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99–694 PDF 2016

S. HRG. 114–223 

NOMINATIONS OF MATTHEW RHETT JEPPSON, 

LISA M. FAIRFAX, AND HESTER MARIA PEIRCE 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

ON 

NOMINATIONS OF: 

MATTHEW RHETT JEPPSON, OF FLORIDA, TO BE DIRECTOR OF THE U.S. MINT

LISA M. FAIRFAX, OF MARYLAND, TO BE A MEMBER OF THE SECURITIES AND

EXCHANGE COMMISSION

HESTER MARIA PEIRCE, OF OHIO, TO BE A MEMBER OF THE SECURITIES

AND EXCHANGE COMMISSION

MARCH 15, 2016 

Printed for the use of the Committee on Banking, Housing, and Urban Affairs 

( 

Available at: http://www.fdsys.gov/ 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

RICHARD C. SHELBY, Alabama, Chairman 

MIKE CRAPO, Idaho 

BOB CORKER, Tennessee 

DAVID VITTER, Louisiana 

PATRICK J. TOOMEY, Pennsylvania 

MARK KIRK, Illinois 

DEAN HELLER, Nevada 

TIM SCOTT, South Carolina 

BEN SASSE, Nebraska 

TOM COTTON, Arkansas 

MIKE ROUNDS, South Dakota 

JERRY MORAN, Kansas 

SHERROD BROWN, Ohio 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

ROBERT MENENDEZ, New Jersey 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

ELIZABETH WARREN, Massachusetts 

HEIDI HEITKAMP, North Dakota 

JOE DONNELLY, Indiana 

WILLIAM D. DUHNKE III, Staff Director and Counsel 

MARK POWDEN, Democratic Staff Director 

DANA WADE, Deputy Staff Director 

JELENA MCWILLIAMS, Chief Counsel 

ELAD ROISMAN, Securities Counsel 

SHELBY BEGANY, Professional Staff Member 

LAURA SWANSON, Democratic Deputy Staff Director 

GRAHAM STEELE, Democratic Chief Counsel 

ELISHA TUKU, Democratic Senior Counsel 

MEGAN CHENEY, Democratic Legislative Assistant 

DAWN RATLIFF, Chief Clerk 

TROY CORNELL, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 

(II)

C O N T E N T S 

TUESDAY, MARCH 15, 2016 

Page 

Opening statement of Chairman Shelby ................................................................ 1 

Opening statements, comments, or prepared statements of: 

Senator Brown ......................................................................................................... 3 

NOMINEES 

Matthew Rhett Jeppson, of Florida, to be Director of the U.S. Mint .................. 5 

Prepared statement .......................................................................................... 39 

Biographical sketch of nominee ....................................................................... 42 

Responses to written questions of: 

Senator Brown ........................................................................................... 92 

Lisa M. Fairfax, of Maryland, to be a Member of the Securities and Exchange 

Commission ........................................................................................................... 6 

Prepared statement .......................................................................................... 52 

Biographical sketch of nominee ....................................................................... 53 

Responses to written questions of: 

Senator Crapo ............................................................................................ 92 

Senator Corker .......................................................................................... 93 

Senator Kirk .............................................................................................. 95 

Senator Sasse ............................................................................................ 96 

Senator Rounds ......................................................................................... 100 

Senator Schumer ....................................................................................... 103 

Senator Menendez ..................................................................................... 104 

Senator Warner ......................................................................................... 109 

Hester Maria Peirce, of Ohio, to be a Member of the Securities and Exchange 

Commission ........................................................................................................... 7 

Prepared statement .......................................................................................... 63 

Biographical sketch of nominee ....................................................................... 64 

Responses to written questions of: 

Senator Corker .......................................................................................... 111 

Senator Kirk .............................................................................................. 112 

Senator Sasse ............................................................................................ 113 

Senator Rounds ......................................................................................... 118 

Senator Schumer ....................................................................................... 121 

Senator Menendez ..................................................................................... 122 

Senator Warner ......................................................................................... 124 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

Charts submitted by Senator Brown ..................................................................... 126 

(III)

(1) 

NOMINATIONS OF MATTHEW RHETT 

JEPPSON, OF FLORIDA, TO BE DIRECTOR 

OF THE U.S. MINT; LISA M. FAIRFAX, OF 

MARYLAND, TO BE A MEMBER OF THE SECURITIES AND EXCHANGE COMMISSION; 

AND HESTER MARIA PEIRCE, OF OHIO, TO 

BE A MEMBER OF THE SECURITIES AND EXCHANGE COMMISSION 

TUESDAY, MARCH 15, 2016 

U.S. SENATE, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Committee met at 10:03 a.m., in room SD–538, Dirksen Senate Office Building, Hon. Richard Shelby, Chairman of the Committee, presiding. 

OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY 

Chairman SHELBY. The Committee will come to order. 

This morning, we will hear testimony on a nomination for the 

U.S. Mint and two nominations for the Securities and Exchange 

Commission. This panel of nominees, if confirmed, will have important responsibilities for the manufacturing and distribution of our 

currency as well as for overseeing our Nation’s capital markets. 

The Committee will first hear from Mr. Matthew Rhett Jeppson, 

who is nominated to be Director of the United States Mint. He has 

served as the Principal Deputy Director of the Mint since January 

15, and before that was Acting Chief Operating Officer of the U.S. 

Small Business Administration. If confirmed, Mr. Jeppson would be 

responsible for overseeing the manufacturing and distribution of 

currency as well as collectible coins, national medals, and other 

precious metals. Mr. Jeppson, the Committee welcomes you this 

morning. 

Both Ms. Fairfax and Ms. Peirce are nominated to be members 

of the Securities and Exchange Commission. Ms. Fairfax is a Leroy 

Sorenson Merrifield Research Professor of Law at the George 

Washington University Law School. Since 2009, she has served on 

the Executive Board and is the Director for Programs for the 

George Washington Center for Law, Economics, and Finance. She 

has previously served as a visiting professor at the Georgetown 

University Law Center as well as various roles at the University 

of Maryland School of Law. Ms. Fairfax has also previously worked 

2 

at a Washington, DC, law firm. She is a graduate of Harvard College and Harvard Law School. 

Ms. Peirce is a Senior Research Fellow at the Mercatus Center 

at George Mason University and the Director of the Mercatus Financial Markets Working Group. Before joining Mercatus, Ms. 

Peirce served as Senior Counsel for securities issues on this Committee’s staff, and prior to that, she served at the SEC as a Staff 

Attorney and Counsel to Commissioner Paul Atkins. Before that, 

she had clerked for Judge Roger Andewelt on the Court of Federal 

Claims and was an associate at a Washington, DC, law firm. Ms. 

Peirce earned her B.A. in economics from Case Western Reserve 

University and her J.D. from Yale Law School. 

As SEC Commissioners, Ms. Fairfax and Ms. Peirce would be responsible for helping the SEC fulfill its mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation. The Committee welcomes you both and 

looks forward to the nominees’ testimony. 

Before we get into that, I would like to comment on a few other 

things. 

The nominations update. Last week, the Committee voted to report out favorably the nomination of Adam Szubin to be Under Secretary of the Treasury for Terrorism and Financial Crimes. 

We currently have 16 nominations pending before the Committee. Of those 16 nominations, seven are privileged, which allows 

them expedited floor consideration upon Committee certification of 

the receipt of paperwork. Of those seven privileged nominations, 

the Committee has transmitted to the floor a certification of receipt 

of nomination information for four individuals, for nominations for 

Directors of the Securities Investor Protection Corporation, John 

Menendez and Leslie Bains, and for nominations for Members of 

the Board of Directors of the National Association of Registered 

Agents and Brokers, Raymond Farmer and Heather Steinmiller. 

Certifying the receipt of paperwork for privileged nominations effectively clears them for floor consideration. 

With respect to the other three privileged nominations before the 

Committee, we are awaiting a response from the Administration 

related to two additional nominees to the National Association of 

Registered Agents and Brokers and have not received the completed paperwork for a third nominee to this association. 

With respect to others pending before the Committee, I have 

scheduled a markup for April 7 for the nomination of J. Neal 

Lerner to be Inspector General of the Federal Deposit Insurance 

Corporation and Amias Gerety to be Assistant Secretary of the 

Treasury. I expect to add other nominations to this markup, as 

well, including those before us today. However, I have excluded 

them from the notice at the request of the Ranking Member at this 

time. 

Regarding the Fed nominations, as I have said before, I will not 

hold a hearing on the two nominations for members of the Federal 

Reserve Board of Governors until the President fulfills his duty 

under the law and nominates a Vice Chairman for Supervision. 

Section 1108 of the Dodd-Frank Act amends the Federal Reserve 

Act to establish this position, one of two Vice Chairmen, which is 

3 

responsible for overseeing the Fed’s supervisory and regulatory activities. 

I would remind you, this is no small role, given the Fed’s unprecedented authority over our financial system granted in DoddFrank. Leaving the position vacant also deprives Congress of an 

important oversight tool, as the Vice Chairman for Supervision is 

statutorily required to testify before this Committee twice a year. 

I believe this position should have been filled long ago. It has now 

been almost 6 years since the enactment of Dodd-Frank. The President should obey the law and hold the Federal Reserve accountable 

for its actions. 

Senator Brown. 

STATEMENT OF SENATOR SHERROD BROWN 

Senator BROWN. Thank you, Mr. Chairman, for holding today’s 

hearing. Congratulations to the three of you as this process begins 

to move forward. 

Government is only as good as the people who are entrusted with 

positions of leadership. I have been clear in my frustration with 

this Committee’s failure to act on the many nominees for whom we 

are responsible. We have received 19 nominations over the past 15 

months. We have acted in Committee on only 1 of those 19, and 

that one we did last Thursday. No other Senate committee failed 

to act on a nominee last year throughout calendar year 2015 except 

this one. 

While a lazy or an uninformed observer might chalk this up to 

partisan bickering or the sort of thing that happens all the time, 

that is not really the case. Do not take my word for it, as Casey 

Stengel liked to say, you could look it up. 

Posted on the Minority’s Web site, this chart are spreadsheets of 

the actions of the Committee and the Senate on nominees over the 

past 15 years. The lowest share of nominees reported by the Committee was 81 percent, in part because three nominees arrived in 

late December. That 81 percent was during my first Congress, my 

first 2 years on the Banking Committee, in 2007 and 2008. There 

was a Democratic majority on this Committee and in the Senate. 

There was a Republican President. Yet, we confirmed 81 percent. 

That number would have been higher if those three nominees had 

not arrived so late. Our record to date is 26 percent, and just a few 

weeks ago, it was zero. 

The lowest rate of confirmation of nominees during this period, 

from the 107th through the 114th Congresses, the lowest rate of 

confirmations was 80 percent. Confirmation means the Committee 

acts, the Senate acts. Our record on these 19 nominees is zero. 

We should make progress on all the nominees pending before the 

Committee, not just the nominees before us today, but those who 

have been in limbo for 200 or 400 or even 900 days. 

I know there are disagreements with President Obama’s policies. 

That is natural. But he was elected the Chief Executive of our 

country twice. In fact, in the last century, only four Americans 

have received a majority of the popular vote twice, Dwight Eisenhower, Franklin Roosevelt, Ronald Reagan, Barack Obama. Only 

four human beings in our country have gotten a majority of the 

vote for President of the United States twice. 

4 

President Obama has the right to put qualified people in executive positions to carry out his policies and to enforce the law. It 

would be a mistake to adopt a wholesale policy of holding staff hostage for supporting the views of their boss. 

That said, Mr. Chairman, I am pleased to welcome today’s nominees. Mr. Matthew Rhett Jeppson has been nominated to be Director of the Mint. Ms. Lisa Fairfax and Ms. Hester Peirce have been 

nominated to be members of the SEC. 

Our first nominee exemplifies public service. He has served our 

country since 1989 in active duty in the First Marine Division and 

then in the U.S. Marine Corps Reserves. Between 1995 and 1999 

and again from 2001 through 2012, Mr. Jeppson held leadership 

positions within unified combat commands, the Marine Corps, and 

U.S. military forces in Afghanistan. In 2012, Mr. Jeppson joined 

the Small Business Administration to focus on veterans business 

development and served as Acting COO, and last year he became 

Principal Deputy Director of the U.S. Mint. 

Eight years after the financial crisis, the importance of the SEC 

in monitoring financial markets, protecting investors, is only more 

obvious. We continue to learn that markets and large institutions 

are interconnected and increasingly complex. 

Ms. Peirce has spent much of her career in public service, first 

at the SEC, then working on this Committee’s Banking staff. At 

that time, Ms. Peirce saw the financial crisis unfold. I trust that 

experience will serve her well as the SEC finalizes Dodd-Frank 

rules and tackles the rest of its agenda, including Chair White’s 

initiatives on mutual funds and market structure. 

Ms. Fairfax brings an academic’s expertise combined with a reasoned perspective to address the complex issues facing SEC. Her 

scholarship on the duties and responsibilities of corporate boards 

will be a valuable point of view when considering enforcement 

issues and the best way to achieve accountability. 

In order to navigate an ever-changing financial market landscape, the SEC must work closely with other regulators here in the 

U.S. and abroad to make sure markets function well and that investors are protected. SEC Commissioners owe a duty to the public 

to achieve these goals. We need to ensure that SEC has the power 

and the resources to do that. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Thank you, Senator Brown. 

Will all the nominees rise and raise your right hand. 

Do you swear or affirm that the testimony that you are about to 

give is the truth, the whole truth, and nothing but the truth, so 

help you God? 

Mr. JEPPSON. I do. 

Ms. FAIRFAX. I do. 

Ms. PEIRCE. I do. 

Chairman SHELBY. Do you agree to appear and testify before any 

duly constituted Committee of the Senate? 

Mr. JEPPSON. I do. 

Ms. FAIRFAX. I do. 

Ms. PEIRCE. I do. 

Chairman SHELBY. You may be seated. 

5 

All of your written testimony will be made part of the hearing 

record. 

Mr. Jeppson, we will start with you, and you sum up what you 

want to say. 

STATEMENT OF MATTHEW RHETT JEPPSON, OF FLORIDA, TO 

BE DIRECTOR OF THE U.S. MINT 

Mr. JEPPSON. Thank you, Mr. Chairman, Senator Brown, and 

Members of the Committee. I am honored to appear before you 

today. 

I would also like to thank the President for the trust he has 

placed in me by nominating me to serve as the 39th Director of the 

United States Mint. 

Since January 2015, I have had the honor of serving as the Principal Deputy Director of one of our Nation’s oldest and most venerable public institutions. The Mint was established early on in the 

life of our republic; coining money is one of the powers the Constitution explicitly grants to Congress. 

I would like to begin my remarks by sharing how my personal 

story led me to the Mint and describing what qualifies me to become its next leader. Following that discussion, I will explain how 

the Mint is fulfilling its mission today and what we need to do to 

sustain the positive results we have produced for the American 

people. 

Throughout my career, I have served our Nation in a variety of 

capacities. Prior to the Mint, I was Associate Administrator for 

Veterans Business Development and later Chief Operating Officer 

at the United States Small Business Administration. In those roles, 

I am proud of the significant strides we made to aid Veterans seeking to start small businesses. 

Earlier in my career, I served as Director of State Purchasing in 

my home State of Florida, where I oversaw the implementation of 

a new electronic procurement system that saved the State government millions of dollars. 

Each of these professional experiences has shaped me in important ways, but my greatest source of pride is my service in the 

United States Marine Corps. My career as a Marine, from those 

early days leading Marines in combat during Desert Storm, to my 

more recent service in Afghanistan and Europe, has given me the 

deepest admiration and respect for the Corps and its mission. 

In January of this year, I retired from the Marine Corps after 

nearly 28 years of combined Active and Reserve service. Serving 

our Nation as a Marine has profoundly influenced who I am. It has 

given me a distinct approach to leadership and management which 

I will bring to the Mint, if I am confirmed. 

David Rittenhouse, renowned American astronomer, inventor, 

clockmaker, and close friend of George Washington, was the first 

Director of the Mint. He held a deep appreciation for coin design 

as an artistic expression of our shared values. 

Other American leaders have also taken great pride in our work. 

President Theodore Roosevelt shared Rittenhouse’s belief that the 

way that we design our coins ought to reflect our shared heritage. 

He personally commissioned the redesign of American coinage in 

the early 20th century. 

6 

Mr. Chairman, the modern United States Mint is a lean, vibrant, 

and efficient organization. When I began my service at the Mint, 

one of the first things I set out to do was visit each of our facilities 

and visit with our employees. Their advice and ideas have helped 

me set priorities for the Mint. We must continue to invest in our 

people and enable them to have the skills they need to accomplish 

our mission and meet the coinage needs of the United States. 

In 2016, our mission is more important than ever. Cash remains 

the most common method consumers use for payment, comprising 

40 percent of transactions, according to a recent report by the Federal Reserve. 

In fiscal year 2015, we shipped more than 16 billion coins, an increase of 24 percent from the previous year. Bullion coin sales were 

up more than 25 percent for fiscal year 2014, with American Eagle 

Silver Bullion Coin sales at their highest since the program started 

in 1986. Numismatic earnings were up more than 32 percent. 

Even as our production needs have increased considerably, we 

have controlled costs. Last year, general and administrative costs 

associated with circulating coin production were down 9 percent. 

The unit cost of the penny was the lowest since 2008, the nickel 

the lowest since 2009, and the dime and quarter were at their lowest since 2006. Thanks to these strong financial results, we were 

able to transfer more than $550 million of seigniorage to the Treasury General Fund, which can be used to reduce the cost of the interest on the national debt. We also generated an additional $61 

million in numismatic and bullion earnings, which were transferred to the General Fund for operational use. 

Mr. Chairman, Members of the Committee, I believe the Mint reflects the very best of our Nation. Our motto, ‘‘Connecting America 

Through Coins’’, has real meaning. The design, themes, and subjects depicted on our coinage represent our shared values, history, 

aspirations, and culture. 

If I am privileged to be confirmed by the Senate as the next Director of the U.S. Mint, I pledge to uphold the trust placed in me 

by you and the President. I appreciate this opportunity to speak 

with you today and look forward to your questions. 

Chairman SHELBY. Ms. Fairfax. 

STATEMENT OF LISA M. FAIRFAX, OF MARYLAND, TO BE A 

MEMBER OF THE SECURITIES AND EXCHANGE COMMISSION 

Ms. FAIRFAX. Chairman Shelby, Ranking Member Brown, and 

Members of the Committee, thank you so much for giving me the 

opportunity to speak with you today. It is an incredible honor and 

privilege to appear before you as one of the President’s nominees 

to be a Commissioner of the Securities and Exchange Commission. 

Before I begin my remarks, I would like to briefly introduce my 

family members who are here with me. I am grateful to be joined 

today by my husband, Roger Fairfax, my three daughters, Fatima, 

Regina, and Nadia, my mother, Elizabeth White, my mother-inlaw, Charlene Fairfax, my brother-in-law, Justin Fairfax, and my 

sister-in-law, Jennifer Fairfax. I have a large extended family. 

[Laughter.] 

Ms. FAIRFAX. And I want to thank all of them, as well as all of 

my friends, for their incredible and continued support. 

7 

I also would like to congratulate Hester Peirce, who like me is 

here today as a nominee to serve on the Commission. 

I sit before you today because I believe deeply in the importance 

of robust and healthy securities markets. I also believe deeply in 

the SEC’s three-part mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. I am 

honored and humbled by the prospect of potentially serving the Nation and its investors alongside the Chair, the other Commissioners, and the many staff members who work tirelessly to support the vital work of the SEC. 

As a law professor, over the last 15 years, I have had the privilege of teaching corporations and securities law to the next generation of practitioners, judges, and regulators, so that they can understand the increasingly complex world in which companies must 

operate, markets must perform, and regulators must monitor. 

My teaching, along with my research and writing in these areas, 

have given me a deep understanding of the issues confronting the 

SEC, as well as a strong desire to help tackle those issues headon. My research and work with organizations such as the American 

Bar Association and FINRA have taught me the importance of engaging a variety of different, diverse perspectives when seeking to 

develop solutions to complex problems. I look forward to such engagement if I am fortunate enough to be confirmed. 

Importantly, I believe that the SEC’s three-part mission is more 

than a statement. It is a set of guiding principles that should shape 

every aspect of the agency’s activities. It is also a set of principles 

that must work together. 

I believe the SEC’s work must be aimed at ensuring that investors are protected at all times and that investors have confidence 

in the markets and the financial system. The SEC also has a responsibility to facilitate access to needed capital for all participants 

in the market, from the corporation and small business owner in 

need of cash and credit, to the individual investing to support a 

family, finance a child’s education, or ensure a comfortable retirement. And all of these participants need assurances that their capital is safe and secure, which is why the SEC has a responsibility 

to maintain markets that are orderly, efficient, and fair. Everyone 

needs to play by the same rules and there must be strong repercussions for those who break them. 

Thank you again for the opportunity to appear before you. If I 

am confirmed, I will work tirelessly to maintain the confidence that 

the President, this Committee, and the Senate will have shown in 

me. I look forward to answering any questions you may have. 

Chairman SHELBY. Ms. Peirce. 

STATEMENT OF HESTER MARIA PEIRCE, OF OHIO, TO BE A 

MEMBER OF THE SECURITIES AND EXCHANGE COMMISSION 

Ms. PEIRCE. Chairman Shelby, Ranking Member Brown, and 

Members of the Committee, thank you for the opportunity to be 

here today as one of President Obama’s nominees for the SEC. It 

is a particular privilege to be here and to be considered along with 

Professor Fairfax. 

My desire to serve at the SEC stems from a belief that the capital markets unlock people’s potential. Investors are able to build 

8 

their retirement nest eggs, their downpayments, and their children’s education funds through the capital markets. And vibrant 

capital markets are able to find and fund individuals and companies with ideas that can enrich our communities, that can enhance 

our Nation’s prosperity. 

This belief in the value of the capital markets stems from lessons 

learned at the Peirce family dinner table, in classrooms at Case 

Western Reserve and Yale, and then from colleagues and mentors 

throughout my career. In securities law, I found a way to combine 

my undergraduate degree in economics, my law degree, and my 

childhood hobby of plotting stock prices. 

When I began at the SEC, I was a Staff Attorney in the Division 

of Investment Management, where my job was to write rules for 

mutual funds and investment advisers. After that, I served on the 

staff of Commissioner Paul Atkins. And then, after my 8 years at 

the SEC, I had the honor of serving on the staff of this Committee 

for then-Ranking Member Shelby. In all of these positions, I 

learned the important role that strong, carefully crafted, and well 

enforced rules play in maintaining vital capital markets and in protecting investors. 

At the Mercatus Center, I am surrounded by colleagues who are 

committed to effective regulation and to sound regulatory process. 

I have learned much from their careful scholarship. And I have 

also learned much from my colleagues on the Investor Advisory 

Committee at the SEC, where we work to educate, empower, and 

protect investors. I would welcome the opportunity to apply all of 

these lessons at the SEC to protect investors, to uphold the integrity of our financial markets, and to facilitate innovation in economic growth. 

Thank you for the honor of appearing before you today and I look 

forward to answering any questions. 

Chairman SHELBY. I will direct this question to both nominees 

to the SEC. The U.S. capital markets are the envy of the world, 

and to maintain this standing, I believe that regulators should do 

everything they can to ease the regulatory burdens on American 

businesses while ensuring investor protection. As part of this, regulators and Congress, I believe, should review rules and regulations 

in order to understand their effect on the markets and the economy 

and to streamline them appropriately. 

In your opinion, how important is economic analysis as part of 

rulemaking, and second, do you agree that regulators should do 

retrospective reviews of rulemakings? What areas of security laws 

would benefit from such reviews? 

Ms. Peirce, we will start with you, go right to left. 

Ms. PEIRCE. I certainly believe that economic analysis is a very 

important tool in the toolbox of regulators. It is a way for them to 

identify a problem that they are trying to fix and then to look at 

alternative solutions to those problems to try to figure out which 

solution will be the most effective for each problem. And then to 

anticipate what the unintended consequences might be of the particular solution. 

It is also important to set out, when you adopt a regulation, to 

set out metrics to measure whether or not the regulation is successful in achieving those objectives, and that gets to your point 

9 

about retrospective review, which I think is tremendously important. You always want to go back and look and see whether the 

rules are working as intended. 

