing public.”
Mr. Gensler was also asked about Regulation Best Interest, or Reg BI, a rule package that took effect in 2020 that was designed to address the obligations of broker-dealers and investment advisers when they provide recommendations or investment advice to retail investors, including rollover recommendations. Its centerpiece best-interest standard aims to compel brokers to put clients’ financial interests ahead of their own and requires them to mitigate financial conflicts.
The SEC chairman said Reg BI is a “work in progress” and recent staff bulletins from the agency make clear that the rule “is not meant to be just a check-the-box exercise, that it’s more than just suitability with some new wrapper,” Mr. Gensler said, referencing FINRA’s suitability rule for broker-dealers. “That means really looking at account openings, it’s really looking costs, really looking at reasonable alternatives.”
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