Friday I attended a conference on “The Role of the SEC in a Changing World” at the Center for Strategic & International Studies in Washington put on by the Hills Program on Governance. The conference was co-sponsored by the Center for Business Ethics Research at Penn’s Wharton School and The American Assembly at Columbia University.
The conference featured panels composed of current SEC officials, securities lawyers and industry participants. The audience included 50 securities lawyers, representatives of trade groups and other industry participants.
There were many great discussions during the day as both panels and audience members participated in lively exchanges. There are two issues I wanted to focus on at the conference: the SEC’s challenges on technology, and SEC improvements in the use of data.
We discussed the disclosure public companies and funds make and how to improve the availability of such disclosure to investors. We focused on both the content of disclosure and the technology to deliver disclosure. My position is that the current EDGAR system for companies and funds to file registration statements with the SEC should be eliminated. It is a system that was new when I began my legal career in the 1980s. Many people at the conference talked about proposed improvements to modernize EDGAR. In my view it is too late to modernize the system. The SEC should approach Google, Yahoo or other technology companies and see if filings can be done on the most up-to-date technology available so that publicly filed information from companies and funds can be in an easily accessed system. EDGAR is never going to be that system.
There were several discussions of the improvement in use of data by the SEC. Two particular improvements in data use stand out. The first is the SEC’s increased commitment to use economic analysis in evaluating the impact of proposed rules. Since the Commission voted to formalize the procedures to be followed for economic analysis of rules, there has been much better use of data to evaluate rules. From my experience, the increased use of data for the money market fund reform proposal was a prime example. The second improved use of data has been for the SEC to use performance information to identify instances where managers may be smoothing or even falsifying returns. This use of data has produced numerous candidates for examination or investigation.
While the use of data at the Commission has improved, there are still significant problems. I’ll be discussing some of these issues in my speech on May 18th at the Institute for Pure and Applied Mathematics at UCLA. See the May 18th Speech here.