I think one area where that is particularly called for at the moment is in equity market structure, where we have built up rules 

over many years, and I think a lot of folks are looking and saying, 

how well are the rules working, and that is an area I would like 

to be involved in if I were confirmed. 

Chairman SHELBY. Ms. Fairfax. 

Ms. FAIRFAX. Thank you so much for your question. I, too, think 

that economic analysis is very important. I think it is important because in the context of rulemaking, we need to make sure that we 

understand the costs and benefits of rules that are being created, 

and economic analysis is one of those tools, as well as many others, 

that should be utilized to make sure that everyone is properly 

thinking through the process and impact of the rules that are being 

created. 

With regard to retrospective review, I think, absolutely, that it 

is important, as well. I think it is very important to think about 

the cost and benefit, but, obviously, you are regulating in the face 

of uncertainty and things change in the regulatory environment, 

which means that sometimes you will have unintended consequences of rules. Sometimes, you will have metrics and goals 

that you set and then you will realize as you move through the regulatory process, and certainly as the rules get implemented, that 

what you thought would occur does not, in fact occur. Since the 

purpose is to try to get things right, and I think looking back and 

understanding whether or not you got things right is very much 

important. 

Chairman SHELBY. In the area of enforcement, I believe enforcing the law is important to maintain confidence in our markets and 

to deter misconduct. And while the SEC does not have criminal authority, it does have civil enforcement authority, which is a powerful tool. 

To both of you, can you describe your views on the SEC’s enforcement program as well as your views on bringing actions against individuals and not just regulated entities, when appropriate. Ms. 

Peirce. 

Ms. PEIRCE. The SEC’s enforcement program is a key part of the 

SEC. Many companies are trying to do the right thing and the compliance program’s purpose is to work with those companies to try 

to enable them to comply. But, there are some companies and some 

individuals that simply do not want to comply with the rules, and 

the enforcement program is necessary. We need strong, clear, swift 

enforcement, and the SEC is blessed to have a tremendous staff of 

enforcement attorneys who are very talented and very experienced. 

And, so, their role is to pursue wrongdoers, and I would welcome 

the opportunity to be part of that if I were confirmed. 

And, in terms of individuals versus corporations, I think, too, 

often, it is easier to charge a corporation rather than going after 

individuals who are responsible, and presumably, if a corporation 

has done something wrong, there are individuals who have been 

engaged in that wrongdoing. And, so, I do think that that is an 

10 

area where it is important to press forward even when it is difficult 

to charge individuals. 

Chairman SHELBY. Ms. Fairfax. 

Ms. FAIRFAX. Thank you. I absolutely believe that enforcement is 

a priority. It instills investor confidence, it ensures accountability, 

and it deters misconduct. I also believe that accountability, both 

with respect to individuals and with respect to corporations, is very 

important and the SEC needs to aggressively engage in enforcement efforts. 

Chairman SHELBY. To both of you, prior to the nomination hearing, were you asked, either of you, to support any policy, rulemaking, or initiative in exchange for support for your nomination? 

Ms. PEIRCE. The only pledge I made was, if I am confirmed, to 

aggressively fulfill the mission of the SEC, including investor protection. 

Chairman SHELBY. OK. Ms. Fairfax. 

Ms. FAIRFAX. Yes. I was not asked that question. Thank you. 

Chairman SHELBY. Mr. Jeppson, could you briefly elaborate on 

the U.S. public’s demand for coins, and with the advent of online 

and card payment technologies how the Mint’s production needs to 

have shifted and will continue to shift. In other words, what is the 

future of the Mint and coins in the U.S. 

Mr. JEPPSON. Mr. Chairman, thank you for the question. We 

have seen that since 2009, with the improving economy, the use of 

coins has increased. We have climbed back to historic levels. We 

have risen from about five billion coins in 2009 to production of the 

circulating line at about 16.1 billion coins last year. This is a threefold increase. Circulating coin production continues to be strong. 

The Federal Reserve forecast holds us flat at about 1 billion for 

the, really, next 12 months, and we believe that we will be within 

that 14 to 16 billion range for the circulating lines. Production continues to be strong. 

On the numismatic side, we saw a big decline in 2009. We have 

managed to gain back some of that demand. We have been able 

to—— 

Chairman SHELBY. Is that because of the economy tanking? 

Mr. JEPPSON. Yes, sir, I believe that in large part it was because 

of the economy. With collectable coins, disposable income plays a 

large role, so I believe that the economy was probably the single 

largest factor in the decline. We have managed to gain back some 

of that. 

But, we also have a demographic that is changing. So, we have 

instituted some outreach to try to broaden our appeal to a larger 

demographic of coin collectors and to make the Mint more accessible. We have also moved more to online sales, which has become 

the preferred method for most of our coin collectors to purchase 

coins. 

Chairman SHELBY. Senator Brown. 

Senator BROWN. Thank you, Mr. Chairman. 

I want to begin by highlighting the important work that remains 

for the SEC to complete its Dodd-Frank Act rules. A number of 

rules still need to be finalized. Others have not yet been proposed. 

A question for both of you, start with you, Ms. Peirce. If confirmed, are you committed to finishing the rulemaking process 

11 

promptly and faithfully according to the law, regardless of your 

personal views? 

Ms. PEIRCE. Senator, I am committed to working with Chair 

White and the rest of the Commissioners to carry out the rest of 

the agenda given to us by Dodd-Frank. I will note that because the 

Chairman does set the agenda, the ability of an individual Commissioner to control the timeline is sometimes quite difficult. 

Senator BROWN. Ms. Fairfax. 

Ms. FAIRFAX. Yes, absolutely. I believe that completing the mandate under Dodd-Frank is important, so I would be committed to 

making sure we try to get that done as quickly and as appropriately as possible. 

Senator BROWN. Thank you. 

Ms. Peirce, you in response to the Chairman’s question mentioned pursuing wrongdoing. I want to follow up on that. The SEC’s 

enforcement record shows a vast majority of cases are settled, and 

even in recent years, admissions of guilt are infrequent. To make 

matters worse, many settlements are with repeat offenders. How 

do you think settlements with admissions of guilt and meaningful 

punishments, especially for chronic offenders, can be achieved in 

enforcement cases? 

Ms. PEIRCE. I think that that is a very important issue, Senator, 

and I think that perhaps because it has become a tradition at the 

SEC to have settlements with neither admit nor deny, that is just 

what the expectation is from both sides. But, I do think that a settlement sends a stronger message if there is an admission of 

wrongdoing. And, sometimes—it is more costly for the SEC to pursue that because the respondent may say I will not do that and I 

want—you have to take me to court, either in-house court or a District Court. But, sometimes it is worth that price for the SEC to 

take that step. I think you mentioned repeat offenders, and I think 

that that is particularly a case where it may be worth taking the 

extra resources and applying them to get an admission of wrongdoing. 

Senator BROWN. Ms. Fairfax, follow-up on enforcement issues. 

Experts say the tone at the top is important in guiding responsible 

corporate behavior. In your research, what elements of corporate 

governance promote better behavior and accountability? 

Ms. FAIRFAX. Thank you. That is a very good question. I think 

the tone at the top is extremely important. I think you need to 

have people who are able to listen to and understand a range of 

perspectives and who can work collectively to engage in problem 

solving. I do think you also need to have people with independence 

and objectivity, because that is important. You need to have expertise, because that is also important, and people with a true commitment, and understanding of a particular mission or a particular responsibility. 

Senator BROWN. Ms. Peirce, on Friday, the National Archive released documents from the Financial Crisis Inquiry Committee’s 

review of the causes of the financial crisis. The documents show 

lapses across the board, both at big banks and by the regulators, 

lapses in understanding risks. Previously, Alan Greenspan conceded he made a mistake in thinking that banks could manage risk 

to protect their firms and shareholders, and he has commented 

12 

that incentive structures matter. Post-crisis regulations, in my 

opinion, including Dodd-Frank, have improved risk management 

and will create better incentive structures at financial firms. Do 

you think these improvements could have happened without a 

change in the law, in the new rules? 

Ms. PEIRCE. I think that the financial crisis showed all of us that 

a change in the financial regulatory structure was necessary. It is 

very important to set incentives properly. One of the concerns that 

I had leading up to the crisis was that the incentives coming from 

regulations were all wrong and they encouraged bad behavior by 

financial institutions, and the financial institutions, frankly, followed right along and engaged in that bad behavior. 

And, so, changes were necessary. I do worry that some of the 

changes that we have put in place will not lead to more personal 

responsibility by people in the financial industry but will lead to 

outsourcing of risk management to regulators, and so I think we 

need to keep an eye on how the Dodd-Frank reforms are working. 

We need to ensure that they are working well, and if they are not, 

we need to make adjustments. But, certainly, strong and effective 

regulation can be helpful in directing behavior so that it is not 

harming people. 

Senator BROWN. Thank you. 

Mr. Jeppson, one question for you. You mentioned the immense 

aging workforce could create gaps in manpower and training to 

make it difficult to meet high demands. What are the skill gaps 

that you—the most significant skills gaps you anticipate in years 

ahead? What kind of tools are you going to use, recruitment channels will you use to address staffing and training challenges? 

Mr. JEPPSON. Yes, sir. As you highlighted, the Mint has an aging 

workforce, much like the rest of the Federal Government. More 

than 30 percent of our employee base is retirement eligible in the 

next 3 years, and they tend to stay for about 3 years after becoming eligible for retirement. 

So, we have two tracks. First, we have begun a new training initiative that allows people to gain leadership and technical skills 

which will allow them to advance, and also a course which may enable an employee to cross-train into other areas. The Mint has a 

wide variety of skill sets, probably more so than any other agency, 

everything from our wage-grade employees as metal forming operators and die setters and heat treaters all the way to sculptors and 

engravers and accountants and designers. So, it is a very broad 

range, and it affects all of those positions. Training is a large component of that, preparing our people for leadership roles. 

Also, we are going to do targeted outreach around our local Mints 

to recruit people and make people aware of the opportunities there. 

We will also focus on our time to hire, so that when we do find 

those talented people, we can actually get them in the door in a 

timely fashion. 

Senator BROWN. Thank you. Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Heller. 

Senator HELLER. Mr. Chairman, thank you. I want to thank you 

and the Ranking Member for holding today’s hearing. 

I appreciate the comments that have been made so far, and congratulations to all three and welcome your family here, also. 

13 

I will probably spend most of my time talking to the two nominees at the SEC. I have a tremendous amount of respect for you, 

Mr. Jeppson, but in this case, we only have a few minutes. 

So, I regulated the securities industry in Nevada for 12 years 

and also was a securities license. I go back to a comment that Arthur Levitt said when he was Chair of the SEC under President 

Clinton. He quoted, an individual’s philosophic orientation has unfortunately become more important than their knowledge of securities law. And, there is some concern up there that people believe 

that qualified individuals with private sector experience and knowledge of the securities law are being overlooked. And, this is not a 

reflection on yourself. I am just trying to get to a better understanding of both of your qualifications. I appreciate both of your 

comments. 

I guess the question I have for both of you is what has been your 

experience in practicing securities law in the past? Ms. Peirce, I 

will start with you. 

Ms. PEIRCE. After clerking after graduating from law school, I 

joined a law firm in D.C. that focused on—had other practice areas, 

but my focus was on securities law. And then I joined the SEC, 

where I worked for 8 years, and then was here on the Committee 

working on securities law issues, as well. And, my research now is 

broader than just securities, but it does include securities, as well. 

Senator HELLER. Have you ever had a securities license? 

Ms. PEIRCE. I have not. 

Senator HELLER. OK. 

Ms. FAIRFAX. Thank you for your question. When I graduated 

from law school, I worked at a large law firm and my focus area 

was in corporate and securities work. I did a wide range of corporate and securities transactions, from public offerings to private 

placement, did what was back then something that not many people were aware about, securitizations. I did work with respect to 

that, as well. 

After I came out of practice, I started teaching. I have been 

teaching for over 15 years in the corporate and securities area, and 

I will say that what teaching in that area has done for me is given 

me a real breadth and depth in terms of my understanding of the 

securities market. 

I did some work with FINRA, which in terms of licensing, gave 

me a real appreciation for licensing and self-regulatory organizations and the mission of FINRA and how that connects to the 

broader securities market. I have done work at the ABA. In connection with my work there, I have worked on rulemaking with regard 

to the Model Corporations Act. So I certainly understand, at least 

from that level, what rulemaking looks like, and what working 

with diverse perspectives and figuring out complex solutions looks 

like. So, I have had a wide variety of experiences in that area. 

Senator HELLER. Have you ever held a securities license? 

Ms. FAIRFAX. I have not. 

Senator HELLER. You have not. Do you have any specific expertise in the equity markets? 

Ms. FAIRFAX. My research touches on the equity markets. I also 

have done teaching in that area and that is where my understanding of that market comes from. 

14 

Senator HELLER. Ms. Peirce, how about the fixed income market? 

Any specific expertise in that area? 

Ms. PEIRCE. I do not have specific expertise in fixed income, although I recognize that it is very important. And, I will note that 

the SEC has many people who are very experienced, including people who have been in industry, and if I were to be confirmed, my 

door would be open so that I could hear from people from all perspectives. I do think that one area the SEC needs to probably have 

more expertise in is fixed income. At least when I was there, there 

was not enough attention paid to that. 

Senator HELLER. OK. In the Chairman’s initial questioning, he 

asked about cost-benefit analysis. Can either one of you give me an 

existing regulation that you believe that the costs outweigh the 

benefits? 

Ms. PEIRCE. I would argue that many of the regulations coming 

out of Dodd-Frank raise questions about that. One that posed particularly difficult cost-benefit issues was the conflict minerals rule, 

which is very far outside the SEC’s normal expertise. But, subsequent reports have led me to believe that the benefits actually may 

be very outweighed by the costs and that there may actually be a 

severe human cost to the very people that that rule was intended 

to help. 

Senator HELLER. Thank you. 

Ms. FAIRFAX. I think engaging in a cost-benefit analysis is very 

important. Sitting here right now, I cannot pick out of the hat 

something that I think the costs outweighed the benefits, because 

sitting from where I am right now, while I have a kind of outside 

perspective, I have not really had the opportunity to hear staff concerns and concerns of all of the other market participants to get a 

real deep understanding of the costs and benefits of certain rules. 

I know that there are concerns raised about a lot of different regulations, and I would certainly, if I am fortunate enough to be confirmed, be interested in listening to those concerns and to ask, as 

the Chairman pointed out, about costs and benefits, and to the extent it turns out that the costs outweigh the benefits, I would be 

responsive. 

Senator HELLER. Thank you to both of you and to all three of 

you. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Reed. 

Senator REED. Well, thank you very much, Mr. Chairman. 

First, Mr. Jeppson, thank you for your service as a Marine in Afghanistan and Iraq. I think that probably prepares someone for 

doing lots of jobs, including the one you are nominated for. But, 

thank you very much, sir. 

Let me turn my attention to the nominees to the Securities and 

Exchange Commission. Thank you very much for your willingness 

to serve. I would like to ask both of you the same question initially. 

Shareholder protection—investor protection—is critical to the 

SEC’s mission, and not only for their protection, but also to ensure 

that there is real shareholder governance in a corporation. And, 

there are a number of issues that are arising. The issue of cybersecurity, the issue of climate change, the issue of political spending— 

15 

in all of these shareholders should, I think, have some voice and 

be protected. 

And, let me ask this specifically. Starting with Ms. Fairfax, what 

is your top objective or top initiative with respect to shareholder 

protection and investor protection? 

Ms. FAIRFAX. Thank you so much for the question, and as my 

opening remarks, I hope, reflected, I think investor protection is extremely important. Obviously, it is a critical aspect of the SEC’s 

mission. And, I think that everything that we do at the SEC, if I 

am fortunate enough to be confirmed, will relate to investor protection. I think one priority is market structure, and that is very 

much interlinked with investor protection. As I mentioned, I do not 

think you can really protect investors if you do not have fair, orderly, and efficient markets and to make sure that investors are 

operating in a structure that treats them fairly and a market structure that is secure. 

The other thing I think is really important is corporate disclosure. I think making sure that investors have the right information 

is important. We talked about what is at the crux of the SEC, and 

it is about putting a spotlight on information and making sure investors have information so that they can make appropriate decisions. 

I also, which should not come as a surprise, think that corporate 

governance issues are important, especially issues around the 

proxy apparatus and making sure that the voting structure works 

appropriately so that changes in the way in which shareholders 

vote and the matters that they vote on are taken into account when 

looking at that structure and trying to figure out how to move forward. 

Senator REED. Thank you. 

Ms. Peirce, please. 

Ms. PEIRCE. As Professor Fairfax underscored, investor protection issues are important across the board of what the SEC does. 

One area that I think will see changes, positive changes made for 

investors, is the disclosure effectiveness review that is going on 

now. Trying to find the information that users need and present it 

to them in a way that they can use it, potentially incorporating 

new technologies, ensuring that the disclosure mechanism at the 

SEC is up to date in terms of technology, I think all of that will 

be very helpful for investors. 

In terms of my work on the Investor Advisory Committee, we 

worked on a proposal which I think has merit, as well, which is 

trying to do a better job of aggregating information about financial 

professionals and making that available to investors in one place, 

and I think that is an exciting initiative that the SEC would do 

well to work on. 

Now, I will say that perhaps when I get to the SEC, I will discover that there are other more pressing issues, and I want to keep 

an open door to that possibility, as well. 

Senator REED. Thank you. 

There has been some discussion about cost-benefit analysis, 

which implies, if you are going to do it correctly, that you have to 

have access to all the costs that are relevant, which would imply— 

well, let me ask. Would the SEC, if it had that direction, also have 

16 

the authority to go in and get the costs of different companies, 

some of which might be argued could be proprietary? 

Ms. PEIRCE. The Paperwork Reduction Act actually limits the 

ability of the SEC to go to more than nine people. So, when I was 

at the SEC, and I did work on some economic analysis when I was 

there, we were able to call three small, three medium, and three 

large companies. Now, needless to say, that leads to some potential 

gaps. One way that the SEC gets around that is to ask for comment that has data in it, and I think those are sometimes the most 

effective comments, the comments that bring data with them. 

Now, certainly, any cost-benefit analysis has assumptions and 

those assumptions need to be spelled out, and where there are data 

gaps, the agency needs to be very clear, we have a gap in data 

here, and that it is all out there and then people can respond to 

that. 

Senator REED. I think the comment was actually very revealing, 

because there has been this mantra about we are just going to do 

cost-benefit analysis, and what you have indicated, first of all, is 

that there are only a few companies that the SEC can directly ask, 

given the present system. And, second, it relies upon comments 

which are voluntary, and so some people could withhold data until 

after the rule is promulgated, and then present the data as, well, 

this is, you know, your costs are not accurate. So, I think we have 

to be, very, very careful as we pursue this approach. 

The second issue is—and I think you alluded to it in terms of the 

minerals rule—it is quantifying social benefits, which is always a 

very challenging problem. So, I think, again, that this is something 

the SEC does, but we have to be very, very careful about the limitations, both legal limitations and practice limitations. 

But, thank you both. You are both bringing incredibly robust academic and legal backgrounds to a very demanding job and I thank 

you. 

Chairman SHELBY. Senator Rounds. 

Senator ROUNDS. Thank you, Mr. Chairman, Ranking Member 

Brown. 

Senator Reed mentioned it, but Mr. Jeppson, I just wanted to 

also say thank you for your service to our country and I appreciate 

your offering to step up and to participate right now in another 

role. 

Most of my comments once again will be directed to our two 

nominees for the SEC position today. Professor Fairfax, I appreciated the time that we spent in my office. Thank you very much. 

It is great to see that you brought your family here, as well. I come 

from a large family. I have got nine brothers, one sister, two stepbrothers, and a step-sister, so it is always great to see support from 

family members here. 

I also appreciated—we touched on a subject while you were in 

my office and I said that I wanted to bring it up today and provide 

you with an opportunity, but also to bring it out and to talk about 

it a little bit. What we talked about was—the topic that we discussed was the amicus brief that you signed in the Walmart v. 

Trinity case. The brief asked the court to allow the Trinity Wall 

Street Church to include a proxy statement which urged Walmart’s 

board to provide oversight concerning the formulation of a policy, 

17 

a company policy, regarding the sale of products that, in their 

words, especially endanger public safety and well-being, have substantial potential to damage Walmart’s reputation, and/or would be 

reasonably considered by many offensive to the family and community values integral to Walmart’s promotion of its brand. 

When we spoke, you said that you had concerns that what was 

written was perhaps inartful, but you signed the brief anyway. I 

hunt. I shoot at targets. I also own firearms, as many South Dakotans do. In 2010, the Supreme Court ruled that it is clear that the 

Framers counted the right to keep and bear arms among those fundamental rights necessary to our system of ordered liberty. This is 

settled law. 

The question that I have is, is do you believe it is reasonable to 

consider the sale of guns by Walmart or any other retailer offensive 

to family and community values? 

Ms. FAIRFAX. Yes. Thank you so much for that question. You are 

right, we discussed it before and I thank you for the opportunity 

to speak about it here today before the Committee. 

First, in signing onto that brief, it was not at all a signal about 

any position with regard to the underlying issue or a signal about 

my position with regard to one company or one industry. It was instead aimed at the larger corporate governance proposition about 

shareholder proposals and what they should look like, and making 

sure that shareholder proposals maintain that careful balance between allowing directors and officers the ability and the important 

discretion to set corporate policy on the one hand, and allowing 

shareholders to communicate on issues that they think are significant on the other. 

The other thing that I explained is, in my view, it is very important for boards to have the discretion to determine what is a significant policy and to determine what impacts their values and 

what impacts the corporation’s bottom line, and it was my view 

that that was not what the shareholders were asking, that is, to 

set policy and make those decisions; but rather, what they were 

doing was communicating their desire to have the board engage in 

their oversight role and engage in the process where directors also 

were thinking about what is appropriate in that context. 

So, again, my signing the brief was about the governance principle of protecting the shareholders’ ability to communicate on important matters, which is, of course, an ability that is protected by 

the Federal securities laws, and balancing that very important 

right with the other very important right of allowing boards to set 

policy and to think through, of course, in their oversight role, what 

things impact the corporation and its bottom line. 

Senator ROUNDS. It was the concern about whether or not it was 

the underlying issue that was of concern, because in an earlier 

brief—I also read the amicus brief that you signed in Burwell v. 

Hobby Lobby. In that case, the amicus brief you signed opposed 

Hobby Lobby’s contention that the owners of Hobby Lobby retained 

their fundamental First Amendment right to free exercise of religion, because once they formed a corporation, they lose the ability 

to make moral adjustments. 

To me, this seemed contrary to the position that you took in the 

Walmart case. In fact, you went so far as saying that the court 

18 

should reject Hobby Lobby’s contentions because doing so could 

make the raising of capital more challenging, recruitment of employees more difficulty, and entrepreneurial energy less likely to 

flourish. 

My question is, is why is it OK for Walmart’s shareholders to instruct the company’s board to closely scrutinize firearm sales because of concerns about family and community values, but it is not 

OK for a family that owns a corporation to exercise their sincere 

religious objections? 

Ms. FAIRFAX. Thank you again for that question. We did not talk 

about Hobby Lobby. And, I would say, number one, with respect to 

my signing onto that brief, it was not about the underlying issue, 

but about the broader corporate governance issue. With regard to 

Walmart, that issue was about shareholders’ ability to communicate as opposed to any kind of mandate. With regard to Hobby 

Lobby, it was actually a corporate governance principle about the 

importance of the separation of the corporate structure from the 

personal and the individual shareholders. 

In my view, the core component of a for-profit corporation is that 

it has a legal existence that is separate and apart from its independent shareholders and there are important benefits that stem 

from that idea, important tax benefits, important benefits with regard to limited liability. It is the reason why people’s personal assets are not the same thing as the corporate assets. And, it has important benefits with regard to the perpetual existence of a corporation. It is why individual shareholders can change from day to 

day and even from minute to minute and the corporation remains 

the same. So, again, it was about that fundamental corporate governance principle, that the corporation has a legal existence that 

is separate and distinct from its shareholders and not the underlying issue that was at play. 

Senator ROUNDS. Thank you. 

Mr. Chairman, you have been generous with your time. I had 

some more questions, but I will yield back at this time. Thank you 

for your patience. Thank you very much for your answers. 

Ms. FAIRFAX. Thank you. 

Chairman SHELBY. Senator Scott. 

Senator SCOTT. Thank you, Mr. Chairman. 

Mr. Jeppson, as everyone already stated, God bless your service 

and you do not get any questions. 

[Laughter.] 

Senator SCOTT. I would not complain about that ever, by the 

way, on this Committee. Lord have mercy. 

[Laughter.] 

Senator SCOTT. And, Senator Rounds, I did not realize that you 

have enough siblings to have a football team. That was a—— 

Senator ROUNDS. A basketball team and a referee to go with it. 

[Laughter.] 

Senator SCOTT. Exactly. An unbiased referee, which would be 

nice these days. 

To the two nominees, thank you for your time and your willingness to serve, without any question. 

My first question is, can you give your views on how you, as a 

Commissioner, will use data to explore the advantages and disVerDate Nov 24 2008 11:06 Jul 27, 2016 Jkt 046629 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 L:\HEARINGS 2016\03-15 NOMINATIONS\HEARING\31516.TXT JASON
19 

advantages of a rule from the perspectives of an investor, the company, and the capital markets. Either may start. 

Ms. PEIRCE. Well, I would just start out by saying data is very 

important at the SEC and I am glad to see that there has been 

more emphasis in recent years on getting good data. And, so, this 

sort of ties to something that Senator Reed asked me about, economic analysis. One way to get information is to ask companies directly, but the SEC should also be looking at other data sources, 

publicly available data sources, private data bases that it purchases. I think those are very important and can all be very useful 

in painting a picture of what the rule would look like if it were in 

practice compared to the existing state of affairs. So, I am excited 

that the SEC is putting more effort into getting good data. 

Senator SCOTT. Ms. Fairfax. 

Ms. FAIRFAX. I similarly think that it is important to have the 

rulemaking process be driven by accurate data. I will note, I think 

as Ms. Peirce has also noted, and Senator Reed has noted, that 

sometimes data can be incomplete. If I am fortunate enough to be 

confirmed as a Commissioner, I would try to find ways to fill gaps 

with regard to that data. But, sometimes data can be inaccurate, 

and so while I think it is extremely important to focus on data and 

try to make decisions where you have the most robust amount of 

data that you can, it is also the case that sometimes you have to 

engage in rulemaking where there are uncertainties, where the 

data is not there, and, where there is an inability to measure, the 

impacts of certain things. 

And, certainly, if I am fortunate enough to be Commissioner, I 

would try to balance the desire to get data and the importance of 

getting that data with the need to move timely and effectively toward a decision. 

Senator SCOTT. Thank you. 

Speaking of data and rulemaking, the reality of it is one of the 

questions I think Senator Heller was trying to get at, asking the 

question about whether or not either of you have had a securities 

license, it is important from an investor protection perspective to 

have worked in the field and spent some time. I know Mr. Heller 

had a Series 7 license for about a decade and I have had a Series 

6 for about 15 years or so. So, understanding investor protection 

from having worked in the field and worked from the ground up 

is a very different appreciation and perspective from what perhaps 

others may have. 

When I think about something like the fiduciary rule that is 

being promulgated by the DOL, I think there is an opportunity for 

us to take a look at the data again, because the data certainly, 

from my perspective, concludes that the small investor is worse off 

under the current rule than they would be without the rule. Are 

you both familiar with the fiduciary rule? 

Ms. PEIRCE. I am familiar with it, although I have not read the 

proposal. I have not had a chance to read the proposal yet. 

Senator SCOTT. OK. It appears to me that the rule itself will 

make winners and losers of smaller investors in a way that is inconsistent with what is in their best interest long-term. Do you 

think it is good or not so good for the Government to help pick winners and losers in this area? 

20 

Ms. PEIRCE. I am quite worried about the Department of Labor’s 

proposal, in part because I have heard, and it is difficult knowing, 

being outside the SEC, that the SEC’s input was not considered. 

And, I think the input goes to some of the very issues you raised. 

We need to understand how rules like this are going to affect everyday people, people who cannot afford to pay a lot for a financial 

professional but who do rely now on a financial professional. And, 

I worry that what will end up happening is that we are going to 

cut a whole segment of people out of getting access. 

And, so, if I were to be confirmed, I would want to talk with the 

staff at the SEC to understand what work they have done to try 

to see what would happen and what work the DOL has done on 

that front, as well. 

Senator SCOTT. Yes. 

Ms. FAIRFAX. Absolutely. I think that protecting investors in this 

space is of critical importance. I think protecting access to quality 

and appropriate advice in this area is also important, particularly 

for middle- and lower-income investors who clearly sometimes cannot afford a quality investment advisor and certainly whose resources would be significantly undermined, if they have investment 

advice that goes wrong. So, that is of critical importance and that 

means that thinking about how any rule like this would impact 

those investors is critically important. 

I think it is also critically important to think about transparency 

in this area, because, one of the things that we have figured out 

is sometimes the investor is sitting across from an investment professional and they do not realize the role that the investment professional is actually going to be playing, or the potential conflicts 

that might be there with regard to that professional. 

So, those are both priorities for me, making sure that we maintain access to good advice, and making sure that we reduce conflicts and that there is transparency. And, of course, keeping client 

needs at the center. 

I have looked, as you might imagine, at the proposals, but do not 

really have a clear understanding of what is going to happen at the 

end of the road. Certainly, if I am fortunate enough to be confirmed 

as Commissioner, I would want to know. I would want to talk to 

everyone involved to get a clear sense of what is happening, what 

the rule is going to be, and their thoughts about what its impact 

is going to be so that we can engage in the appropriate response. 

Senator SCOTT. Thank you very much for your answers. Certainly, with respect to the Department of Labor and their coordination with SEC, from my chatting with some other folks, that is why 

included the definition of collaboration differs from the Labor Department to the SEC from my perspective, and I would certainly 

encourage you both to take some time, if you are confirmed, to look 

deeply into it. This is one of those issues where you see a bipartisan collaboration happening with, I think it was 97 House Democrats signed a letter with serious concerns about the fiduciary rule 

and what it would do to some of the smallest investors, and the notion that we can figure out how to have no advisor and just use 

robo-advisors through technology does not appear to be in the best 

interest consistently of the smaller investor. 

Thank you. 

21 

Chairman SHELBY. Senator Schumer. 

Senator SCHUMER. Thank you, Mr. Chairman. 

First, I would be remiss if I did not acknowledge that the chart 

behind us shows that many nominees are awaiting confirmation. 

But, I want to thank our Ranking Member, Senator Brown, for 

pushing so hard for these nominees. And I want to thank our 

Chairman. We are making significant progress and very much appreciated. We appreciated the fact that Adam Szubin came out of 

Committee last week and we are looking to vote on several nominees right away when we return. 

These are positive steps, but there is more to be done. The 

Eximbank is paralyzed right now. It cannot—it does not have a 

sufficient number of members to make a quorum and I hope we can 

move that nominee, as well. But, in general, I want to thank the 

Chairman for his efforts in the last few weeks and hope that we 

will continue to see progress moving forward. 

Now, for my questions. This is for Ms. Fairfax and Ms. Peirce, 

and I thank you for being here today. Now, I want to start with 

this. I make no secret in the fact that I believe 6 years ago, the 

Supreme Court ripped a giant hole through the fabric of our campaign finance system. Since that time, our politics has not been the 

same. Special interests have plowed hundreds of millions of dollars 

of dark money into our elections. They have created a rigged system, making it harder for people to elect individuals that will fight 

for families to get opportunities and to stay in the middle class. 

There is no doubt in my mind that Citizens United has had a 

corrosive effect—it is poison—on our election, our politics, and ultimately on our country. The SEC certainly is not responsible for 

patching that hole in our campaign finance system, but you can 

help preventing that hole from being ripped open even wider. 

As you know, corporations are under no obligation to disclose 

their corporate political spending to shareholders or the public. As 

a result, shareholders remain in the dark as executives of public 

corporations funnel money into our political system with no transparency or accountability. Citizens United has allowed for dark 

money to flood our airwaves and choke our democracy. It is a decision that must be overturned. 

But even the Justices that supported the Citizens United ruling 

did so with the assumption that the political spending would 

promptly be disclosed to shareholders and the public. Sadly, this 

has not yet happened. In my opinion, it needs to change. 

So, I am going to ask both nominees, Ms. Fairfax and Ms. Peirce, 

do you believe that shareholders of a company have a right to know 

about a company’s corporate political spending, and do you believe 

that the SEC has a responsibility to investors to require that such 

disclosures are made? 

And let me forewarn you, if I get a mushy answer, I am going 

to seriously consider being against your nomination. I feel that 

strongly about it, even if your other criteria are good. The campaign finance system is killing us. I am very upset that the Chairman of the SEC has not gone forward with this. We need the new 

nominees to be for it, whether you are Democrat, Republican, liberal, or conservative. So, I am really serious about this and I really 

22 

want an answer, not gobbledygook. No offense, but we get a lot of 

that from other witnesses, I hope not from you. 

Ms. Fairfax. 

Ms. FAIRFAX. Thank you for your question. Well, I unfortunately 

have to start with, first and foremost, there is a budget bill that 

appears to prevent rulemaking on this very issue and so, obviously, 

because I think the Commission does not have the freedom to ignore mandates from Congress, I certainly would think seriously 

about whether or not that is off the table. But, I understand that 

there—— 

Senator SCHUMER. Let us just say that the budget bill does not 

apply here—— 

Ms. FAIRFAX. OK. 

Senator SCHUMER. ——because I believe it does not. What would 

you do? How would you vote? 

Ms. FAIRFAX. OK. I think, sitting from the outside, I cannot know 

how I would vote, and I am not being gobbledygook and mushy, but 

I do think that my role is to consider the various perspectives 

around this issue, and I understand that this issue is one that is 

very much hotly contested. I certainly appreciate the things that 

you have been saying—— 

Senator SCHUMER. I would like you to enumerate one argument 

why shareholders should not know the money that corporations, 

that the corporate board, corporate CEO, or whatever, has decided 

to give in a political campaign. Give me one argument against it. 

Ms. FAIRFAX. Sure. I will tell you the arguments that have been 

put forward. One argument that has been put forward is that the 

information is immaterial. You will hear people saying that is one 

argument—— 

Senator SCHUMER. What is—you mean the shareholders do not 

care? 

Ms. FAIRFAX. Umm—— 

Senator SCHUMER. Many do. 

Ms. FAIRFAX. ——for some shareholders—I think there is an argument about whether or not it is material—— 

Senator SCHUMER. Do you believe it is material, Ms. Fairfax? 

Ms. FAIRFAX. I think that there is certainly an argument to be 

made that it is material. That argument stems not only from what 

shareholders want, but also, of course, from the notion that shareholders should be able to think through whether and to what extent—— 

Senator SCHUMER. I want to hear from Ms.—— 

Ms. FAIRFAX. ——spending is consistent with corporate governance. 

Senator SCHUMER. OK. That argument that it is immaterial does 

not cut much mustard with me, and, I think, with many shareholders—not all, but many. 

Ms. Peirce, would you please answer the question as directly as 

you can. 

Ms. PEIRCE. Well, I echo what Professor Fairfax said, that right 

now, the Congress has made fairly clear that it should not be a priority for the SEC. Were it to come up later, I would need to know 

what the actual text of the disclosure requirement was and I would 

23 

want to speak with staff in the Division of Corporation Finance as 

well as other interested parties. 

Senator SCHUMER. OK. I am not satisfied with either answer. I 

am putting you folks on notice. If you think back, I am going to 

submit the question in writing and I would ask you to give me your 

answers in writing. I think in the light of day, the written answers, 

what you said, will not stand up, so you had better come—I hope 

you will come up with a better answer than this, because right 

now, I would be leaning against both of your nominations given 

your answers, OK. Thank you. 

Chairman SHELBY. Senator Menendez. 

Senator MENENDEZ. Thank you, Mr. Chairman. 

Congratulations to all on your nominations, and I want to pick 

up where Senator Schumer just left off—not necessarily on his very 

last statement. I have not gotten to that point yet, but I may get 

there along with him. 

I believe that the issue of the disclosure of corporate spending is 

a shareholder interest, as well as a societal good. Adding transparency, cleaning up campaign finance, and keeping the elections 

process fair and free is incredibly important. 

Now, the information, I believe, is material to how shareholders 

decide where to invest their money and how to vote in corporate 

elections. I do not know that I—you know, I want to invest in a 

company that is going to ultimately make its greatest profits and 

that, from my perspective as one shareholder, to also make sure 

they are doing so within both the ambit of the law and, hopefully, 

as a good corporate citizen. 

But, I really—if I want to go spend money in a campaign, I will 

spend my money in a campaign and I will decide where it goes. 

But, I have no interest in having a corporation spend the money 

that in part is mine by virtue of my investments in whomever they 

want or whatever they want. And if they are going to be able to 

do that, fine, then at least I should know so that I can make decisions as an investor, so that pension funds can make decisions as 

investors as to whether or not to do that. 

So, last year, I reintroduced the Shareholder Protection Act to require public companies to disclose their political spending and to 

require a shareholder vote to approve it. It is pretty elemental. At 

least let the shareholders decide if that is what they want. Maybe 

they do. Maybe the shareholders in that company want to. But, at 

least they should have what I think is a commonsense solution. 

So, I know that in response to Senator Schumer’s question you 

referenced the 2016 omnibus appropriations law that, unfortunately, included a 1-year provision to try to block the SEC from 

issuing, implementing, or finalizing a rule to require public companies to disclose their political spending to shareholders. 

When we saw that, I sent a letter to Chair White along with 96 

of my colleagues in the Senate and the House pushing the Commission to move forward, notwithstanding the language of the end-ofthe-year bill because it is our analysis and those shared by a series 

of law professors throughout the country that this provision does 

not bar the SEC from moving forward to prepare, propose, or develop a rulemaking on corporate political spending. It may not be 

24 

able to finally issue it, but there is no reason it cannot prepare 

itself to do so when the year ends. 

So, I would like to hear from you, both of you, if, in fact, you are 

confirmed as a Commissioner, what steps will you set in motion for 

the development, preparation of such a rule, even if the rule cannot 

ultimately be issued within and until the year expires. 

Ms. FAIRFAX. I would say, first, whether or not steps can be put 

in motion at the top level is a decision that the Chair has to make. 

But, at the secondary level, certainly I think with respect to any 

of these issues, it is important not to prejudge. I would need to, if 

I am confirmed, be very much open, and I would be open, to hearing more information about the debate. I will say the issue about 

materiality is not mine, or necessarily mine, but something that I 

have heard, and I think it is fair, certainly, if I am fortunate 

enough to get into the position, to then listen to the concerns on 

the other side and to think through those concerns. 

I also would agree that the devil is very much in the details. To 

that extent, what is the rule—if there is a rule, what will it look 

like, how will it take shape, what kind of impact will it have. Those 

are things certainly to think through and I would certainly work 

with my fellow Commissioners and staff and others who are interested, if I am fortunate enough to be confirmed, to think through 

those types of things. 

Senator MENENDEZ. I hope, Professor, when you are listening to 

the other side, there are 1.2 million comments on this rule, more 

than any other rule in SEC history. There are a lot of comments 

that have been made in this regard. I hope that as Commissioners, 

you would not be rejecting 1.2 million voices in the country. 

Ms. Peirce. 

Ms. PEIRCE. Again, I think the appropriations language is clear. 

The Chairman has the agenda—— 

Senator MENENDEZ. What do you mean by clear? Tell me, what 

does that mean? 

Ms. PEIRCE. In terms of directing the Commission that that is 

not the priority for the Commission this year. Now, if the Chairman has a different view of what that language means, I would be 

open to hearing from her and from the General Counsel to understand how we could work on something like that given that language. 

Senator MENENDEZ. Well, I tell you something. I think I have the 

same reservations that Senator Schumer has, and I have other 

questions on diversity disclosure and other elements of Dodd-Frank 

that I included in the law when it was written, but my time has 

expired. I hope to be able to pursue those with you individually 

and, as well, for the record. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Warren. 

Senator WARREN. Thank you, Mr. Chairman, and thank you all 

for being here today, and thank you for your willingness to serve. 

The job of SEC Commissioner is largely to be a watchdog, to 

make sure that the public is protected and the markets are honest 

and fair. After the financial crash of 2008 showed us that Wall 

Street was out of control, Congress passed Dodd-Frank to try to 

25 

rein them in. And the SEC was directed to write or enforce dozens 

of rules to protect our financial systems. 

Now, Ms. Peirce, in the past few years, you have attacked many 

of those same rules. For example, you edited and contributed to an 

entire book called, Dodd-Frank: What It Does and Why It Is 

Flawed, which criticizes several SEC rules required by law. You 

wrote that the Volcker Rule, one of the key provisions to deal with 

too big to fail, quote, ‘‘requires regulators and industry to pour 

countless hours into an effort that may end up impairing rather 

than shoring up our financial institutions and our markets. It is 

nothing to celebrate.’’ 

You wrote that Congress should, quote, ‘‘perform major surgery,’’ 

close quote, on Dodd-Frank to reduce its directives to agencies, and 

you argued that the SEC, quote, ‘‘is a prime candidate for mandate 

trimming.’’ You have described the CEO pay ratio disclosure rule 

and the conflict minerals disclosure rule, two SEC rules that are 

required by Congress, as, quote, ‘‘pointless Dodd-Frank mandates.’’ 

What you propose, as best I can tell from your writings, is less 

oversight of big banks, fewer efforts to rein them in, more chances 

for them to take on big risks, boost their profits, and if things go 

wrong, come crying to the Government for another bailout. 

Now, you are certainly entitled to your opinion and to express it 

as loudly as you want. But, the question is whether someone 

should be put in charge of enforcing laws that they think are unnecessary or counterproductive. You know, no one hires a watchdog 

who is not committed to enforcing the rules. 

So, I want to ask, what kind of watchdog will you make if you 

believe that parts of Dodd-Frank are, and I am quoting you, ‘‘pointless,’’ and you think that Congress should repeal much of it? 

Ms. PEIRCE. Senator, I certainly understand your concern, but I 

wrote those comments not in the context of a regulator charged 

with implementing the rules but in the context of an academic researcher whose goal is to suggest a financial regulatory architecture that will work better at protecting investors and ensuring that 

people take responsibility for their own behavior. 

The reason I do not think you need to be concerned is that I was 

a regulator. I was a regulator for 8 years and I was able to do the 

job. And certainly in asking you to confirm me for this job, I am 

not asking you to confirm me to not implement rules, but to implement rules. And, in fact, the time that I spent here on the staff was 

very useful in teaching me the importance of regulators adhering 

to what Congress tells them to do. 

Now, I do not think there is anything wrong with a regulator 

saying, we are going to do this as you asked us to do. We do have 

concerns, but we are going to do this, and that is what I would do 

if I were there. I would work on implementing the rules as best as 

they could be implemented and pointing out where I thought there 

might be issues that Congress should look at again. But until Congress looks at those again, the responsibility of the agency is to enforce the rules. 

Senator WARREN. Well, I have to say, I assume anyone who 

wants the watchdog job would say exactly that. But an SEC Commissioner has a lot of tools that can be used to undermine all of 

26 

Congress’ mandates. You can delay the rules. You can water them 

down. You can look the other way when it is time to enforce them. 

And, frankly, there will not be much that Congress can do about 

it once you are confirmed, and that is a real concern for me, because in April 2014, the D.C. Circuit rejected a challenge to the 

SEC’s Congressionally required conflict minerals rule, and shortly 

after the court’s ruling that the SEC could act and that Congress 

had required it to act, you took a very different view. You tweeted, 

just because the court is not stopping SEC from requiring immediate compliance with conflict minerals rule does not mean the 

SEC should not stop itself. Now, that sounds like you believe SEC 

Commissioners can and should ignore the law, that the watchdog 

should look the other way. 

So, I want to be absolutely clear on this. If you are confirmed as 

a Commissioner and a Congressionally mandated Dodd-Frank rule 

does not fit with your personal view of the SEC’s mission, are you 

now saying that you will do everything in your power to effectively 

implement and enforce that rule? 

Ms. PEIRCE. Certainly, and sometimes effective implementation 

requires delaying so that companies are able to implement it properly. 

Senator WARREN. So, the way—it sounds like you have left yourself a lot of room here. 

Ms. PEIRCE. When the SEC crafts rules, one of the things it does 

is it sets implementation periods, and it does that in a way to make 

sure that industry is going to be able to get on board in a way that 

is effective and achieves the objectives of the rules. And if I were 

to be confirmed, my goal would be to work with the staff of the 

Commission and the other Commissioners to figure out the most effective way to implement the statutory mandates given by DoddFrank and other statutes. That would be my job as a Commissioner. 

Senator WARREN. Thank you. 

Congress mandated that no more than three out of five of the 

SEC Commissioners can be members of the same political party, 

and so long as that is the case, we are going to have Republican 

Commissioners and Democratic Commissioners and they will invariably have different views about the job. But, there is a big difference between disagreeing about how best to implement a law 

and actively sabotaging the law. Advice and consent is about making individualized good faith judgments, and I think your record 

gives the American people reason to be concerned about your nomination. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Cotton. 

Senator COTTON. Thank you. 

I apologize to our nominees. I have been presiding over the Senate. It is a duty as much as it is an honor. The Chairman remembers doing that in the Reagan administration. 

[Laughter.] 

Senator COTTON. Back before he came to the right side. 

Chairman SHELBY. That is right. 

Senator COTTON. Ms. Peirce, I have some questions about the Financial Industry Regulatory Authority, FINRA. Last year, you 

27 

wrote a paper analyzing the structure and operations of FINRA 

with one theme being, quote, ‘‘Although commonly perceived as a 

self-regulator, FINRA is not accountable to the industry in the way 

a self-regulator would be,’’ end quote. Could you elaborate on that 

theme. 

Ms. PEIRCE. Certainly. FINRA has changed over time and is 

something different than what its predecessor organization was, 

and it right now has a board that has people that are not drawn 

from the industry, and so that raises concerns about what exactly 

the organization is. To whom is it accountable? Is it accountable to 

the industry? Is it accountable to the SEC? Is it accountable to investors? And, I think there have been concerns raised from each of 

those areas, from each of those constituencies, that it is not doing 

a good job. 

Now, certainly, if I were to be confirmed as a Commissioner, I 

would want to meet with and speak with folks from FINRA as well 

as the people at the SEC who oversee FINRA and see if there are 

areas where we can shore up the SEC’s oversight of FINRA and 

work together to make sure that investors are being protected as 

they should be and that the organization is working as it should 

be. 

Senator COTTON. So, what are the implications for our securities 

markets if the regulatory entity for broker-dealers operators with 

only nominal oversight from the SEC, as you pointed out in the 

paper, less SEC oversight than the Public Company Accounting 

Oversight Board receives? 

Ms. PEIRCE. The implications are that we are not getting the 

kind of regulation of broker-dealers that we need, and so perhaps 

there are concerns that innovation is being slowed by the way 

FINRA is governed and that investors are not being protected the 

way they should be and that there is no ability for someone to say 

to FINRA, OK, we are going to hold you accountable for this decision, because it is one step removed. 

So, those are the nature of the concerns I have. Again, I would 

want to get to the SEC and talk with the people who are actually 

doing the monitoring of FINRA to better understand if there is 

more that the SEC can do to watch more closely. 

Senator COTTON. Over the last 7 years, in many industries, to include the financial services industry, we have seen considerable 

consolidation. Specifically among broker-dealers, we have seen consolidation from 7,900 back 15 years ago to only 4,000 today. I 

would estimate that rising compliance costs from multiple regulatory initiatives is a factor in this consolidation. One, do you 

agree, and two, if so, what could that trend imply for municipal 

issuers and investors, particularly in small States like Arkansas? 

Ms. PEIRCE. Yes. I think, certainly, that small financial firms are 

feeling the press of regulation in a way that large firms do not. In 

fact, I think it was once described—regulation was once described 

as a moat around the larger firms, protecting them. So, that is a 

concern that needs to be taken into account. 

In terms of the municipal space, certainly when you see smaller 

financial firms disappearing, I think municipal issuers have fewer 

options. So, that is a concern generally. 

28 

Senator COTTON. And then thinking about FINRA’s future going 

forward, it seems that it is kind of in this neither fish nor fowl category now with its relationship to the SEC, but also not maybe 

being purely a SRO anymore. Do you think it needs to move in one 

direction or the other, it needs to essentially be folded into the 

Commission or it needs to be returned or reconceived as a true 

SRO, maybe with competing SROs, as well? 

Ms. PEIRCE. Yes. As I laid out in the paper, there are multiple 

options. You could go to the route of folding it into the SEC. You 

could go to the route of trying to encourage there to be competing 

SROs. Or, you could go the route of just trying to reform FINRA 

and put in some more accountability mechanisms and make sure 

the SEC is doing its oversight properly. 

I have not formed an opinion on what the right answer is. To 

some degree, that lies with Congress and certainly not with the 

SEC. But, it would be an area that, if I were to be confirmed, I 

would want to speak with the staff who are day to day involved 

with this oversight and understand from them what they think the 

best course is and then speak with my fellow Commissioners, as 

well. 

Senator COTTON. Thank you. My time has expired, but congratulations to you all on your nominations and your willingness to 

serve. Mr. Jeppson, thank you in particular for your past service 

in uniform to our country. 

Chairman SHELBY. Senator Donnelly. 

Senator DONNELLY. Thank you, Mr. Chairman. 

Ms. Peirce, I want to tell you a little bit about what happened 

in Indiana. I know you are from Ohio. We had 2,100 workers fired 

for a company that said, we are on the high end of expectations for 

earnings, that is in the middle of a $16 billion stock buy-back, and 

they were fired so that the jobs could be sent to Mexico for $3 an 

hour. Among the folks fired were over 60 veterans who had put 

their lives on the line for our country. 

So, going a little bit more into this, the CEO from 2 years ago, 

approximately, walked away with a golden parachute of over $190 

million in stocks and in others. The present CEO makes over $10 

million a year. And, the savings they are going to have by firing 

all these workers who gave their heart and soul to the company, 

they say it is going to be $60 million, approximately. I think it is 

probably less. But, that is one-third of 1 percent of the stock buyback—one-third of 1 percent. So, we have 2,100 workers fired for 

the following offenses: Earnings of 20 percent, great brand name, 

working hard, doing everything they can for the company, and the 

jobs sent to Mexico for $3 an hour. 

Should the SEC allow this kind of thing? You have $16 in stock 

buy-backs because they want to get the price of the stock up. Onethird of 1 percent of that $16 billion are the workers who have 

been fired. The earnings of the company are over $7 billion, but the 

stock buy-back is more than twice their annual earnings. Should 

the SEC allow this kind of thing to occur? 

Ms. PEIRCE. First of all, my heart certainly goes out to the employees who lost—— 

Senator DONNELLY. I understand that, but what I want to know 

is—— 

29 

Ms. PEIRCE. ——their jobs, so—— 

Senator DONNELLY. ——should the SEC allow over 60 veterans 

to be fired who are making in a two-tier wage system maybe $14 

with minimal benefits so that we can have a stock buy-back of $16 

billion, and their wages are one-third of 1 percent of that? 

Ms. PEIRCE. So, I cannot speak to the specifics of that case because I only know what I just heard from you about it. But, I will 

say that the SEC has rules regarding stock buy-backs, and this 

concern that you express is one that I have heard from others, as 

well—— 

Senator DONNELLY. Well, as a potential SEC nominee, do you 

think this should be allowed? 

Ms. PEIRCE. Again, it is difficult for me to assess the facts and 

circumstances of that particular case, but what I would say—— 

Senator DONNELLY. Assume they are true. 

Ms. PEIRCE. What I would say is that if I were to be confirmed 

as a Commissioner, I think it is an area that I would think merits 

looking at, because the volume of stock buy-backs is up, and so I 

would want to talk with the staff at the SEC and with my fellow 

Commissioners about whether the rules that are on the books now 

are working as they should. 

Senator DONNELLY. Well, what does it say about a system where 

the driving factor is not your profits. The driving—well, maybe it 

is, because maybe they are thinking instead of one-third of 1 percent of the stock buy-back, they can go to one-half of 1 percent of 

the stock buy-back. But, what does it say when you leave 2,100 

workers behind who have given their heart and soul, many 20, 25 

years, to that company and in return they are all fired so they can 

get $3 an hour wages in Mexico, and they tell you it is critical to 

save that $60 million, but they are giving a $16 billion stock buyback. Is not something wrong with that process? 

Ms. PEIRCE. Again, the number of stock buy-backs is up and I 

think it is an area that I would be interested in learning more 

about from the staff who have been looking at that at the—— 

Senator DONNELLY. Well, do you see that as destructive of our 

workers and of the people who have given their lives to these companies? I mean, where does—I guess, where does—in the SEC’s 

mind, where do the employees, the workers, the people who have 

given their heart and soul, fit in as well as the stockholders? What 

is the balance on that? 

Ms. PEIRCE. The SEC’s mandate relates to investor protection as 

opposed to employee protection. But, naturally, any company that 

is trying to be an effective company has to treat its employees well. 

Senator DONNELLY. Well, apparently, I think, part of the stock 

buy-back craze has been that the workers get left behind. 

Ms. Fairfax. 

Ms. FAIRFAX. If you have seen some of my corporate governance 

work, you have seen that I think corporations and boards owe their 

duty to the entire corporate enterprise, and that means that you 

should be thinking about everybody and everything that is impacted by that enterprise, and I think, then, that flows into this 

question of corporations and how we think about them and what 

our mandate is with respect to them. 

30 

If you are asking me the question about the particulars, again, 

I was just listening to it—— 

Senator DONNELLY. Yes. 

Ms. FAIRFAX. ——as you heard, and I would agree with Ms. 

Peirce that I know share buy-backs are up. I know there is significant concern about them and their impact on the corporation and 

would certainly be interested in looking at that issue, probing it 

more deeply, with an understanding that it should not be a zerosum game, that it—— 

Senator DONNELLY. It is really breathtaking to me that Carrier 

would fire these people, that United Technologies, who has contracts with the U.S. Government, and what they are asking me to 

do is to go back to fired veterans and tell them, you have been 

fired, but we now want your tax dollars to be used to buy products 

from the same company that fired you. Something seems very, very 

wrong with that process, and I think something needs to be looked 

at by the SEC in the way this is going on. 

How do you, as a veteran, give your heart and soul to a company, 

see them make great earnings, the American promise. I mentioned 

this the last time I was here. The American promise. I will work 

hard. I will make sure this company does well. In return, their 

shareholders are going to do awesome. And in return, all I ask for 

is a halfway decent salary and a chance to put a roof over my head. 

That is the American dream, and I think the SEC ought to stand 

up for the American dream. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Brown. 

Senator BROWN. Thank you, Mr. Chairman. 

I have a couple more questions, and I just—I appreciate Senator 

Donnelly’s bringing up his constituents who have been so wronged 

by greedy management, pure and simple. And as—I mean, there 

are lots of unhappy people in this country now. People have a notice from election results, and I appreciate his talking about this. 

And I appreciate Senator Schumer’s comments about money and 

campaigns and whether—I mean, I know you both want to be confirmed. Whether you—regardless of your personal feelings. You did 

not seem to want to share them very much. I understand that. 

But, I do hope that you listen to some of the outrage from this 

Committee and in this country. Even though maybe you cannot 

commit on things now, maybe you do not have all the information 

you need, but there are—I would just hope you would be more sensitive than your answers perhaps suggested, and Ms. Peirce, in 

your case, than your writings suggest in terms of listening to some 

of the inequities and injustices in this society. I will leave it at 

that. 

But, I have a couple of questions for both of you, starting—well, 

for both of you. If we go back to 2009 and you had a blank slate, 

where would you start with financial market reform? Ms. Peirce, 

why do you not start. 

Ms. PEIRCE. Umm—— 

Senator BROWN. Forgetting Dodd-Frank, give us a real quick outline of where you would start. 

Ms. PEIRCE. Sure. I think that the key theme would be trying to 

restore responsibility for mistakes to the people who make them. 

31 

And, so, part of that, for example, in the bank realm, would be 

higher capital for banks to make sure that there is a cushion when 

there is a problem at a bank. So, that would be one example. 

In the securities space, for example, I think some of the reforms 

that are going on now in terms of making sure that disclosures are 

appropriate, so that when someone is looking at a financial firm, 

looking at the filings, someone can actually understand what is 

going on inside that firm. 

So, those would be a couple of the areas that I would address. 

Senator BROWN. Do you tier capital requirements in terms of 

percentages or leverage ratios? Do you tier them so that JPMorgan 

Chase has higher capital standards than the First Bank of Sycamore, and you are in my home State? 

Ms. PEIRCE. I think simple capital ratios are appropriate. Whether you tier it by the size of the bank is something that I have not 

personally investigated. I mean, my inclination would be to say 

that you have a standard across the board, but, I would—— 

Senator BROWN. So, a community—— 

Ms. PEIRCE. ——welcome the opportunity to think more about 

that. 

Senator BROWN. Because that—— 

Ms. PEIRCE. You know, I—— 

Senator BROWN. Does that suggest that the First Bank of Sycamore is a threat—poses the same threat to the stability of our financial system as does JPMorgan Chase or Goldman Sachs? 

Ms. PEIRCE. Well-capitalized, well-managed banks do not fail, 

and so I think across the board, even from the perspective of that 

small bank, I think having a good capital cushion is wise management. But, again, I mean—— 

Senator BROWN. Ms. Fairfax, where would you start? 

Ms. FAIRFAX. Where to start? I think, actually pulling back for 

a second it is interesting that a lot of what happened seemed to 

center around banks. So, I do think it was right to think about reforms in that space. Whether or not it is capital requirements, 

thinking through liquidity concerns and risk assessments, I think 

you asked me a question about board governance, et cetera. I think 

that would be linked to this question about incentives. 

And linked a little bit to Senator Donnelly’s concern about people 

and individuals who are operating in these entities, do they have 

the appropriate incentives to think about long term versus short 

term. I think that is a very important question, and making sure 

that we have appropriate incentives, and looking through the rules 

to think about what the rules say and what kind of directions the 

rules may pull people in, I think it is very important. 

Transparency is critical. I think the crisis taught us that there 

was a lot actually we did not know about what was going on in the 

derivatives space, about the interconnectedness between certain 

markets. And, so, I think it is right to shine more light on that 

space and to get more information connected with that. 

The other thing I think we saw was that agencies and industries 

were operating in their own separate spheres and there was not a 

clear realization that what one market is doing would clearly have 

an impact on what another market is doing. And, so, I think thinking through collaboration and coordination, or at least responding 

32 

to ways that we can collaborate and coordinate and recognize interconnectedness is also really important. 

Senator BROWN. A real quick question, and I note Senator 

Merkley has not had a round yet and I know Senator Warren had 

a question, too. 

There is notable representation—this is for both of you, Ms. 

Peirce first—of women and minorities in management positions in 

financial services and among financial regulators. Tell me if you 

think it is important to have policies to improve representation of 

women and minorities at the SEC, and if you do not think so, why 

not. Ms. Peirce. 

Ms. PEIRCE. Certainly, the SEC should take advantage of the 

beautiful diversity that this country has, and I would hope that it 

does. I think if we are confirmed, we will be able to set an example 

as a board that is 80 percent female. 

Senator BROWN. But, you are not suggesting any kind of actions 

to improve those numbers? 

Ms. PEIRCE. Numbers at the SEC? 

Senator BROWN. And on regulators—— 

Ms. PEIRCE. I am not familiar—— 

Senator BROWN. Regulators and staff and—at financial institutions. 

Ms. PEIRCE. Certainly—— 

Senator BROWN. I will give you an example. In your hometown, 

in my hometown, there is a female CEO of Key Bank. She is the 

only female CEO among, I believe, the 25 largest banks in the 

United States. Does the SEC have any—should they have any 

thoughts about helping banks move in the direction of better minority and women leadership position representation? 

Ms. PEIRCE. Well, Dodd-Frank did put in an Office of Minority 

and Women Inclusion, and so if I were to be confirmed, I would 

want to speak with that office to find out what the efforts are underway. I know that guidance was put out by multiple agencies. I 

believe the SEC was one of those agencies. 

Senator BROWN. Ms. Fairfax. 

Ms. FAIRFAX. My work clearly shows that I think diversity inclusion is important and I think diversity inclusion matters in every 

sector of our economy. When you think about what that looks like 

on the ground, it is not clear, but certainly if I am fortunate 

enough to be confirmed, I would work to make sure that the SEC 

is a leader on this effort in terms of setting the tone, as Ms. Peirce 

said, about what our structure would look like, and, of course, setting the tone about the importance of that work through the Diversity Office that was mandated by Dodd-Frank and, thinking 

through ways in which we can set that tone in other industries. 

Chairman SHELBY. Senator Merkley. 

Senator MERKLEY. Thank you very much, Mr. Chairman. 

And, just to jump right into it, I am very concerned that of the 

rules required by Dodd-Frank, a third have not been finalized and 

there is no clear timeframe. One of the rules that I was specifically 

interested in was the conflict of interest provision. This was the situation where, essentially, firms were packaging securities to sell to 

clients and then they were taking bets that those very securities 

33 

they were selling would collapse. In other words, they were selling 

something they knew to be defective. 

And, so, the conflict of interest is just about absolutely stopping 

a predatory practice of designing a product designed to fail and 

then selling it as if it is the best thing since sliced bread, certainly 

not something a firm should be doing. And, yet, the law as written 

says for this section, not later than 270 days after the date of enactment, the Commission shall issue rules. 

Is it, Ms. Fairfax, appropriate that the SEC has failed to address 

this fundamental conflict of interest and has failed to follow the 

law written by Congress? 

Ms. FAIRFAX. Thank you for your question. I absolutely think it 

is important that we move to try to enact the mandates under 

Dodd-Frank. I am not, obviously, at the SEC. If I am fortunate to 

be confirmed, I will hopefully get some insights into what the process around the rulemaking has been and how we can work to get 

things done in a timely fashion—— 

Senator MERKLEY. That is all very diplomatic, but when Congress says, you shall do something at the SEC, and you are here 

to be a Commissioner at the SEC, do you take that instruction in 

the law seriously and would you work hard to say, yes? And, I realize the Chair sets the agenda, so you do not have full power over 

this, but would you work hard as a Commissioner to say, we here 

on the SEC should follow the law? 

Ms. FAIRFAX. Absolutely. I think the Commission should follow 

the law and the Commission should try to work to comply with 

whatever time commitments are there within the law. 

Senator MERKLEY. Ms. Peirce, do you think the SEC should follow the law? 

Ms. PEIRCE. Yes. 

Senator MERKLEY. Do you find it somewhat embarrassing that 

when the law says 270 days and we are now 6 years later, that 

that is not just a—that is just not a little bit of a miss, but that 

is a complete and utter systemic failure? 

Ms. PEIRCE. I think that the SEC would agree that that is a 

miss. They have had many rulemakings, and so I know that there 

has been a lot of competition for the rulemaking resources, but it 

is a miss. 

Senator MERKLEY. So, you would use your position to say, let us 

do what Congress asked, and sometimes that means, if you will, 

that a rule is not going to go through 10,000 reiterations. It is 

going to get done and out and field tested, and then we can all 

come back to it later and say, well, does it need to be improved or 

not, but that when Congress says it shall be done, you believe it 

should be done? 

Ms. PEIRCE. Yes. I mean, the SEC does have to adhere to the Administrative Procedure Act in proposing and adopting regulations, 

which does sometimes take some time. 

Senator MERKLEY. Thank you. 

I am going to turn to the issue of whether owners of companies 

have a right to know how that company is spending their money, 

the owners’ money, on political activity. Ms. Fairfax, do the owners 

of companies have a right to know how the company is spending 

their money on political activities? 

34 

Ms. FAIRFAX. Thank you so much for your question, and just to 

get back, because I know Senator Brown was also concerned about 

this issue, as are, I understand, many others. On the issue of disclosure around political spending, I talked about initially what I 

know were concerns on the other side. I certainly am fully cognizant of the concerns that you are raising, that this is something 

that investors have really asked about, that certain investors absolutely believe it is material, and certainly to the extent what they 

are saying is that they believe it is material, both in terms of the 

type of information they want to know, but also in terms of thinking through whether or not spending is occurring in a way that is 

consistent with the corporation’s best interest, then I think that is 

something that, obviously, we need to be taking into account and 

thinking through how best to respond. 

Senator MERKLEY. Ms. Peirce, is spending other people’s money 

and not informing them on political speech, is that still on speech? 

Ms. PEIRCE. A corporation has the ability to spend money without checking every time it spends with its shareholders. Obviously, 

its goal is to increase the value of the corporation. And, the rules 

in terms of disclosure are rules that apply across the board to all 

types of issues, including the issue that you raise. 

Senator MERKLEY. But, there is no rule for disclosure in this area 

and the SEC has refused to do it. Is it not a valid interest of an 

owner to know how political speech is being conducted with their 

money? 

Ms. PEIRCE. Again, as Professor Fairfax noted, there are a lot of 

people who have expressed an interest in that, and if that issue 

were to come up at the SEC, it is one that I would certainly look 

at and listen to the concerns raised by folks who have raised them. 

Senator MERKLEY. You would listen to people, but you do not 

have any opinion on whether a company spending your money— 

you are a stockholder—on political speech without your permission 

is OK? No opinion on that? 

Ms. PEIRCE. In terms of the SEC’s role, the SEC’s role is to get 

information to investors so that they can make their investment 

decisions, and that is the lens through which I would view this. 

Senator MERKLEY. So, it has often been argued that an individual who disagrees with the political spending of the company 

can just sell their stock, that it is an easy exit. But, how can that 

individual use that easy exit ramp if they never get information 

about how that company is spending money on political speech? Is 

it not essential to have that information in order for the exit ramp, 

or the on ramp, to be utilized? 

Ms. PEIRCE. Again, I think that the issue of political spending 

should be viewed through the same lens that other disclosure 

issues are in terms of other things that the company is spending 

its money on. 

Senator MERKLEY. Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Warren, do you have further questions? 

Senator WARREN. I do. Thank you, Mr. Chairman. 

So, I want to focus on this question about who makes decisions. 

Ms. Peirce, your writings suggest that you believe that the SEC’s 

purpose is to empower investors to make their own informed deciVerDate Nov 24 2008 11:06 Jul 27, 2016 Jkt 046629 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 L:\HEARINGS 2016\03-15 NOMINATIONS\HEARING\31516.TXT JASON
35 

sions. For example, in 2014, you wrote that, quote, ‘‘The SEC’s approach too often entails making decisions for investors rather than 

providing them a framework within which to make their own 

choices.’’ 

In 2013, SEC Chair White gave a speech in which she said that 

the SEC should review corporate disclosure requirements with an 

eye toward eliminating disclosures that the SEC did not think were 

helpful to investors, and you praised that decision in an article, 

writing that Chair White’s speech, quote, ‘‘recognizes that too much 

disclosure can harm the investors for whom it is purportedly designed.’’ 

So, I want to sort this out, because it looks like to me your positions are directly contradictory. You want the SEC to empower investors to make their own choices and you do not want the SEC 

to make choices for them. So, why would you want the SEC to be 

the one to decide that certain information is not relevant to investors? 

Ms. PEIRCE. I think often in the area of disclosure, we want to 

look at the presentation and the balance and make sure that information that is important to investors is not lost in a mountain of 

information. 

Senator WARREN. Well, thank you, Ms. Peirce, but that is not my 

question. My question is not whether or not you want to get it organized in a way that makes sense for people. My question is why 

you would want to cut out information if investors think that it is 

important to them. 

Ms. PEIRCE. I think the goal is, and certainly what my understanding of what the SEC is doing through the Disclosure Effectiveness Review, is to try to find out what users of financial statements, what investors who are using financial statements to make 

decisions, what information they need, how investors—— 

Senator WARREN. Wait, what information you think they need or 

what information they think they need? 

Ms. PEIRCE. What the SEC is trying to do is it is trying to get 

information from all of the relevant investors and trying to get as 

much feedback as it can in making those determinations. It is actively reaching out—— 

Senator WARREN. Well, good. Then, let me ask a question that 

is a follow-up here. If the investor community wants fewer disclosures, that makes perfect sense to me. I completely get that. But, 

investors like getting those disclosures. That seems like a pretty 

good indication that investors find that information relevant to the 

decisions they make. 

So, would you oppose eliminating any disclosures that the investor community wants to keep? 

Ms. PEIRCE. Yes. I would like to understand who the investor 

community is and I would like to understand, you know, that is important when you are trying to figure that out. You are trying to 

figure out who has expressed the opinions that they want the information, and certainly—— 

Senator WARREN. But, ultimately, what you are driving for, driving toward, is if the investors want the information, then you 

would say, let us not eliminate it, is that right? 

36 

Ms. PEIRCE. SEC disclosure is intended to provide the reasonable 

investor the information she needs to make her investment decision. 

Senator WARREN. OK. But, you have said, let us let the investors 

make the decisions. So, now, let me ask the question the other way. 

If a million investors want the SEC to require public companies to 

disclose corporate political contributions because those investors 

believe that it is relevant information for their investing, will you 

support them, assuming that the contributions are material to the 

company’s finances? 

Ms. PEIRCE. Again, the company should be making disclosures of 

material items. 

Senator WARREN. Well, but I am asking you the question about 

who decides what is important to investors. So, if a million investors, or, let us pick another number, exactly 1.2 million investors, 

say it is relevant to me as an investor to have this piece of information, that is, what corporations are spending in the political realm, 

would you support them in that? After all, you said you thought 

it was important that the SEC not make decisions for investors, 

but rather that you provide a framework for which they could 

make their own decisions. 

Ms. PEIRCE. If a particular disclosure requirement comes up 

while I am at the Commission, if I am confirmed, I would certainly 

look at the letters that came in as well as other people who—— 

Senator WARREN. You are going to be there a long time, because 

there is already, I think, 1.2 million letters. You know, if the SEC 

wants to impose fewer restrictions on investors’ decisions, then 

those investors need robust disclosures so they can make their own 

informed decisions, and you just cannot have it both ways on this 

one. 

I want to raise one other question, and I will be quick on this 

one, Mr. Chairman. After the Enron accounting disaster, Congress 

created the Public Company Accounting Oversight Board, or 

PCAOB. The PCAOB oversees accounting firms to ensure that they 

are not misleading investors and that the public have—not misleading investors or the public about the financial condition of the 

companies that they are auditing. 

The SEC oversees the PCAOB and appoints its five members, including the chairman. The term of the current chairman has expired—it expired in October of last year—and SEC Chair White recently announced the SEC will decide on the next chair as soon as 

the two vacancies on the Commission are filled. 

Now, when it created the PCAOB, Congress required that the 

SEC select its members to serve on the board who are, quote—and 

I want to read this—‘‘prominent individuals of integrity and reputation who have a demonstrated commitment to the interests of 

investors and the public and an understanding of the responsibilities for and nature of the financial disclosures required of the 

issuers under the securities laws and the obligations of accountants 

with respect to the preparation and issuance of audit reports with 

respect to such disclosures.’’ Demonstrated commitment to the interests of investors and the public. 

37 

So, my question is, Professor Fairfax, if you are confirmed as an 

SEC Commissioner, will you oppose the appointment of a PCAOB 

chairman who does not meet those legal requirements? 

Ms. FAIRFAX. So, certainly, I think that my role, if I am fortunate 

enough to be confirmed as Commissioner, is to follow the law—— 

Senator WARREN. So, you only need one word here. 

Ms. FAIRFAX. [Laughter.] The answer is, to the extent that I 

come to a reasoned judgment that it is the case that someone before me may not be qualified by whatever the criteria within the 

law is, then I do think it is my obligation to not confirm that person. 

Senator WARREN. So, if they do not have a demonstrated commitment to the interests of investors and the public, you are a no? 

Ms. FAIRFAX. Again, I will follow the law, and to the extent that 

those—— 

Senator WARREN. It is there. 

Ms. FAIRFAX. ——are the things I am supposed to be looking for, 

then that will—— 

Senator WARREN. We already did our part. 

Ms. FAIRFAX. ——impact my decision. 

Senator WARREN. All right. Ms. Peirce, how about you? 

Ms. PEIRCE. If that issue comes up, I will follow the law in applying it. 

Senator WARREN. Thank you. It is important for this board to 

function as intended and I look forward to the SEC following Congress’ direction and appointing a highly qualified individual to 

serve as the PCAOB’s chairman. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Merkley, you have another question. 

Senator MERKLEY. Yes. I think I have one last question, Mr. 

Chairman. Thank you, Mr. Chairman. 

So, it has been 3 years since the Volcker Rule was finalized, and 

last year, the rule went into effect. The challenge is that it—the 

Volcker Rule sought to distinguish between proprietary trading, 

which was banned, and market making, which is not. The basic 

common explanation of the difference is between when you bet on 

a warehouse full of something, that is proprietary trading. When 

you have a retail outlet with a few loaves of bread for the customer, that is market making. 

And, so, there is a boundary necessary to distinguish between 

the two for both the benefit of the companies and the benefit of the 

regulators. However, the final rule did not include specific parameters for enforcement and compliance and this lack of clear guidance makes it difficult, not for just those in Congress or the public 

to understand, but for those in the industry and for the regulators. 

What are the metrics that are going to be applied? What are the 

quantitative thresholds that would determine whether or not a 

bank is engaged in proprietary trading, or even what are the proper steps that must be initiated if a bank is to be found noncompliant? 

For enforcement of this boundary, this boundary must be absolutely clear. Would you, Ms. Fairfax, do everything possible in your 

role as an SEC Commissioner to make that boundary between proprietary trading and market making clear? 

38 

Ms. FAIRFAX. It is a very good question. Obviously in order to enforce the laws about something, you have got to know exactly what 

they apply to. Volcker obviously just took effect, and so thinking 

about what its impact is is important and how we manage its impact. I do think, if I am fortunate enough to be confirmed as Commissioner, I will work with the staff and other parties to try to 

make sure that we are clear on that line, and you are right, it is 

important both for purposes of the industry to understand where 

that line is and also for purposes of regulators to understand, how 

best to monitor whether or not people are stepping over that line. 

Senator MERKLEY. Ms. Peirce this concern, which is important to 

the financial firms and to the regulators so that they all know the 

rules of the game, do you support a clear definition, understanding, 

boundary, between market making and proprietary trading? 

Ms. PEIRCE. Yes. I think it’s important to write clear rules that 

enable people to behave, knowing that they are in compliance with 

the law, and then for the enforcers to know how to enforce the rule. 

Senator MERKLEY. Do you anticipate that you would contribute 

to the conversation about how to make this boundary clearer for 

the sake of all involved? 

Ms. PEIRCE. Yes. I certainly would welcome the opportunity to 

work with the staff, who have been looking at this in detail, and 

with my fellow Commissioners if I were to be confirmed. 

Senator MERKLEY. Thank you. 

Chairman SHELBY. We thank all of you for your appearance here 

today. We will try to get the Committee together as soon as we can 

and try to move you to the floor and go from there, your nominations. 

There has been a lot said here today about following the law. 

That is important. But, I hope that the President will follow the 

law, the Dodd-Frank Act, which Senator Warren had a lot of influence in. It has been nearly 6 years, and he could appoint a member 

of the Board of Governors to be the Vice Chair of the Fed that we 

could have some interaction and some dialog with on regulatory affairs, both ways. He has not done that yet. I hope he will follow 

the law, and I hope you will follow the law. 

Thank you very much. 

[Whereupon, at 12:04 p.m., the hearing was adjourned.] 

[Prepared statements, biographical sketches of nominees, responses to written questions, and additional material supplied for 

the record follow:] 

39 

PREPARED STATEMENT OF MATTHEW RHETT JEPPSON 

TO BE DIRECTOR OF THE U.S. MINT

MARCH 15, 2016 

Thank you, Mr. Chairman, Senator Brown, and distinguished Members of the 

Committee. I am honored to appear before you today. Thank you for your time— 

and I would like to thank President Obama for the trust he has placed in me by 

nominating me to serve as the United States Mint’s 39th Director. 

Although they were not able to be here with me today, I want to acknowledge my 

wife Renee and our children—Holly, Heidi, Hayden, and Hans. 

Before I outline some of the initiatives I would prioritize if I have the privilege 

of being confirmed as the next Director of the United States Mint, I would like to 

share with the Members of the Committee a little about my background and how 

my professional experiences have prepared me for the position. 

My life and career have not always followed a conventional, predictable path. I 

moved to Florida from Utah when I was 16 and graduated from the University of 

Florida with a degree in history. After college I was commissioned in the United 

States Marine Corps, where I served as an infantry officer. 

My service as a Marine—from those early days leading Marines in combat, 

breaching into Kuwait during Desert Storm, to my service as the Deputy Director 

of Operations for United States Forces in Afghanistan—developed in me a profound 

love of the Corps and its Marines. They are truly are my brothers and sisters. In 

January, I retired from the Marine Corps with nearly 28 years of combined active 

and reserve service. These years of service have influenced who I am, shaped how 

I interact with my colleagues, and imbued in me an approach to leadership and 

management that I believe will be an asset to the United States Mint if I am confirmed. A constant thread throughout my career has been a focus on, and commitment to, individuals and how they fit into the larger organization—from the Marine 

on the ground to the Mint employee on the manufacturing floor making coins. 

During my last deployment to Afghanistan, I served as Deputy Director of Operations for United States forces leading up to and during the troop surge in 2009 

and 2010. These were enormous, complex military operations that gave me valuable 

skills for leading the United States Mint’s workforce of approximately 1,700 dedicated men and women here in Washington and at five facilities across the country— 

Philadelphia, West Point, Fort Knox, Denver, and San Francisco. 

Mr. Chairman, in the early 1990s, my life and career took an unexpected turn 

when my father, who was running a small construction business, became seriously 

ill and I assumed responsibility for running the business for a number of years. I 

was young at the time and faced a steep learning curve. But I felt like it was my 

duty to my family to see it through while my Dad recovered. The experience gave 

me valuable skills that help me relate to employees at the United States Mint 

across our facilities, who range from marketing specialists to graphic designers, 

sculptors, die setters, press operators, IT specialists, financial analysts, engineers, 

police officers, human resources specialists, and other functions. 

Later, I served as Florida’s Director of State Purchasing. While overseeing $12 billion in State contracts, we developed a new electronic procurement system and 

modified the way we bought goods and services, saving the State millions of dollars 

by leveraging technology to make the State more efficient and accountable. 

Before coming to the United States Mint, I was the Acting Chief Operating Officer 

at the United States Small Business Administration (SBA), overseeing all aspects 

of the agency’s disaster relief and risk management efforts, personnel, facilities, information technology, and equal opportunity programs. 

I was also proud to serve as the Associate Administrator for Veterans’ Business 

Development at SBA for 2 years, helping Veterans conceive, fund, start, build, and 

grow their own businesses. I assumed responsibility for an office that was facing 

major challenges at the time. With the help of my team, we transformed the office, 

making it a model of cooperation for SBA by using public–private partnerships between educational institutions and corporations to leverage scarce resources and 

make enormous strides for Veterans seeking to start small businesses. 

Mr. Chairman, since January 2015, I have had the honor of serving as the Principal Deputy Director of one of our country’s oldest and most venerable public institutions. Congress established the United States Mint early in the life of our republic 

in 1792; making coins is one of the explicit powers given to Congress by Article I 

of the Constitution. We have a rich history and important role in the financial and 

commercial fabric of our country. 

David Rittenhouse—renowned American astronomer, inventor, clockmaker and 

close friend of George Washington—was the first Mint director. Rittenhouse believed 

40 

that coin design was a form of art. And President Theodore Roosevelt, who personally commissioned the redesign of American coinage early in the 20th century, believed that coin design should reflect our history, values, and heritage. The beliefs 

of Rittenhouse and President Roosevelt live on today in our employees and in the 

products we offer. 

Nearly 225 years after its founding, the modern United States Mint is a vibrant, 

efficient, and lean organization. General and administrative costs in fiscal year 2015 

decreased by 9 percent compared to fiscal year 2014 and 46 percent compared to 

fiscal year 2009. And although circulating coinage operations grew to meet increased 

Federal Reserve Bank demand, we decreased the overhead costs at our manufacturing facilities by 4 percent compared to fiscal year 2009. In fiscal year 2015, the United States Mint returned $550 million in circulating 

seigniorage—the difference between the face value and cost of producing circulating 

coins—to the Treasury General Fund. In fact, the Federal Reserve’s demand for circulating coinage is at its highest level since 2006. This tells us that coins are still 

very relevant and that our mission at the United States Mint is as important as 

ever. To meet the public demand, we are recruiting more talented and hard-working 

professionals to join our ranks, including military Veterans, and investing more in 

their training, development, and advancement. Veterans currently make up 35 percent of our workforce across the Mint. Since I became the Mint’s Principal Deputy 

Director, we are continuing to exceed our goal that 40 percent of all new hires be 

Veterans. 

All of this progress over the last 5 years is a testament to the commitment of our 

employees, as well as the leadership of Secretary Lew and Treasurer of the United 

States Rosie Rios. I assure you that I intend to remain on this sound financial path 

if confirmed as the Mint’s next Director. 

Mr. Chairman, when I came to the agency in January 2015, the first thing I wanted to do was to hear from our employees about their jobs—what they appreciate, 

what they would like to change about the organization, and how I could help. I set 

out to visit each facility and meet face-to-face with as many employees as I could. 

Their advice and ideas helped me set priorities for the bureau, such as helping all 

our employees get the training they need to advance their careers. This investment 

in human capital will not only address the demographic challenges associated with 

an aging workforce but will also help us to continue to meet the increased demand 

for coinage. 

Soon after I came to the Mint, it became apparent that our employees would be 

better served if all our human resources functions were aligned under the Workforce 

Solutions Department at headquarters, allowing the sharing of resources and development of technical expertise. This realignment led to benefits such as HR Solution 

Centers—small teams of experts who foster knowledge management and create consistency across the organization. 

Mr. Chairman, to satisfy the Nation’s demand for numismatic coins, it is important that we take advantage of every opportunity to improve the experience of the 

American consumers who buy our products while exercising prudent stewardship of 

the public resources that are entrusted to us. As a part of our commitment to embracing a culture of continuous improvement in all aspects of our operations, we 

have invested in two significant technological innovations that are already showing 

positive results for our customers and our mission. First, in July 2015, we launched 

a new mobile app—MyUSMint—a first for the bureau. It allows smart phone users 

to learn about Mint history and order our products from their phones. The app provides an important new method for the public to interact with the Mint. It netted 

nearly $550,000 in sales within its first few weeks of operation and has received 

a very high user rating. 

The new online catalog and order management system deployed in the fall of 2014 

was a much-anticipated overhaul of a 14-year-old legacy system. This new system 

includes: 

• an enhanced customer experience with advanced functionality; 

• a more responsive Web site; 

• improved order tracking and issue resolution; 

• better order status transparency; and 

• improved access to the product catalog from all types of devices 

This new, end-to-end solution offers cost and processing efficiencies and greater 

opportunities to capitalize on retail and e-commerce industry best practices. As of 

March 7, the new system had processed more than $548 million in sales and 

shipped approximately 6.8 million products to customers. 

41 

Both of these technological innovations have presented unique opportunities to 

better engage with our customers and the general public. We are changing as an 

organization to better serve our customers and using modern technology such as sophisticated robotics for packaging and enhanced manufacturing processes at the 

plants to improve our operations and invest in our employees and their safety. 

Mr. Chairman, the United States Mint is a lean, cost-effective, transparent organization. We accomplish our core mission to produce circulating coins, precious 

metal bullion coins, and collector coins and medals to meet the needs of the Nation 

and protect our national precious metals reserves. If I am confirmed as the Mint’s 

next Director, I pledge to continue meeting that core mission. 

I believe the United States Mint reflects the very best of our Nation. Our motto— 

Connecting America Through Coins—has real meaning, since the designs, themes, 

and subjects depicted on our coinage represent our shared values, history, and culture—who we are and what we believe to be important as a country. 

If I have the privilege of earning the Senate’s confirmation as the next Director 

of the United States Mint, I pledge to all of you that I will fulfill my responsibilities 

with pride and integrity. I will never forget that I serve the public and will always 

strive to uphold the trust placed in me by the President of the United States and 

the Members of this Committee. I also look forward to working with this Committee, 

the Senate as a whole, and the House of Representatives to serve the American people. 

It has truly been an honor to serve with my colleagues at the United States Mint 

for the past 14 months. I thank you all, once again, for your time, interest, and consideration. I appreciate the opportunity to speak with you today and look forward 

to your questions. 

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PREPARED STATEMENT OF LISA M. FAIRFAX 

TO BE A MEMBER OF THE SECURITIES AND EXCHANGE COMMISSION

MARCH 15, 2016 

Chairman Shelby, Ranking Member Brown, and Members of the Committee, 

thank you so much for giving me the opportunity to speak with you today. It is an 

incredible honor and privilege to appear before you as one of the President’s nominees to be a Commissioner of the Securities and Exchange Commission. 

Before I begin my remarks, I would like to briefly introduce my family members 

who are here with me. I am grateful to be joined today by my husband, Roger Fairfax, my three daughters, Fatima, Regina, and Nadia, my mother Elizabeth White, 

my mother-in-law Charlene Fairfax, my brother-in-law Justin Fairfax, and my sister-in-law Jennifer Fairfax. I have a large extended family and want to thank all 

of them, as well as all of my friends, for their incredible and continued support. I 

also would like to congratulate Hester Peirce who, like me, is here today as a nominee to serve on the Commission. 

I sit before you today because I believe deeply in the importance of robust and 

healthy securities markets. I also believe deeply in the SEC’s three part mission to 

protect investors, maintain fair, orderly, and efficient markets, and facilitate capital 

formation. I am honored and humbled by the prospect of potentially serving the Nation and its investors alongside the Chair, the other Commissioners, and the many 

staff members who work tirelessly to support the vital work of the SEC. 

As a law professor, over the last 15 years I have had the privilege of teaching 

Corporations and Securities Law to the next generation of practitioners, judges, and 

regulators, so that they can understand the increasingly complex world in which 

companies must operate, markets must perform, and regulators must monitor. My 

teaching, along with my research and writing in these areas, have given me a deep 

understanding of the issues confronting the SEC, as well as a strong desire to help 

tackle those issues head on. My research and work with organizations such as the 

American Bar Association and FINRA have taught me the importance of engaging 

a variety of diverse perspectives when seeking to develop solutions to complex problems. I look forward to such engagement if I am fortunate enough to be confirmed. 

Importantly, I believe that the SEC’s three-part mission statement is more than 

a statement; it is a set of guiding principles that should shape every aspect of the 

agency’s activities. It is also a set of principles that must work together. 

I believe the SEC’s work must be aimed at ensuring that investors are protected 

at all times, and that investors have confidence in the markets and the financial 

system. 

The SEC also has a responsibility to facilitate access to needed capital for all participants in the market, from the corporation and small business owner in need of 

cash and credit, to the individual investing to support a family, finance a child’s 

education, or ensure a comfortable retirement. 

And all of these participants need assurances that their capital is safe and secure, 

which is why the SEC has a responsibility to maintain markets that are orderly, 

efficient, and fair. Everyone needs to play by the same rules, and there must be 

strong repercussions for those who break them. 

Thank you again for the opportunity to appear before you today. If I am confirmed, I will work tirelessly to maintain the confidence that the President, this 

Committee, and the Senate will have shown in me. I look forward to answering any 

questions you may have. 

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PREPARED STATEMENT OF HESTER MARIA PEIRCE 

TO BE A MEMBER OF THE SECURITIES AND EXCHANGE COMMISSION

MARCH 15, 2016 

Chairman Shelby, Ranking Member Brown, and Members of the Committee, I am 

honored to appear before you today as one of the President’s nominees to serve as 

a member of the U.S. Securities and Exchange Commission. It is a particular privilege to be considered for the SEC together with Professor Lisa Fairfax. 

My desire to serve at the SEC is motivated by the conviction that the capital markets help unlock people’s potential. Investors build their retirement nest eggs, their 

downpayments, and their children’s college funds. Vibrant capital markets find and 

fund individuals and companies with brilliant ideas that can enhance people’s lives 

and the Nation’s prosperity. 

My belief in the capital markets’ ability to enrich our communities is built on lessons I have learned at the Peirce family dinner table, in classrooms at Case Western 

Reserve and Yale, and from mentors and colleagues throughout my career. 

In the field of securities law, I found a natural way to combine my undergraduate 

degree in economics, my law degree, and my elementary school hobby of plotting 

stock prices. I wrote rules for investment companies and investment advisers as a 

staff attorney in the SEC’s Division of Investment Management. I then worked for 

Commissioner Paul Atkins. Following my time at the Commission, I had the honor 

of working for then Ranking Member Shelby on the staff of this Committee. In all 

of these roles, I learned the importance of carefully crafted and well enforced laws 

and regulations in maintaining strong capital markets. 

At the Mercatus Center at George Mason University, my colleagues share my passion for high-quality regulation and sound regulatory process. I have learned much 

from their careful scholarship. 

Another set of lessons—this time about how to use regulation effectively to educate, protect, and empower investors—has come from my fellow members of the 

SEC’s Investor Advisory Committee. 

I would welcome the opportunity to apply these lessons to protect America’s investors, preserve the integrity of our financial markets, and facilitate innovation and 

economic growth. 

Thank you for allowing me to appear before you today. I look forward to answering your questions. 

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RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN 

FROM MATTHEW RHETT JEPPSON 

Q.1. For more than 30 years, Congress has required that the Mint 

use only gold or silver mined within the U.S. in the past 12 months 

in any gold or silver coins, medals, or bullion. I support sourcing 

materials from U.S. companies, but I am concerned that the arbitrary time window and limitation to newly mined metals unnecessarily restricts the Mint’s acquisition processes and undermines the 

Mint’s efforts to produce the highest quality products in the most 

cost-effective way. 

As Director of the Mint, would you consider acquiring metal for 

bullion from mines and other U.S. sources, including recycled metal 

facilities, if permitted by Congress, provided quality was maintained? 

A.1. Yes. Currently, provisions in sections 5112 and 5116 of title 

31, United States Code, require that any gold and silver purchased 

by the United States Mint (Mint) be from domestic natural deposits 

and that it be acquired within 1 year after the month in which the 

ore from which it was derived was mined. 

The Mint’s Office of Procurement, working in close collaboration 

with our Manufacturing Department, ensures that all of the gold 

and silver that the Mint purchases meets the Mint’s stringent quality requirements, which cover such factors as purity and the grain 

size of the metal. If the law were changed to allow the Mint to purchase gold and silver from other U.S. sources, the Mint would consider all possible bullion blank sources permitted by law, including 

those from recycled metal facilities that would meet the Mint’s 

quality requirements. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO 

FROM LISA M. FAIRFAX 

Q.1. I am interested in learning more about the policy issues raised 

in the amicus brief you signed in the Trinity Wall Street v. 

Walmart case. It is my understanding that the Trinity’s shareholder proposal sought to have the Walmart board of directors address policies that could shape what products are sold at Walmart, 

such as high capacity rifles. 

Where do you draw the line on shareholder proposals that seek 

to shape social policy and the ordinary business operations of a 

company? 

A.1. My signing of the amicus brief in this case did not signal my 

taking any position on the underlying issue, or on a particular company or industry. Instead, my signing reflected my belief in the 

broader corporate governance principle that shareholder proposals 

must continue to strike a careful balance between boards and 

shareholders. Consistent with this balance, I believe that the appropriate line for shareholder proposals is one that allows boards 

and managers the discretion to oversee corporate affairs and implement day-to-day policies, but that also gives shareholders the ability they have been granted under Rule 14a-8 of the Securities and 

Exchange Act to communicate with the board regarding issues of 

significance. 

93 

Q.2. In its decision in 2015 the Third Court used a two-part test: 

(1) whether the proposal focuses on a significant policy; and (2) if 

so, whether that policy transcends the company’s ordinary business 

operations. 

What is the practical effect of this two-part test on the SEC ordinary business exclusion? 

A.2. I have not had the opportunity to assess the practical impact 

of the Third Circuit’s test on the ordinary business exclusion. However, in a 1988 Release, the SEC explained that proposals under 

Rule 14a-8(i)(7) relating to ordinary business matters that focus on 

‘‘significant social policy issues . . . would not be considered to be 

excludable because the proposal would transcend the day to day 

business matters.’’ As a general matter, therefore, a test examining 

whether a proposal focuses on significant policy issues, and whether such issues transcend ordinary business matters, appears consistent with SEC guidance on this matter. I also understand that, 

following the Third Circuit’s opinion, the SEC staff has reaffirmed 

its view that shareholder proposals focusing on significant policy 

issues are not excludable under Rule 14a-8(i)(7) because such proposals would transcend day-to-day business matters. The SEC staff 

also has reiterated that it would continue to apply the SEC’s prior 

interpretative approach under Rule 14a-8(i)(7) when considering 

whether proposals are excludable. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR CORKER 

FROM LISA M. FAIRFAX 

Q.1. If you are confirmed as a Commissioner and the SEC Chair 

presents a rule being developed for your consideration, how would 

you go about forming a position on the rule? If the rule presented 

addresses a regulatory principle you fundamentally disagree with, 

would that change your approach? 

A.1. If confirmed, and a rule is presented for my consideration, I 

would form my position by gathering as much information as I 

could to learn about the issues in the rule. I also would form my 

position by listening to the views of investors, corporations and 

their advisors, my fellow Commissioners and the SEC staff, and 

others with expertise and experience relevant to the rulemaking effort. My approach would remain the same for any rulemaking effort, and thus would not change based on the regulatory principle 

addressed by the rule. 

Q.2. Can you envision an instance in which you would vote in favor 

of a rule that does not comport with your ideology but fits with the 

SEC’s mission? 

A.2. Yes, if I am confirmed as Commissioner, my rulemaking efforts will not be dictated by my personal preferences or interests, 

but instead by the extent to which a rule is mandated by Congress 

and is otherwise consistent with the SEC’s three-part mission. 

Q.3. Do you believe there are circumstances in which the SEC 

should not implement and enforce statutorily required rules? If so, 

what are those circumstances? 

A.3. I believe the SEC has an obligation to follow the law, and that 

the SEC must do its best to implement and enforce mandated rules 

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in a manner that is responsible and consistent with the SEC’s mission. While it may be appropriate for the SEC to voice concerns 

when it appears that a particular rule may be inconsistent with the 

SEC’s mission or otherwise unworkable, I do not believe this negates the SEC’s obligation to follow the law. 

Q.4. What role do you believe the SEC should play in increasing 

corporate board diversity? 

A.4. I believe the SEC has a responsibility to ensure that shareholders receive material information about a company and its operations. I understand that there are competing views about the impact of board diversity, including evidence indicating that diverse 

boards may behave similarly to nondiverse boards. However, I also 

understand that there are investors who believe that board diversity has a material impact on a corporation’s governance, decision 

making, and bottom line. For such investors, disclosure about a 

corporation’s diversity practices and current status enables them to 

make more informed voting and investment decisions. Thus, I support SEC efforts to provide shareholders with sufficient information 

on this issue. 

Q.5. How do you view the SEC’s role in overseeing the U.S. equity 

market structure? What changes, if any, do you believe should be 

made? 

A.5. I believe maintaining and enhancing the high quality of the 

U.S. equity markets is critical to the SEC’s mission. Markets have 

undergone sweeping changes from manual markets to the current 

environment in which trades occur at high frequencies in a diversity of trading venues. While these changes may be beneficial, they 

also raise important questions. I believe it is imperative that the 

SEC have a deep appreciation for the current structure of our equity markets so that it is in the best position to oversee those markets. If confirmed, it would be a top priority for me to continue the 

SEC’s engagement in efforts that comprehensively review the equity markets. It also would be a priority for me to monitor and 

work on the process for developing and implementing a consolidated audit trail. I believe that establishing a consolidated audit 

trail will significantly enhance the ability to oversee and analyze 

trading activity, and enforce the rules. While there is potential for 

reform in a variety of other areas, I believe the results of the SEC’s 

review will provide important insights about how such reform efforts should take shape. If confirmed, I would look forward to those 

results, and to working diligently toward needed reforms with the 

SEC staff and other interested parties. 

Q.6. How would you approach consideration of a rule brought up 

by the Chair that attempts to increase capital formation? 

A.6. If confirmed, my approach for consideration of any rule would 

be to gather as much information as I could about the issues in the 

rule, and to listen to the perspectives and concerns of those interested in, and impacted by, the rule. Facilitating capital formation 

is one of the three components of the SEC’s mission. Therefore, if 

I am confirmed, I believe an essential aspect of my work would be 

to actively consider ways in which the SEC can facilitate access to 

capital for all market participants. I also believe that the SEC 

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should work to advance each aspect of its three-part mission. Thus, 

if I am asked to consider a rule related to capital formation, I also 

would carefully consider how the rule impacts investors and the 

markets. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR KIRK 

FROM LISA M. FAIRFAX 

Q.1. There is no question that in the decade since Regulation NMS 

was adopted, U.S. trading markets have evolved considerably. I am 

pleased to see the Commission considering alternatives to the current structure, such as the implementation of the Tick Size Pilot 

program for smaller companies that is anticipated this fall. However, there are many structural items in need of review or consideration: access fees, market fragmentation, market data, and tradeat proposals to name a few. Should you join the Commission, will 

you commit to follow through on Chair White’s pledge to look holistically at the equity markets and move toward needed reforms? 

A.1. I believe maintaining and enhancing the high quality of the 

U.S. equity markets is critical to the SEC’s mission. If confirmed, 

it would be a top priority for me to continue the SEC’s engagement 

in efforts that comprehensively review the equity markets, and to 

work diligently toward needed reforms. 

Q.2. Each of the current SEC Commissioners, in addition to former 

Commissioners Gallagher and Aguilar, have publicly called for the 

Commission to focus on completion of rules governing the securitybased swap market, as mandated by Title VII of the Dodd-Frank 

Act. While I share concerns about the structure and benefits of 

Title VII, I also agree that continuing to delay these rulemakings 

only perpetuates market uncertainty. Given that the CFTC completed its rules 2 years ago, do you view the completion of Title VII 

rulemakings as a priority for the Commission? 

A.2. Yes, I believe completing the rulemaking mandates under 

Dodd-Frank or otherwise mandated by Congress should be a top 

priority for the Commission. 

Q.3. When questioned about the Department of Labor’s fiduciary 

proposal, you indicated that protecting access to quality and appropriate advice is important, particularly for middle and lower income investors. Given that investor protection is paramount to the 

SEC’s mission, how should the SEC act to preserve access to quality, affordable investment advice if the DOL’s final rule results in 

the crowding out of such access for low- and middle-income investors? Do you believe that the rule as currently proposed would affect these investors’ ability to access advice? 

A.3. I believe that an appropriate fiduciary duty rule for brokerdealers rule is essential for ensuring that investors are protected. 

I also believe that any rule in this area must ensure that investors 

have access to quality, affordable investment advice that adequately considers their needs. It is also important that investment 

advice is transparent and free from inappropriate conflicts of interests. I have not seen the final version of the Department of Labor 

rule and thus I cannot speak to the impact it may have on investors’ ability to access advice. However, I understand that concerns 

96 

have been raised about the extent to which the DOL rule would 

limit access to quality investment advice, particularly for lowerand middle-income investors. I also understand that the SEC consulted with the DOL staff about these and other concerns. I believe 

this kind of consultation and coordination is critical, and will help 

to ensure that issues involving investor access and protection are 

considered. I also believe that if a DOL rule is finalized and implemented, the SEC should continue to coordinate with the DOL to 

monitor the rule’s impact, and that the agencies should work together to determine appropriate responses if concerns emerge. I 

also recognize that, consistent with Section 913(f) of the DoddFrank Act, the SEC staff has studied this issue, and the SEC has 

begun its own rulemaking efforts in this area. I believe that the 

SEC’s efforts must be mindful of any DOL rule, and that the SEC 

must attempt to minimize any conflicts, confusion, or inconsistencies, while also ensuring that any rule it develops is consistent 

with the goals of protecting investors and ensuring their ability to 

access appropriate investment advice. If confirmed, I look forward 

to engaging on this effort at the SEC, coordinating with DOL on 

their efforts, and working to make certain that unnecessary costs 

or burdens are not imposed on investors or other market participants. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR SASSE 

FROM LISA M. FAIRFAX 

Q.1. In your opinion, under what circumstances might it be appropriate for national securities regulations to preempt blue sky laws? 

Why? 

A.1. As an initial matter, determining the appropriateness of a regulation seeking to preempt blue sky laws requires consideration of 

whether such preemption is consistent with governing legal and 

statutory principles. Beyond such consideration, I believe whether 

any SEC regulation (including a regulation aimed at preempting 

blue sky laws) is appropriate depends upon whether such regulation is consistent with the SEC’s three-part mission. Thus, if a regulation calling for preemption is not consistent with investor protection, the maintenance of fair, orderly, and efficient markets, and 

the responsibility to facilitate capital formation, then such preemption is not warranted. 

Q.2. Does anything need to be done to improve the use of cost-benefit analysis at the SEC? If so, will you commit to advocating for 

taking these steps? 

A.2. Consistent with SEC guidance on this issue, I believe that 

carefully analyzing the potential economic consequences of a proposed rule (including its costs and benefits) is a critical aspect of 

sound rulemaking. I understand that the SEC has made efforts to 

enhance its economic analysis of rulemaking, including reviewing 

its cost-benefit approach, hiring economists, and engaging in more 

expanded economic analysis when necessary. I believe it is important to continually monitor this effort to ensure that economic analysis is appropriately tailored to each rulemaking effort. If confirmed, I will commit to working with the SEC staff, particularly 

97 

the Division of Economic and Risk Analysis, to ensure that SEC 

guidance in this area is appropriate, and that adjustments are 

made when necessary. 

Q.3. I’d like to ask you more about the SEC’s mission ‘‘protect investors, maintain fair, orderly, and efficient markets, and facilitate 

capital formation.’’ 

What factors should dictate the SEC’s rulemaking schedule? 

Does the SEC’s rulemaking schedule reflect the right balance between focusing on these three missions? If not, how would you 

change it? 

A.3. I believe that the SEC’s three-part mission should represent 

a set of guiding principles that shape every aspect of the SEC’s 

work, including its rulemaking schedule. I also believe that those 

principles must work together, and that every effort should be 

made to focus on all three of those principles when engaging in 

rulemaking. I understand that much of the SEC’s recent rulemaking agenda has been dictated by the need to comply with the 

Congressional mandates under the Dodd-Frank Act. If confirmed, 

I would work to ensure that the SEC diligently and responsibly 

completes these mandates as well as work to ensure that rulemaking reflects an appropriate balance of its three-part mission. 

Q.4. Former SEC Commissioner Dan Gallagher has said that 

‘‘issues specific to small business capital formation too often remain 

on the proverbial back burner. This lack of attention doesn’t just 

harm small business; it also harms investors and the public at 

large.’’ Do you agree? 

A.4. Because I am not employed at the SEC, I am not privy to the 

manner in which specific issues have been prioritized. However, I 

do agree that small businesses are important to investors and play 

a critical role in our economy. I also agree that the SEC must pay 

appropriate attention to the capital formation needs of small businesses. 

Q.5. Will you commit to actively pursuing the ‘‘capital formation’’ 

mission as a Commissioner? If so, how? For example, should the 

SEC do more to encourage public IPOs? Should the SEC do more 

to scale regulations for smaller firms? 

A.5. Facilitating capital formation is one of the three components 

of the SEC’s mission. Therefore, if confirmed, I will commit to actively considering ways in which the SEC can facilitate access to 

capital for all participants in the market, including smaller firms 

which play a critical role in job growth. I believe that considering 

ways in which the SEC can bolster the public IPO market is important. I also believe it is important to consider ways to facilitate responsible capital formation through private placements and other 

innovate sources. 

I believe the SEC must consider how any rule impacts different 

market participants, and make appropriate adjustments. This 

means that the SEC must consider whether and to what extent 

regulations should be adjusted in order to take into account their 

impact on smaller firms. Prior SEC rules have been adjusted to accommodate the special concerns of smaller firms and, if confirmed, 

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I would expect the SEC to continue making such adjustments when 

appropriate. 

Q.6. I’d like to ask about the SEC’s use of Administrative Law 

Judges: 

Under what circumstances is it appropriate for the SEC to send 

cases to Administrative Law Judges? 

Do you have constitutional concerns with ALJs? 

Is there a risk that ALJs have an improper pro-SEC bias? 

A.6. I believe that enforcement is essential to the SEC’s mission, 

and is necessary to protect investors, maintain investor confidence, 

and ensure that capital formation occurs under market conditions 

that are fair. It, therefore, is important that investors have confidence that the SEC is fairly enforcing the laws. On the one hand, 

I understand that process and fairness concerns have been raised 

about the SEC’s use of Administrative Law Judges. I believe that 

the SEC must be mindful of those concerns and find appropriate 

ways to respond to them. The SEC must be especially mindful of 

the issue of bias, both real and perceived. Thus, I support the decision to make a careful determination about the kind of cases being 

sent to ALJs as well as the decision to reiterate the process and 

rationale for sending cases to ALJs. I also support the decision to 

enhance the evidentiary rules for ALJs. Each of these actions 

brings greater transparency to the process and, if confirmed, I 

would continue the effort to do so. On the other hand, I do believe 

it is appropriate to make use of ALJs. Many agencies use ALJs for 

reasons of efficiency, greater expertise, and shorter timelines for 

resolution. Moreover, ALJ decisions can be appealed to Federal 

courts. In light of these benefits and Federal court review, it makes 

sense for the SEC to use ALJs in appropriate circumstances so long 

as the SEC is mindful of the concerns and risks associated with 

such use and takes steps to appropriately address them. 

On the issue of constitutional concerns, I am not a constitutional 

law scholar, but I am mindful that such concerns have been raised 

and that courts have resolved the issue in different ways. Because 

this is an issue that is still being resolved in court, I do not think 

it is appropriate for me to comment further. 

Q.7. I’d like to obtain more information about your approach to securities regulations. 

Is there a risk that regulations can give large incumbent firms 

a competitive advantage over smaller farms? If so, what can be 

done to mitigate this risk? 

A.7. I believe regulations can impact different market participants 

differently, and thus there is a risk that regulations can impact 

smaller firms differently. The SEC should take steps to understand 

any potential differences in order to account for them in the rulemaking process. I believe the best way to account for these differences, including with respect to smaller firms, is to carefully 

consider the potential impact of a regulation by getting input from 

firms, their advisors, and other interested parties. In addition, the 

SEC must be willing to make adjustments to account for any problematic impacts. Prior SEC rulemaking efforts have sought to assess the impact on smaller firms. Moreover, the SEC has made adjustments to rules in order to accommodate the special concerns of 

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smaller firms. If confirmed, I would expect the SEC to continue 

making such adjustments when appropriate. 

Q.8. Is it ever appropriate for the SEC to engage in ‘‘merit review’’ 

of investment choices, where the SEC would elevate its evaluation 

of a particular investment over the evaluation of a private investor? 

A.8. The Federal securities laws are not based on merit review, but 

rather are based on the notion that investors are best protected 

when they are provided with clear and effective disclosure, and can 

make informed investment choices. From this perspective, the SEC 

should focus on ensuring that investors have access to appropriate 

information so that they can make their own evaluations. 

Q.9. Is it appropriate—in the words of Chair White—to ‘‘effectuate 

social policy or political change through the SEC’s powers of mandatory disclosure’’? 

A.9. While I recognize that disclosure can and does have an impact 

on market participants, I believe that the purpose of disclosure is 

to provide shareholders with information necessary to make informed voting and investment choices. 

Q.10. Is there a danger that disclosure requirements become so voluminous that they become unhelpful to investors? If so, what can 

be done to avoid this problem? 

A.10. Disclosure should be clear and aimed at ensuring that investors have sufficient information to make informed decisions. One 

challenge for disclosure requirements is determining what constitutes ‘‘sufficient’’ information, particularly given the potential for 

too little information as well as the potential that information may 

be too voluminous for investors to appropriately digest. I understand that the Chair has asked for a comprehensive review of existing disclosure rules, and I believe that insights gained from that 

review will help determine areas of concern and how best to respond. 

Q.11. I’d like to explore your views on ‘‘accredited investors.’’ 

Should the SEC consider expanding the definition of ‘‘accredited 

investor’’ beyond mere investor income and assets to also include 

investor expertise, such as possessing a graduate degree in a related field? 

How should the SEC strike the balance between investor protection and investor freedom when it comes to the definition of accredited investor? 

A.11. I believe that the SEC should consider changes to the current 

accredited investor definition. The definition is essential for investor protection because it seeks to determine which investors can 

best fend for themselves, and thus which investors should be subject to different regulatory approaches. I understand that, consistent with the Dodd-Frank Act, the SEC staff has issued a report 

reviewing the definition of accredited investor and analyzing various approaches for modifying that definition. I also understand 

that the SEC has issued a request for public comments on the report. If confirmed, I would welcome the opportunity to review the 

report with the Chair, my fellow Commissioners, and the SEC staff 

to gain a better appreciation for the recommended approaches. I 

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also would look forward to reviewing the comments of shareholders, companies, and other market participants on this critical 

issue. Such input will be important for determining how best to respond to the report, and how best to fashion an accredited investor 

definition that strikes the appropriate balance between protection 

and flexibility by helping to identify investors who have sufficient 

sophistication and experience to assess whether an investment is 

appropriate for them. 

Q.12. The marketplace online lending ecosystem has grown significantly as of late. Would you recommend changes to how the SEC 

approaches this field? For example, should the SEC contemplate 

creating a broad safe harbor for marketplace online lenders, which 

scales registration requirements to reflect their unique business 

model? 

A.12. Marketplace online lending has grown in significance and has 

become increasingly complex. Such lending has the laudable goal 

of facilitating a more efficient and cost-effective borrowing process, 

and thus has the potential to significantly expand access to capital, 

particularly to underserved segments of the market. I believe it is 

important for the SEC to consider how best to approach the marketplace in order to balance the goal of facilitating innovative 

methods of accessing capital with the goal of investor protection. I 

believe it would be premature to recommend changes related to the 

marketplace without first ensuring that the SEC has an appropriate understanding of the current status and impact of the marketplace. To this end, it makes sense for the SEC to engage with 

participants in the marketplace and other interested parties to gain 

insight about the impact and efficiency of different approaches to 

the field. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS 

FROM LISA M. FAIRFAX 

Q.1. The New York City Public Advocate recently wrote the SEC 

asking that it examine publicly traded gun manufacturers with an 

eye towards charging them with fraud for not disclosing information about gun-related deaths. 

Similar questions have been raised about oil companies and climate change. In fact, Attorney General Lynch recently said that 

the Department of Justice considered prosecuting climate change 

skeptics. 

The idea that the Government would consider prosecuting political opponents is chilling and has no place in our political system. 

The SEC should be about safeguarding markets, protecting investors, and helping to foster capital formation. 

Attempts to settle political scores that should be decided at the 

ballot box have no place on the SEC’s agenda. 

Can you assure me that you will not pursue or support any attempts to politicize corporate disclosure rules—whether for gun 

control, climate change or any other issue which should be properly 

decided by Congress? 

A.1. I believe that effective disclosure is fundamental to our Federal securities laws and is critical to the SEC’s three-part mission. 

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If confirmed, I can assure you that my work related to disclosure 

will not be guided by any political agenda, but by the goal of complying with the law and ensuring that disclosure is consistent with 

the SEC’s three-part mission. 

Q.2. One of the best tools we have to make sure that regulations 

are fair and make sense is cost-benefit analysis. 

A cost-benefit analysis allows regulators to clearly examine the 

benefits of a rule and weigh them against the damages caused by 

the proposed rule. 

If a statute is silent on the use of cost-benefit analysis, do you 

believe the Commission can conduct a cost-benefit analysis or can 

it only conduct an analysis if the statute explicitly includes that requirement? 

A.2. I believe that carefully analyzing the potential economic consequences of a proposed rule is a critical aspect of sound rulemaking. Therefore, I believe that even without any statutory requirement, the SEC’s rulemaking efforts should involve consideration of potential economic consequences, including the potential 

costs and benefits of any rule. I appreciate that it may be difficult 

to sufficiently measure the costs and benefits of a rule. However, 

I do believe that the Commission should make reasonable efforts 

to determine the probable costs and benefits of a proposed rule, or 

explain why such a determination cannot be made. 

Q.3. Rather than creating punitive rules which increase compliance 

costs, what can you do, if you are confirmed, to incentivize regulated entities and investors to make better decisions? 

A.3. I believe that regulation works best when it relies on a range 

of approaches when seeking to encourage entities and investors to 

make appropriate decisions. Thus, I also believe that in addition to 

relying on enforcement, the SEC also should consider approaches 

(including market-based policies) that are aimed at incentivizing 

market participants. If confirmed, I would be interested in assessing current incentives and their impact. I also would be interested 

in exploring ways to develop incentives that would encourage market participants to act in the best interests of companies and their 

shareholders. 

Q.4. Last year, the New York City pension system issued numerous shareholder proposals on proxy access. Many of these proposals 

were centered on energy companies and their purpose was not to 

improve governance but to push an agenda on climate change. 

Two recent reports by the Manhattan Institute have shown that 

public pension funds that engage in politically motivated corporate 

governance fights have lower returns forcing tax payers to foot the 

bill, while union sponsored shareholder proposals are concentrated 

in industries or businesses targeted in organizing campaigns. 

What role should the SEC undertake as a gate-keeper to make 

certain that shareholder proposals and director elections are correlated to the interests of a corporation and its investors, rather 

than a political or social agenda? 

A.4. I do believe that the SEC has a responsibility to be a gatekeeper and monitor activity related to both shareholder proposals 

and director elections. On the one hand, the SEC should take efVerDate Nov 24 2008 11:06 Jul 27, 2016 Jkt 046629 PO 00000 Frm 00105 Fmt 6602 Sfmt 6602 L:\HEARINGS 2016\03-15 NOMINATIONS\HEARING\31516.TXT JASON
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forts to ensure that parties do not abuse the shareholder proposal 

process. The Federal securities laws already have a system in place 

under the no-action process that enables the SEC to monitor the 

shareholder proposal process and intervene where appropriate. I 

understand that there have been concerns about the workability of 

that system. If confirmed, I would be interested in working with 

the SEC staff and other interested parties to assess the shareholder proposal process and determine if reforms are needed. On 

the other hand, the SEC should pay close attention to director elections because such elections have a significant impact on the corporation and its investors. I understand that there have been a 

number of changes to the election process at public companies, 

such as an increase in declassified boards and an increase in the 

number of companies adopting majority voting. I also understand 

that there has been an increase in the number of proxy fights within the last few years. The SEC should monitor these and other developments related to director elections to understand their impact, 

and to make certain that the election process is fair, and that parties are not engaging in actions that negatively impact the corporation and its investors. 

Q.5. The Labor Department’s proposed Fiduciary rulemaking will 

radically alter the market for individual retirement savings. 

Many commentators believe that rather than protecting investors, it will price many middle class retirement savers out of the 

market for investment advice. 

Can you envision circumstances in which a retirement saver of 

more modest means could benefit from the personalized advice of 

someone who knows them and their circumstances but who is not 

qualified as a fiduciary? 

A.5. I understand that the Labor Department has proposed a fiduciary duty rule for broker-dealers. I also understand that, consistent with the study required by Section 913(f) of the Dodd-Frank 

Act, the Chair has asked the SEC staff to develop a uniform fiduciary rule for brokers-dealers and investment advisors. I believe 

that the goal of any rulemaking effort in this area should be to ensure that investors, particularly lower- and middle-income investors, have access to quality affordable investment advice, and that 

such advice considers an investor’s particular needs and circumstances. 

Q.6. In December 2015, the SEC voted to propose rule 18f-4, which 

would regulate the use of derivatives by registered investment companies. This rule attempts to regulate the use of derivatives to protect investors and reduce systemic risk, but I am concerned that it 

goes farther than intended and will alter the commodities futures 

market by setting arbitrary portfolio limitations for derivatives. 

The rule appears to incentivize funds to overweight portfolios 

with stocks and bonds and move away from trading commodities. 

What is your view on the regulation of simple, diversifying derivatives? 

A.6. I understand that proposed rule 18f-4 has three main elements—limitations on portfolio leverage, asset segregation requirements, and derivatives risk oversight. I also understand that the 

purpose of the proposed rule is to reduce leverage risks associated 

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with derivatives and achieve a more standard treatment of derivatives transactions. I believe that the financial crisis revealed the 

need to enhance transparency with respect to derivatives, and pay 

closer attention to risks associated with derivatives transactions. I 

also believe that derivatives pose both benefits and risks for investors and the market. Any regulatory effort in this area must carefully consider how best to account for risks without disadvantaging 

investors and other market participants. If confirmed, I look forward to reviewing the comments to the proposed rule, engaging 

market participants to better understand the potential risks and 

benefits of the rule, and working with the SEC staff and other interested parties on the most appropriate path forward. 

Q.7. Do you believe that proposed rule 18f-4, will limit the average 

investor’s ability to access diversifying assets? If so, why? If not, 

why not? 

A.7. In proposing rule 18f-4, the SEC acknowledged that the proposed rule could have a significant impact on certain funds, potentially requiring them to significantly alter their investment strategies. This raises the possibility that the proposed rule also could 

impact investors’ access to certain funds and their assets. If confirmed, I look forward to reviewing the comments on this proposed 

rule in order to work with the SEC staff and other interested parties on determining the most appropriate path forward. 

Q.8. Are you concerned that this rule could harm rather than protect investors because it incentivizes registered investment companies to concentrate their assets in equities rather than derivatives? 

A.8. The proposed rule raises several questions and concerns. I believe the goal of public comments is to address those questions and 

concerns so that any final rulemaking can appropriately account 

for them. If confirmed, I would work with my fellow Commissioners 

and the SEC staff to ensure that any final rule appropriately considers and addresses concerns related to investor protection, as 

well as any other concerns raised by the commentators or other interested parties. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHUMER 

FROM LISA M. FAIRFAX 

Q.1. Ms. Fairfax, do you believe that information related to a company’s corporate political spending should be considered material to 

prospective investors and/or shareholders? 

A.1. I understand that there have been an extraordinary number 

of commentators to the rulemaking petitions submitted to the SEC, 

as well as a significant number of shareholder proposals on this 

issue, expressing the belief that such information is material. Several corporations also have voluntarily agreed to provide shareholders with corporate political spending information based, at 

least in part, on the belief that the information is material. I believe many of these commentators, shareholders, and corporations 

advance strong arguments that the information is material because 

it allows investors to assess whether such spending is beneficial 

and consistent with the corporation’s best interests. However, I also 

understand that many others question whether information related 

104 

to corporate political spending is material not only because the 

amount of money spent may be small in comparison to the corporation’s total assets or expenditures, but also because shareholders 

have rejected the vast majority of shareholder proposals on this 

issue. I also recognize that many have concerns about such disclosure that extend beyond the question of materiality. 

Although I do believe that corporate political spending disclosure 

is an important issue that deserves thoughtful consideration, I do 

not believe I should prejudge any issue without the benefit of full 

engagement. However, if confirmed, and so long as it is not prohibited by law, I would engage with shareholders, corporations and 

their advisors, the SEC staff, and interested stakeholders so that 

I can thoughtfully and fully consider this issue. My consideration 

would focus on assessing the various views expressed during this 

engagement to determine if such information should be deemed 

material in light of prevailing understandings of materiality. As 

part of this assessment, I would examine whether such information 

aligns with the materiality test articulated by the Supreme Court 

in TSC Industries v. Northway, which focuses on whether there is 

a substantial likelihood that a reasonable investor would consider 

information important, and whether information would alter the 

investor’s ‘‘total mix’’ of information. I also would consider whether 

the information is consistent with SEC guidance on materiality, 

which relies on the Supreme Court’s formulation, and assesses both 

quantitative and qualitative factors to determine if the information 

would influence the investment decision of a reasonable investor. 

Q.2. Do you believe that the SEC should consider whether investors should be entitled to information disclosing a company’s corporate political spending? 

A.2. Given the overwhelming amount of comments and attention to 

the rulemaking petitions on this issue, and so long as it is not prohibited by Congressional mandate, I believe the SEC should continue to engage investors and other interested stakeholders to determine whether, and to what extent, investors should be entitled 

to information about a company’s corporate political spending. 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR MENENDEZ FROM LISA M. FAIRFAX 

Q.1. What actions will you take as Commissioner to bring muchneeded accountability and transparency for shareholders to ensure 

that public companies disclose how they use corporate resources for 

political activities? 

A.1. As an initial matter, I believe in the importance of the SEC 

following the law and to the extent that the law prevents the SEC 

from finalizing, issuing, or implementing rules, regulations, or orders on this issue, the SEC must comply. However, given the overwhelming amount of comments and attention to the rulemaking petitions on this issue, and so long as it is not prohibited by the law, 

I also believe the SEC should continue to engage investors and 

other interested stakeholders to determine whether, and to what 

extent, investors should be entitled to information about a company’s corporate political spending. 

105 

Q.2. Given the record input from securities experts, institutional 

and individual investors, and members of the public on this rulemaking petition—more than 1.2 million comments, more comments 

submitted than any other rulemaking in the SEC’s history—where 

would this rulemaking fall in your list of priorities, and how will 

you advocate that the Commission prioritize its development and 

proposal? 

A.2. Although it is the Chair’s responsibility to set the SEC’s agenda, in light of the input from investors and stakeholders on this 

issue, and so long as it is not prohibited by the law, if confirmed, 

I believe it would be appropriate for me to engage the Chair and 

my fellow Commissioners on this issue to ensure that such input 

has been fully considered in the process of setting the SEC’s priorities. 

Q.3. Can I have your commitment that if confirmed as Commissioner, you will do everything within your power to move this rulemaking forward? 

A.3. As noted above, I intend to comply with the law. To the extent 

the SEC is permitted to engage in rulemaking on this issue, I will 

certainly do everything that I can to move any rulemaking effort 

forward. 

Q.4. The fiscal year 2016 omnibus appropriations law unfortunately included a 1-year provision to block the SEC from issuing, 

implementing, or finalizing a rule to require public companies to 

disclose their political spending to shareholders. Immediately following the enactment of this law, I sent a letter to SEC Chair 

White, along with 96 of my colleagues in the Senate and House, 

pushing the Commission to move forward notwithstanding the language contained in the end-of-year spending bill. It is our analysis 

and understanding, which is notably shared by Harvard Securities 

Law Professor John Coates, that the provision in the omnibus does 

not bar the SEC from moving forward to prepare, propose, or develop a rulemaking on corporate political spending. To that end, I 

fully expect the SEC to host public roundtables, solicit additional 

stakeholder feedback, and do everything within its power to develop a proposal on this issue. If confirmed as Commissioner, what 

immediate steps will you take to set in motion the development, 

preparation, and proposal of this critical rulemaking? 

A.4. I understand that the omnibus law limits the SEC on this 

issue. If confirmed, I would be interested in engaging with the SEC 

staff, including the Office of the General Counsel, to understand 

their analysis of the Congressional mandate, to work with the 

Chair, my fellow Commissioners and the SEC staff to make an assessment regarding what is allowed by the mandate, and to ensure 

that SEC actions are consistent with that mandate. So long as it 

is not prohibited, I believe the SEC should continue to engage investors and other interested stakeholders to determine whether, 

and to what extent, investors should be entitled to information 

about a company’s corporate political spending. If it is determined 

that the law allows for other actions, I certainly would be open to 

exploring those actions, carefully considering the range of concerns 

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sioners, the SEC staff and other interested parties to determine the 

best path forward. 

Q.5. On the issue of corporate board diversity, to what extent is 

having a wide range of perspectives represented in the boardroom 

critical to effective corporate governance? 

A.5. I believe the composition of the corporate board has an impact 

on effective corporate governance. I understand that there are differing views about the connection between board diversity and corporate governance. Some have questioned such a connection, maintaining that the available data is mixed. Others believe that diversity in the boardroom can enhance the quality of a board’s decision 

making and monitoring roles, thereby impacting corporate governance and the corporation’s bottom line. This belief is based on the 

view that diverse groups may have a wider variety of approaches 

to analyzing and assessing information, increasing the potential for 

broader perspective and a broader range of solutions to complex 

problems. 

Q.6. In your opinion, does corporate board diversity allow for 

boards to better anticipate and consider the concerns and perspectives of all of their key constituencies? 

A.6. I understand that there are competing views about the impact 

of board diversity, including evidence indicating that diverse boards 

may behave similarly to nondiverse boards. However, such evidence also suggests that under appropriate circumstances, a diverse board with a range of experiences may have an enhanced 

ability to anticipate and consider the concerns and perspectives of 

a diverse group of investors, clients, customers, and other key constituencies. 

Q.7. As you know, the SEC adopted a rule change in 2009 to require publicly traded companies to disclose more information on director selection and diversity. However, many, including myself, 

have expressed concerns that the current rule is inadequate, and 

that investment advisors and shareholders need more comprehensive information to make informed investment and voting decisions. An enhanced diversity disclosure, in my view, would be one 

step to help promote sociodemographic diversity on corporate 

boards. 

In your view, how does the disclosure of specific details about the 

diversity of corporate boards assist shareholders in making informed investment and voting decisions? 

A.7. For shareholders who believe that board diversity has an impact on a corporation’s governance, decision making, and bottom 

line, disclosure about a corporation’s diversity practices and current 

status helps such shareholders assess the corporation and make 

more informed voting and investment decisions. 

Q.8. Can you explain how the SEC’s decision not to define diversity 

in its 2009 rule undermines the value of the information provided 

by the current disclosure? 

A.8. I understand that the SEC’s diversity disclosure rule did not 

define diversity in order to allow companies the ability to define diversity in ways they consider appropriate. I also understand that 

there were different views on the benefit of such an approach. 

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Some commentators agreed that corporations should have the discretion to define diversity based on their own business model and 

specific needs. In contrast, others expressed concern that the failure to define diversity would undermine the utility of disclosure, 

particularly if the disclosed information did not indicate the factors 

a company considered in assessing diversity. While there are competing views about the impact of board diversity, there are investors who believe that board diversity has a material impact on a 

corporation’s governance, decision making, and bottom line. For 

such investors, disclosure on this issue enables them to make more 

informed voting and investment decisions. Existing evidence about 

the current diversity rule suggests that while some companies provide information about how they define diversity, other companies 

do not. Based on that evidence, I believe that there may be reason 

for concern about the rule’s approach, and its ability to provide the 

type of information investors need to make informed decisions. If 

confirmed, I would be interested in working with the SEC staff and 

other interested parties to explore this issue and determine how 

best to proceed. 

Q.9. If confirmed as Commissioner, will you commit to strengthening the quality of required disclosures on the consideration of diversity in the board selection process? 

A.9. I understand that the Chair has expressed concern that the 

existing diversity rule may not provide investors with sufficient information. In light of those concerns, the Chair has instructed the 

staff to review existing company disclosures in order to determine 

whether the SEC should require companies to provide more specific 

details about their diversity practices. If confirmed, I look forward 

to learning about the status of that review, and I will certainly 

commit to working with the SEC staff and other interested parties 

to determine how best to ensure that investors receive sufficient information on this issue. 

Q.10. In the aftermath of the Great Recession, many reported that 

excessive executive compensation schemes provided some of the 

fuel for the crash. I worked to include a provision in the Wall 

Street Reform Act to require publicly listed companies to disclose 

in their annual SEC filing the ratio of their CEO’s total compensation to their median worker’s compensation. In August, after 5 

years of delays, I was pleased to see the SEC finally took the step 

to clear the way for the CEO-to-Worker Pay Ratio. This information is especially important in a day and age in which executive 

compensation has skyrocketed. A 2014 study by the Economic Policy Institute found that chief executive pay, as a multiple of a typical worker’s pay, increased exponentially from an average of 20 

times in 1965 to almost 300 in 2013. 

In your opinion, how will this information inject transparency 

and promote fairness in corporate America? 

A.10. I believe that the Federal securities laws should promote 

clear, concise, and understandable disclosure on executive compensation. Such disclosure allows investors to evaluate whether a 

company’s pay practices are consistent with corporate objectives, 

provide appropriate incentives for executives, and have a positive 

impact on corporate performance and the corporate enterprise. I 

108 

understand that opinions differ on the value of the pay ratio rule. 

I also recognize that many believe the rule may enhance compensation disclosure by providing more transparency about pay structure, providing shareholders with a different metric for analyzing 

compensation, and increasing shareholder’s ability to engage with 

companies about the nature and impact of pay packages. 

Q.11. If confirmed as Commissioner, will you commit to ensuring 

this rule is properly implemented? Will you work to ensure that 

provisions included by the Commission to facilitate compliance do 

not inadvertently open up loopholes for companies looking to evade 

this requirement? 

A.11. If confirmed as Commissioner, it would be a priority for me 

to ensure the appropriate implementation of all the Commission’s 

rules and to monitor that implementation to determine whether 

such rules are having their intended effect. If confirmed, I also 

commit to working with the Chair, my fellow Commissioners, the 

SEC staff, and other interested parties to develop appropriate responses when issues of concern emerge. I understand that, in response to costs and other concerns, the pay ratio rule provides companies with significant flexibility. If confirmed, I would work with 

the Chair, my fellow Commissioners, the SEC staff, and other interested parties to ensure that such flexibility achieves its desired 

result. 

Q.12. Another critical provision included in the Wall Street Reform 

Act is the ‘‘say on pay’’ requirement to give shareholders the right 

to an advisory vote on companies’ executive pay policies. Please discuss the value of this requirement, and to what extent you believe 

it enhances shareholders’ ability to influence corporate pay practices? 

A.12. It is my understanding that ‘‘say on pay’’ was designed to 

give shareholders the ability to have a voice in company pay practices. Like other proposals, ‘‘say on pay’’ sparked differing opinions 

about its benefits and drawbacks. However, I do believe that existing evidence suggests that under the appropriate circumstances 

such a vote adds value. To be sure, some questioned the ability of 

an advisory vote to impact pay practices. Others questioned the 

benefit of enabling shareholders to influence pay practices because 

shareholders may have limited information, or shareholders might 

encourage companies to adopt ‘‘one-size-fits-all’’ pay packages that 

might not be appropriate for every company. My understanding is 

that some of these concerns persist. 

Nevertheless, many investors believe that ‘‘say on pay’’ has been 

valuable, particularly to the extent that it has focused corporate attention on better aligning pay practices with corporate objectives, 

and has increased engagement between corporations and shareholders about compensation issues. 

Q.13. What additional steps should the SEC take to address excessive executive compensation structures? 

A.13. I believe that executive compensation issues are important, 

and that providing shareholders with information about such 

issues allows them to assess whether a company’s pay practices are 

aligned with corporate objectives. There have been a number of 

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changes with respect to executive compensation practices over the 

last few years, including the SEC’s most recent rulemaking on pay 

ratios. I believe that the SEC should assess the impact of these 

rules to determine whether they are individually and collectively 

having their desired impact. I also believe it is important for the 

SEC to complete the rulemaking mandates under the Dodd-Frank 

Act, including those related to executive compensation. If confirmed, I would work diligently on this effort, and would welcome 

the opportunity to work with the Chair, my fellow Commissioners, 

the SEC staff and interested parties to monitor developments in 

this area, and determine if additional reforms or changes are needed. 

Q.14. As a member of the SEC’s Investor Advisory Committee, can 

you speak to the value of a broker-dealer fiduciary duty, and explain what exactly needs to be done to eliminate the regulatory gap 

that allows broker-dealers to offer investment advice without being 

subject to the same fiduciary duty as other investment advisers? 

A.14. I believe that an appropriate fiduciary duty rule for brokerdealers is essential for ensuring that investors are protected, that 

investors have access to advice that adequately considers their 

needs, and that such advice is transparent and free from inappropriate conflicts of interests. I understand that, historically, brokerdealers and investment advisers have been regulated differently. I 

also understand that concerns have emerged about the impact of 

this difference on investors, particularly as lines have begun to blur 

between services provided by broker-dealers and those provided by 

investment advisers. I believe that those concerns deserve a 

thoughtful attention and an appropriate response. As required by 

Section 913(f) of the Dodd-Frank Act, the SEC staff studied this 

issue and made recommendations designed to better protect investors and decrease investor confusion. The SEC staff’s two primary 

recommendations were that the SEC engage in rulemaking to develop a uniform fiduciary rule for brokers-dealers and investment 

advisors, and that the SEC consider harmonizing certain regulatory requirements of broker-dealers and investment advisers. 

Consistent with this recommendation, the Chair has asked the 

SEC staff to begin work on developing a uniform fiduciary duty 

rule. If confirmed, I look forward to learning about the status of 

this effort and working with the Chair, my fellow Commissioners, 

the SEC staff, and other interested parties to ensure that it moves 

forward in a diligent and responsible manner. 

Q.15. If confirmed as Commissioner, will you commit to prioritizing 

this rulemaking? 

A.15. If confirmed, it would be a priority for me to ensure that SEC 

efforts in this area move forward in a diligent and responsible 

manner. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER 

FROM LISA M. FAIRFAX 

Q.1. Unelected Directors: The Committee on Capital Markets Regulation recently conducted a study examining the frequency with 

which corporate directors resign or decline to stand for re-election 

110 

after failing to receive a majority of shareholder votes. The study 

finds that 85 percent of directors who received less than a majority 

of votes were still board members 2 years after the vote—so called 

‘‘unelected directors.’’ To protect the integrity of the shareholder 

vote in the face of the unelected directors problem, would you be 

supportive of a Commission regulation requiring, at a very minimum, that corporate boards disclose the specific reasons that an 

unelected director remain on the board despite the failure to receive a majority of shareholder votes? 

A.1. I believe that voting in director elections is a fundamental 

shareholder right, and that such voting serves an important accountability function. I understand that there are studies indicating many instances in which directors have failed to receive a 

majority vote, but nevertheless remain in their positions. I also recognize that there may be appropriate reasons for maintaining a director (for example when the underlying reason for targeting a director has been appropriately addressed). However, shareholders 

may not know those reasons. It would be premature for me to support a rule without fully exploring an issue with the SEC staff and 

other interested parties. It also would be premature for me to support a rule without knowing the specific details, and potential impact, of the rule. However, if confirmed, I not only would be open 

to becoming more fully informed about this issue, but I also would 

welcome the opportunity to work with the Chair, my fellow Commissioners, the SEC staff and other interested parties to determine 

the most appropriate response to this issue, including rulemaking 

if necessary. If confirmed, my goal on this issue would be to determine how best to ensure that the shareholder vote is meaningful 

and appropriately impacts director elections and board composition. 

Q.2. Standardized Data Formats: The SEC has adopted standardized data formats for some corporate filings, such as the financial 

statements contained within quarterly and annual Exchange Act 

reports, but most filings are still expressed as outdated paper documents. In 2013, the Investor Advisory Committee called on the 

SEC to adopt standardized formats for all corporate filings. The Investor Advisory Committee said the Commission should prioritize 

forms that would improve the transparency of corporate governance 

if they were expressed as standardized data, instead of documents. 

The Investor Advisory Committee specifically cited the portions of 

the proxy statement on Schedule 14A that relate to executive compensation and shareholder votes, and voting results disclosed by 

mutual funds in Form N-PX. Do you agree that such filings should 

be transformed from documents into standardized data? 

A.2. I believe the SEC has a responsibility to ensure that disclosures are as clear and effective as possible. I understand that the 

SEC is making efforts to determine how best to adopt standardized 

data formats. On the one hand, I believe that standardized data 

formats have the potential to positively impact disclosure, particularly by making disclosed information easier to review, retrieve, 

and analyze. On the other hand, I understand that concerns have 

been raised about the usage, costs, and quality of data stemming 

from such formats. If confirmed, I would welcome the opportunity 

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to learn more about the status of SEC efforts in this area in order 

to find the best path forward. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR CORKER 

FROM HESTER MARIA PEIRCE 

Q.1. If you are confirmed as a Commissioner and the SEC Chair 

presents a rule being developed for your consideration, how would 

you go about forming a position on the rule? If the rule presented 

addresses a regulatory principle you fundamentally disagree with, 

would that change your approach? 

A.1. I would seek to understand the problem Chair White was trying to solve, speak with the staff developing the proposal and the 

economists conducting the economic analysis of the proposal, and 

discuss the matter with my fellow Commissioners. I would also 

work with my own staff to review available data, relevant academic 

articles, and white papers. As appropriate, I also would seek input 

from experts, including investors, people in the regulated community, and academics. If the rule embodies a regulatory principle 

with which I disagree, I would follow the same course, but also 

would work with others at the Commission to identify alternative, 

more effective approaches to achieving the proposed rule’s objectives. The key with any rule is to identify the problem that needs 

to be solved and figure out the best way to solve it. 

Q.2. Can you envision an instance in which you would vote in favor 

of a rule that does not comport with your ideology but fits with the 

SEC’s mission? 

A.2. If I am confirmed, my job will be to implement the SEC’s mission of protecting investors, facilitating capital formation, and 

maintaining fair, orderly, and efficient markets. There are different 

approaches to fulfilling that mission, and I will strive to work with 

my colleagues on the Commission and on the staff to best fulfill 

that mission. In a multi-member body, compromise is often necessary to reach consensus. Therefore, I can envision voting for a 

rule that is consistent with the SEC’s mission, but is not the approach I would take if I were solely responsible for crafting the 

rule. 

Q.3. Do you believe there are circumstances in which the SEC 

should not implement and enforce statutorily required rules? If so, 

what are those circumstances? 

A.3. As an administrative agency, the SEC is charged with implementing and enforcing the laws that Congress writes. Recognizing 

that there may be circumstances in which a particular law is not 

appropriately applied, Congress has granted the SEC broad exemptive authority in its key statutes when such relief is necessary or 

appropriate in the public interest and is consistent with the protection of investors. The SEC may, for example, employ its general exemptive authority to respond to the unique challenges faced by 

small companies, changes in technology, or innovations. 

Q.4. How would you approach consideration of a final rule dealing 

with Section 956 of Dodd-Frank, regarding the disclosure and proVerDate Nov 24 2008 11:06 Jul 27, 2016 Jkt 046629 PO 00000 Frm 00115 Fmt 6602 Sfmt 6602 L:\HEARINGS 2016\03-15 NOMINATIONS\HEARING\31516.TXT JASON
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hibition of certain executive compensation structures at financial 

institutions? 

A.4. With respect to the final rule implementing Section 956 of 

Dodd-Frank, which is a multi-agency rule, among other things, if 

confirmed, I would speak with colleagues at the other regulatory 

agencies and would review the comment letters. I would also consult the relevant staff at the Commission, including the staff of the 

Division of Economic and Risk Analysis, and my fellow Commissioners and seek feedback from outside experts, as appropriate. A 

rule that deals with compensation requires extreme care, as compensation is highly fact-and-circumstance specific. A properly designed compensation arrangement is an appropriate and effective 

way to encourage employee excellence, but improperly crafted compensation can harm employees, shareholders, companies, and the 

broader economy. Regulators need to achieve the statutory objective of ending the use of harmful compensation arrangements, 

while being mindful of the difficulty of establishing one-size-fits-all 

requirements with respect to compensation arrangements across a 

range of different types of firms. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR KIRK 

FROM HESTER MARIA PEIRCE 

Q.1. In your testimony, you indicated that retrospective review is 

particularly important with respect to regulations governing equity 

market structure. There is no question that in the decade since 

Regulation NMS was adopted, U.S. trading markets have evolved 

considerably. I am pleased to see the Commission considering alternatives to the current structure, such as the implementation of the 

Tick Size Pilot program for smaller companies that is anticipated 

this fall. However, there are many structural items in need of review or consideration: access fees, market fragmentation, market 

data, and trade-at proposals to name a few. Should you join the 

Commission, will you commit to follow through on Chair White’s 

pledge to look holistically at the equity markets and move toward 

needed reforms? 

A.1. If I were to join the Commission, I would welcome the opportunity to work with Chair White and the rest of the Commission 

on a holistic review of equity market structure. Based on the results of that review and consistent with the Commission’s mission 

and other Commission priorities, I would work toward crafting, 

testing, and implementing any needed reforms. 

Q.2. Each of the current SEC Commissioners, in addition to former 

Commissioners Gallagher and Aguilar, have publicly called for the 

Commission to focus on completion of rules governing the securitybased swap market, as mandated by Title VII of the Dodd-Frank 

Act. While I share concerns about the structure and benefits of 

Title VII, I also agree that continuing to delay these rulemakings 

only perpetuates market uncertainty. Given that the CFTC completed its rules 2 years ago, do you view the completion of Title VII 

rulemakings as a priority for the Commission? 

A.2. I view the completion of Title VII rules as a priority for the 

Commission. The impetus to complete these rules expeditiously to 

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1Wall, Emma, ‘‘10 Million Find Advice Too Expensive’’, Morningstar, Aug. 28, 2014, http:// 

www.morningstar.co.uk/uk/news/128424/10-million-find-advice-too-expensive.aspx. 

fulfill the statutory mandate and provide the market with needed 

certainty should be paired with a careful approach to the design 

and implementation of the rules. 

Q.3. The Department of Labor is expected to finalize its proposed 

rule amending the definition of ‘‘fiduciary’’ under the Employee Retirement Income Security Act (ERISA) any day now. I am deeply 

concerned about the potential consequences this rule may have on 

investors, particularly of low and moderate incomes. As has been 

widely reported, the United Kingdom’s similarly intentioned Retail 

Distribution Review (RDR) resulted in as many as 11 million consumers losing access to ongoing investment advice, as firms moved 

to minimum account thresholds of $50,000 or more. 1 This effect 

would directly harm those investors that the rule purports to help. 

Are you concerned that the implementation of the rule as currently 

proposed will result in decreased investor options? 

Additionally, at the heart of the debate surrounding the DOL’s 

proposed rule is the question of jurisdiction. Do you believe that 

any such rule amending the definition of fiduciary investment advice should originate at the SEC as directed by Section 913 of the 

Dodd-Frank Act? 

A.3. I am concerned by the claims of some commenters that the Department of Labor’s proposed rule—although seeking to protect investors—could have unintended adverse consequences on investors’ 

access to financial services. Ensuring that investors have access to 

the financial services they need is one component of investor protection, which, in turn, is a key part of the SEC’s mission. If confirmed, I will work with the SEC staff to understand how DOL’s 

rule would affect the investors the SEC is charged with protecting. 

As your question notes, Section 913 of the Dodd-Frank Act authorizes the SEC to establish and define a standard of conduct for 

financial professionals providing personalized investment advice. 

Section 913 reflects Congressional recognition of the need for careful regulation to guard against unintended consequences and the 

SEC’s long experience and expertise in this area. The Department 

of Labor, in exercising its authority under the Employee Retirement Income Security Act to finalize its fiduciary rule, should draw 

on the SEC’s expertise and coordinate its actions with those of the 

SEC. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR SASSE 

FROM HESTER MARIA PEIRCE 

Q.1. In your opinion, under what circumstances might it be appropriate for national securities regulations to preempt blue sky laws? 

Why? 

A.1. The blue-sky laws have played an important role in the development of our securities markets and continue to serve investors. 

Nevertheless, as our markets become more national in scope, preemption may be appropriate in some circumstances. Specifically, 

preemption may be warranted if it is authorized by statute, appropriate Federal investor protections are in place, and State blue sky 

114 

protection would be duplicative. The SEC, for example, recently determined to preempt State securities registration (but not antifraud) laws in connection with the subset of newly permitted socalled Regulation A+ offerings that the Commission predicted 

would be ‘‘national in character.’’ In doing so, the SEC cited a concern that the cost of complying with multiple State laws ‘‘may deter 

issuers from using amended Regulation A, which could significantly limit the impact of the exemption as a tool for capital formation.’’ The SEC and State regulators should work closely with one 

another on investor protection and capital access issues. If I were 

to be confirmed, I would consult the North American Securities Administrators Association, along with my fellow Commissioners and 

Commission staff, in considering whether preemption is appropriate in specific circumstances. 

Q.2. Does anything need to be done to improve the use of cost-benefit analysis at the SEC? If so, will you commit to advocating for 

taking these steps? 

A.2. Since the SEC staff issued its March 2012 guidance on the use 

of economic analysis, the SEC appears to have placed a greater emphasis on both generating high-quality economic analysis and using 

it to help shape its rules. If I were confirmed, I would have a better 

view of how the SEC is conducting economic analysis, whether that 

analysis is being used, and whether the problems identified by 

courts and academics in the past have been resolved. Among other 

things, I would work to ensure that the agency is using economic 

analysis to clearly identify the problem a regulation is intended to 

solve, assess the benefits and costs of alternative solutions against 

a common baseline, and identify metrics in advance for retrospectively assessing the success of a regulation at solving the problem. 

Q.3. I’d like to ask you more about the SEC’s mission ‘‘protect investors, maintain fair, orderly, and efficient markets, and facilitate 

capital formation.’’ 

What factors should dictate the SEC’s rulemaking schedule? 

A.3. The SEC’s rulemaking schedule should be dictated by statutory mandates, market and regulatory developments, and resource 

constraints. To the extent possible, the Commission should adopt 

rules in conformance with the timelines set by Congress. The Commission also must seek to ensure that its rulemaking agenda is responsive to new developments in technology, emerging threats to 

investors, innovations, economic growth, disruptive market events, 

and regulatory changes that might necessitate companion changes 

in SEC rules. Although the Chair sets the rulemaking schedule, if 

confirmed, I would be pleased to work with her on balancing the 

SEC’s need to be responsive to statutory mandates with the imperative of keeping pace with developments in the markets. 

Q.4. Does the SEC’s rulemaking schedule reflect the right balance 

between focusing on these three missions? If not, how would you 

change it? 

A.4. Without being at the Commission and having access to relevant nonpublic information, it is difficult to know whether the 

rulemaking schedule properly balances the three missions. That 

said, I am concerned that the heavy statutorily mandated ruleVerDate Nov 24 2008 11:06 Jul 27, 2016 Jkt 046629 PO 00000 Frm 00118 Fmt 6602 Sfmt 6602 L:\HEARINGS 2016\03-15 NOMINATIONS\HEARING\31516.TXT JASON
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making schedule of the last several years has distracted the agency 

from bread-and-butter rulemakings in each of the SEC’s three mission areas. Ensuring that SEC and market infrastructures are 

working effectively, modernizing corporate disclosure, and streamlining access to capital are some of these issues. If I were to be confirmed, I would not be able to control the agenda, as the SEC Chair 

exercises that authority. However, I would work with Chair White 

and my fellow Commissioners to identify issues that warrant space 

on the rulemaking agenda. 

Q.5. Former SEC Commissioner Dan Gallagher has said that 

‘‘issues specific to small business capital formation too often remain 

on the proverbial back burner. This lack of attention doesn’t just 

harm small business; it also harms investors and the public at 

large.’’ Do you agree? 

A.5. Commissioner Gallagher correctly identified small business 

capital formation as an area that could benefit from greater SEC 

attention. The JOBS Act helped to change that by directing the 

SEC to prioritize capital formation, including small business capital formation. The SEC responded with a number of changes that 

are likely to ease small companies’ ability to raise capital. The SEC 

should monitor those changes to see whether they are working as 

intended and pursue additional rulemaking that enables investors 

to safely participate in funding the growth of small companies and 

benefits investors, companies, and the economy as a whole. 

Q.6. Will you commit to actively pursuing the ‘‘capital formation’’ 

mission as a Commissioner? If so, how? For example, should the 

SEC do more to encourage public IPOs? Should the SEC do more 

to scale regulations for smaller firms? 

A.6. If I were confirmed, I would pursue all elements of the SEC’s 

mission, including facilitating capital formation. Before committing 

to specific avenues, I would want to consult with investors, small 

companies, my fellow Commissioners, the staff, the SEC’s Advisory 

Committee on Small and Emerging Companies, and others with interest, experience, and expertise in small business capital formation. The Advisory Committee and the annual Government-Business Forum on Small Business Capital Formation have made a 

number of recommendations, which warrant consideration. Among 

the areas the SEC should consider for further reform are identifying and removing unwarranted obstacles to IPOs and appropriately scaling regulation for small firms, while continuing to 

maintain investor protection. 

Q.7. I’d like to ask about the SEC’s use of Administrative Law 

Judges: 

Under what circumstances is it appropriate for the SEC to send 

cases to Administrative Law Judges? 

A.7. Congress has authorized the SEC to use administrative law 

judges (ALJs) in a number of circumstances, but has allowed the 

SEC considerable discretion in forum selection. In exercising this 

discretion, the SEC should follow a consistent set of guidelines that 

provides a clear, predictable framework for agency staff, potential 

subjects of enforcement actions, and the general public and ensures 

appropriate accountability. The SEC’s existing guidance looks at 

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1Office of Inspector General, SEC, Report of Investigation Case #15-ALJ-0482-I, 21 (Jan. 21, 

2016), available at https://www.sec.gov/oig/reportspubs/Final-Report-of-Investigation.pdf. 

factors such as the types of relief available and the relative costs 

of bringing actions. If I were to be confirmed, I would like to work 

with my fellow Commissioners and the enforcement staff to determine whether the factors outlined in the staff guidance are appropriate and whether additional guidance from the Commission is 

warranted. 

Q.8. Do you have constitutional concerns with ALJs? 

A.8. Congress has authorized the SEC to use ALJs. In a number 

of ongoing challenges, respondents have raised constitutional concerns. These concerns are best considered and decided by Article III 

judges. If I am confirmed, I will work to ensure that the SEC responds appropriately to any constitutional issues identified by 

courts. 

Q.9. Is there a risk that ALJs have an improper pro-SEC bias? 

A.9. An ALJ, like any other arbiter, is responsible for assessing in 

each matter whether she is able to be objective or should recuse 

herself. If an ALJ fails to behave properly, a respondent can raise 

these concerns during the appeals process. If I were confirmed, I 

would take allegations of bias seriously. There are avenues to investigate such allegations. For example, the SEC’s Office of Inspector General recently looked into some specific allegations of ALJ 

bias and ‘‘did not develop any evidence to support the allegations 

of improper influence.’’ 1 If future bias allegations arise, the OIG 

could be called on to assess their validity. More generally, the Commission is currently revisiting the rules applicable to administrative proceedings. This is an important initiative to ensure that administrative proceedings are fair and effectively test the validity of 

the facts and legal violations identified by the staff. If confirmed, 

I will be very interested to review the comments the Commission 

has received in response to the proposed changes. 

Q.10. I’d like to obtain more information about your approach to 

securities regulations. 

Is there a risk that regulations can give large incumbent firms 

a competitive advantage over smaller farms? If so, what can be 

done to mitigate this risk? 

A.10. Regulators must be mindful of the risk that regulations can 

give incumbent firms a competitive advantage over smaller firms. 

The notice-and-comment rulemaking process under the Administrative Procedure Act helps to mitigate this risk by ensuring that all 

interested members of the public have an opportunity to identify 

potential unintended consequences of the regulation. By issuing a 

concept release prior to drafting a proposed rule, the agency can 

spot potential harm to small firms early. Economic analysis and 

Regulatory Flexibility Act analysis—both of which can help the 

agency identify competitive harm and craft solutions that are sensitive to the impact on small entities—are important mitigating 

tools. The SEC also can use its exemptive authority to ease disproportionate burdens on small firms. 

117 

Q.11. Is it ever appropriate for the SEC to engage in ‘‘merit review’’ of investment choices, where the SEC would elevate its evaluation of a particular investment over the evaluation of a private 

investor? 

A.11. Absent a contrary directive from Congress, the SEC’s role is 

to provide the investor with the information she needs to make a 

careful decision, rather than to override her evaluation of an investment through regulatory merit review. 

Q.12. Is it appropriate—in the words of Chair White—to ‘‘effectuate social policy or political change through the SEC’s powers of 

mandatory disclosure’’? 

A.12. The role of SEC-mandated disclosure is to ensure that investors have the information they need to evaluate investment opportunities. Under the securities laws, the purpose of SEC disclosure 

is not to achieve social or political ends. 

Q.13. Is there a danger that disclosure requirements become so voluminous that they become unhelpful to investors? If so, what can 

be done to avoid this problem? 

A.13. Properly designed disclosure requirements benefit investors 

by getting them the information they need to make investment decisions. It is important to remember that investors also bear the 

cost of disclosure mandates. First, company (and thus shareholder) 

resources are devoted to making legally compliant disclosures. Second, the disclosure of immaterial items can obscure material ones. 

Accordingly, the SEC needs to carefully craft and periodically revisit disclosure mandates. The SEC’s ongoing Disclosure Effectiveness initiative is a useful undertaking to answer the question of 

whether the SEC’s disclosure mandates are getting the information 

to investors that they need in the form they need it. If I am confirmed, I look forward to working with colleagues at the SEC to 

further this initiative and, in conjunction with each potential new 

disclosure mandate, to consider whether and how investors will use 

the information. 

Q.14. I’d like to explore your views on ‘‘accredited investors.’’ 

Should the SEC consider expanding the definition of ‘‘accredited 

investor’’ beyond mere investor income and assets to also include 

investor expertise, such as possessing a graduate degree in a related field? 

A.14. The SEC is undertaking a statutorily mandated review of the 

scope of the accredited investor standard, and the staff recently 

issued a report on the review. One of the issues covered by the report is the feasibility of assessing an investor’s sophistication using 

metrics other than wealth or income. If confirmed, I look forward 

to reviewing the report, comments collected by the SEC in its review of the definition, and other relevant materials such as the 

Government Accountability Office’s report on ‘‘Alternative Criteria 

for Qualifying as an Accredited Investor’’. I also look forward to 

working with SEC staff and my fellow Commissioners in revisiting 

the accredited investor definition and considering whether it should 

be expanded beyond income and net worth. Among the considerations that will inform my view are how investors would be affected by any changes and whether a particular change would help 

118 

to open capital formation to groups and regions of the country that 

have previously been excluded by the existing income and net 

worth metrics. The ultimate goal is to ensure that investors are 

adequately protected, while facilitating capital formation and allowing investors access to a range of investment opportunities. 

Q.15. How should the SEC strike the balance between investor protection and investor freedom when it comes to the definition of accredited investor? 

A.15. Investor protection and investor freedom go hand-in-hand. 

Precluding an investor from an investment may protect the investor from losses in that particular investment, but may harm the investor’s ability to build her portfolio in the manner she judges best. 

Economic analysis of any changes can help the SEC to strike the 

proper balance. In the context of accredited investors, for example, 

the SEC needs to assess how any change in the definition will affect the size and composition of the pool of accredited investors. To 

help to strike the balance, the SEC also should seek input from investor groups and continue its efforts to collect and analyze relevant data. 

Q.16. The marketplace online lending ecosystem has grown significantly as of late. Would you recommend changes to how the SEC 

approaches this field? For example, should the SEC contemplate 

creating a broad safe harbor for marketplace online lenders, which 

scales registration requirements to reflect their unique business 

model? 

A.16. If I am confirmed, I look forward to working with my colleagues to look at how well jurisdictional divisions and SEC registration requirements have worked in this context, particularly as 

the industry has grown and changed over the years since its inception. If the current regulatory framework is not working, is imposing costs without proportionate benefits, or is uncertain in its application, the SEC should consider a range of alternatives, including a safe harbor or a rule specifically designed for these types of 

offerings. The SEC should work with other regulators active in this 

space to ensure that rules are effective, but not duplicative. As 

with other areas, the key is ensuring that investors are protected 

and able to obtain the information they need without imposing an 

undue burden on capital formation. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS 

FROM HESTER MARIA PEIRCE 

Q.1. The New York City Public Advocate recently wrote the SEC 

asking that it examine publicly traded gun manufacturers with an 

eye towards charging them with fraud for not disclosing information about gun-related deaths. 

Similar questions have been raised about oil companies and climate change. In fact, Attorney General Lynch recently said that 

the Department of Justice considered prosecuting climate change 

skeptics. 

The idea that the Government would consider prosecuting political opponents is chilling and has no place in our political system. 

119 

The SEC should be about safeguarding markets, protecting investors, and helping to foster capital formation. 

Attempts to settle political scores that should be decided at the 

ballot box have no place on the SEC’s agenda. 

Can you assure me that you will not pursue or support any attempts to politicize corporate disclosure rules—whether for gun 

control, climate change or any other issue which should be properly 

decided by Congress? 

A.1. The SEC’s mission is to protect investors, facilitate capital formation, and maintain fair, orderly, and efficient markets. If I were 

to be confirmed, I would be committed to ensuring that the SEC 

focuses exclusively on this mission. In fulfilling this mission, a key 

role of the SEC is making sure that investors have the information 

they need to make investment decisions. I would work to ensure 

that corporate disclosure is designed for this purpose, not for political ends. 

Q.2. One of the best tools we have to make sure that regulations 

are fair and make sense is cost-benefit analysis. 

A cost-benefit analysis allows regulators to clearly examine the 

benefits of a rule and weigh them against the damages caused by 

the proposed rule. 

If a statute is silent on the use of cost-benefit analysis, do you 

believe the Commission can conduct a cost-benefit analysis or can 

it only conduct an analysis if the statute explicitly includes that requirement? 

A.2. A cost-benefit analysis is an essential tool for the SEC as it 

seeks to identify the problem it is trying to solve, alternate solutions to the problem, and the costs and benefits associated with 

each potential solution. If a statute is silent with respect to costbenefit analysis, the SEC—in furtherance of sound rulemaking and 

the Commission’s commitment to identify real problems and solve 

them effectively—can and should perform such an analysis. 

Q.3. Rather than creating punitive rules which increase compliance 

costs, what can you do, if you are confirmed, to incentivize regulated entities and investors to make better decisions? 

A.3. An important function of the SEC, as a regulatory agency, is 

to assist regulated persons that want to comply with the law in 

doing so. The SEC’s large compliance program works with regulated entities to help them identify problems and implement effective solutions. When well-intentioned registrants know that they 

can come to the SEC for guidance in getting things right, they will 

make better decisions and investors will be better protected. With 

respect to investor decision making, the SEC’s Office of Investor 

Education and Advocacy works with investors to educate them and 

encourage them to ask question and receive satisfactory, credible 

answers before investing. Investor education thus serves to empower investors to make better decisions. Another way to aid investors is to ensure that they have access to accurate ongoing disclosures about their investments and comprehensive, current information about the financial professionals with whom they work. 

Q.4. Last year, the New York City pension system issued numerous shareholder proposals on proxy access. Many of these proposals 

120 

were centered on energy companies and their purpose was not to 

improve governance but to push an agenda on climate change. 

Two recent reports by the Manhattan Institute have shown that 

public pension funds that engage in politically motivated corporate 

governance fights have lower returns forcing taxpayers to foot the 

bill, while union-sponsored shareholder proposals are concentrated 

in industries or businesses targeted in organizing campaigns. 

What role should the SEC undertake as a gate-keeper to make 

certain that shareholder proposals and director elections are correlated to the interests of a corporation and its investors, rather 

than a political or social agenda? 

A.4. The SEC staff reviews shareholder proposals when companies 

ask whether they can exclude them from their proxies without facing an SEC enforcement action. In making such a no-action request, the company identifies a reason for the exclusion that corresponds with one of the bases for exclusion in SEC rule 14a-8, 

which otherwise requires that proposals be included in the proxy. 

If I were to be confirmed, I would welcome the opportunity to work 

with the SEC staff and my fellow Commissioners to take a close 

look at the shareholder proposal process and determine whether 

adjustments to the rule or additional guidance are needed in light 

of the changing volume and nature of such proposals. 

Q.5. The Labor Department’s proposed Fiduciary rulemaking will 

radically alter the market for individual retirement savings. 

Many commentators believe that rather than protecting investors, it will price many middle class retirement savers out of the 

market for investment advice. 

Can you envision circumstances in which a retirement saver of 

more modest means could benefit from the personalized advice of 

someone who knows them and their circumstances but who is not 

qualified as a fiduciary? 

A.5. Over the years, investors have worked with financial professionals subject to a variety of conduct standards. Many of these investors have been served well by financial professionals who are 

not fiduciaries. 

Q.6. In December 2015, the SEC voted to propose rule 18f-4, which 

would regulate the use of derivatives by registered investment companies. This rule attempts to regulate the use of derivatives to protect investors and reduce systemic risk, but I am concerned that it 

goes farther than intended and will alter the commodities futures 

market by setting arbitrary portfolio limitations for derivatives. 

The rule appears to incentivize funds to overweight portfolios 

with stocks and bonds and move away from trading commodities. 

What is your view on the regulation of simple, diversifying derivatives? 

A.6. The SEC’s recently proposed rule 18f-4 under the Investment 

Company Act would change the way registered investment companies can use derivatives. If confirmed, I would discuss the proposal 

with my fellow Commissioners and relevant staff and review the 

comments, the white paper prepared by the Division of Economic 

and Risk Analysis, and other relevant materials before formulating 

a position on the rule. An appropriate regulation will balance the 

121 

important role that derivatives can play in a portfolio with other 

investor protection concerns. 

Q.7. Do you believe that proposed rule 18f-4 will limit the average 

investor’s ability to access diversifying assets? If so, why? If not, 

why not? 

A.7. For the stated purpose of protecting investors, proposed rule 

18f-4 would limit the ability of registered investment companies to 

use diversifying assets, which in turn would affect investors’ investment options. In finalizing the rule, the Commission will have to 

consider whether the proposed restrictions are appropriately calibrated to achieve the intended objectives without undue adverse 

consequences for investors. As part of that consideration, the SEC 

should consider the comment letters it has received and economic 

analyses conducted by the Division of Economic and Risk Analysis 

and submitted to the SEC as part of the notice-and-comment process. Economic analysis will be key in understanding how average 

investors would be affected by such a rule. 

Q.8. Are you concerned that this rule could harm rather than protect investors because it incentivizes registered investment companies to concentrate their assets in equities rather than derivatives? 

A.8. In connection with any rule that places limitations on investment company holdings, it is important to understand how investors will be affected. In addition to exploring the potential benefits 

of the rule, if I were confirmed, one question I would ask in connection with this rule is whether and to what degree it could harm investors by limiting the flexibility of registered investment companies to select and pursue investment strategies. The proposing release asks commenters to respond to many questions that are potentially relevant in this context, such as ‘‘To what extent do commenters anticipate that proposed rule 18f-4 could lead funds to 

modify their investment strategies or decrease their use of derivatives?’’ and ‘‘If funds would have to restructure their portfolios to 

comply with the risk-based portfolio limit, how would they do so?’’ 

If confirmed, I look forward to reviewing comments as I seek to understand how registered investment companies would respond to 

the rule and thus how investors would be affected. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHUMER 

FROM HESTER MARIA PEIRCE 

Q.1. Ms. Peirce, do you believe that information related to a company’s corporate political spending should be considered material to 

prospective investors and/or shareholders? 

A.1. The materiality of information related to an issuer’s corporate 

political spending depends heavily on the facts and circumstances. 

An analysis of materiality needs to consider both quantitative and 

qualitative factors, such as the size of the expenditure, the size of 

the corporation, and the corporation’s other disclosures. As the Supreme Court has stated, for information to be material, ‘‘there must 

be a substantial likelihood that the disclosure of the omitted fact 

would have been viewed by the reasonable investor as having sigVerDate Nov 24 2008 11:06 Jul 27, 2016 Jkt 046629 PO 00000 Frm 00125 Fmt 6602 Sfmt 6602 L:\HEARINGS 2016\03-15 NOMINATIONS\HEARING\31516.TXT JASON
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1TSC Industries v. Northway, 426 U.S. 438, 449 (1976). 

nificantly altered the ‘total mix’ of information made available.’’ 1

Securities law has developed standard metrics for assessing quantitative and qualitative materiality, which I would use in assessing 

materiality with respect to corporate political spending. 

Q.2. Do you believe that the SEC should consider whether investors should be entitled to information disclosing a company’s corporate political spending? 

A.2. Broad SEC consideration of this issue might occur in response 

to rulemaking petitions the SEC has received on the issue. Section 

707 of the Consolidated Appropriations Act of 2016, however, includes the following limitation on the use of SEC funds: 

None of the funds made available by any division of this 

Act shall be used by the Securities and Exchange Commission to finalize, issue, or implement any rule, regulation, 

or order regarding the disclosure of political contributions, 

contributions to tax exempt organizations, or dues paid to 

trade associations. 

By including this language, Congress seems to have foreclosed 

the issue for this year. If I am confirmed and if the Chair places 

the issue on the agenda after this Congressional limitation has expired, I would consider the issue. My consideration would include 

reviewing relevant rulemaking requests and comment letters and 

discussing the issue with the Chair, my fellow Commissioners, and 

SEC staff with expertise in corporate disclosure. 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR MENENDEZ FROM HESTER MARIA PEIRCE 

Q.1. The issue of corporate political spending is quite simply about 

materiality and transparency for investors. Demand for this information by public investors has increased steadily in recent years, 

as has support for such a rulemaking from former SEC Chairs and 

Commissioners. In fact, former SEC Chairs William Donaldson and 

Arthur Leavitt wrote to Chair White in May of last year, and said 

that the Commission’s failure to act, ‘‘flies in the face of the primary mission of the Commission, which has since 1934 been the 

protection of investors.’’ 

Do you agree with former SEC Chairs Donaldson and Leavitt 

that shareholders—those that actually own the wealth of corporations—should be informed of political spending decisions made with 

their money? 

A.1. Your question highlights transparency and materiality—two 

considerations that drive the SEC as it works to ensure that investors have the information they need to make investment decisions. 

An analysis of materiality needs to consider both quantitative and 

qualitative factors such as the size of the expenditure, the size of 

the corporation, and the corporation’s other disclosures. As the Supreme Court has stated, for information to be material, ‘‘there must 

be a substantial likelihood that the disclosure of the omitted fact 

would have been viewed by the reasonable investor as having sigVerDate Nov 24 2008 11:06 Jul 27, 2016 Jkt 046629 PO 00000 Frm 00126 Fmt 6602 Sfmt 6602 L:\HEARINGS 2016\03-15 NOMINATIONS\HEARING\31516.TXT JASON
123 

1TSC Industries v. Northway, 426 U.S. 438, 449 (1976). 

2See, e.g., Lisa M. Fairfax, ‘‘Board Diversity and Corporate Performance: Filling in the Gaps: 

Board Diversity Revisited: New Rationale, Same Old Story?’’, 89 N.C.L. REV. 855 (2011). 

nificantly altered the ‘total mix’ of information made available.’’ 1

Securities law has developed standard metrics for assessing quantitative and qualitative materiality, which, if confirmed and if the 

issue is raised, I would use in assessing materiality with respect 

to corporate political spending. 

Q.2. In your opinion, do diverse boards have the ability to engage 

in richer and ultimately more effective discussion and debate than 

those boards that are less diverse? 

A.2. Diversity on boards allows people of different backgrounds, expertise, and experience to contribute to decision making. Entities 

in the public and private sector have benefited from drawing on diverse talent who bring to the table different ways of analyzing and 

solving problems. 

Q.3. Do you agree that a boardroom composed of directors of diverse backgrounds is less likely to practice what can be dangerous 

‘‘groupthink’’? 

A.3. Boards that are made up of inquisitive individuals with a diversity of backgrounds, expertise, and experience have the advantage of being able to consider decisions from multiple perspectives. 

An environment that welcomes people of diverse mindsets is therefore likely to be more resistant to ‘‘groupthink.’’ 

Q.4. In your opinion, what value do directors of diverse backgrounds bring to board discussions? 

A.4. There is an academic literature (some of which is written by 

my fellow nominee, Professor Lisa Fairfax 2) that delves deeply into 

the nuances of this topic. In my opinion, directors of diverse backgrounds bring to bear on decisions their unique personal, academic, 

intellectual, and professional experiences and distinctive approaches to problem-solving. As noted above, considering issues 

from multiple perspectives makes it more likely that the full range 

of challenges and opportunities will be identified and addressed 

timely and effectively. 

Q.5. In your opinion, do investors have the tools necessary to make 

an informed choice about whether they prefer to work with a 

broker-dealer operating under a suitability standard or an investment adviser who is a fiduciary? 

A.5. It is important that investors understand the nature of their 

relationship with their financial professionals. The SEC should continue working to eliminate investor confusion in this area. To answer the question of whether investors currently have the tools 

they need to make an informed choice about working with a 

broker-dealer operating under a suitability standard or an investment adviser who is a fiduciary, I would want to review the latest 

relevant work of the SEC’s Divisions of Investment Management 

and Trading and Markets, Office of Investor Education and Advocacy, and Investor Advocate. If confirmed, I also would want to consult with the staff who have been studying the issue, seek feedback 

from the Investor Advisory Committee, review relevant outside 

124 

studies by investor groups, academics, and others, and discuss 

these issues with my fellow Commissioners. If I am confirmed and 

I find that investors do not have enough information to make informed decisions about their financial professionals, I would work 

with my fellow Commissioners and the staff to devise an appropriate solution. 

Q.6. Do you see any reason why we should not have a uniform 

standard that includes broker-dealers? If confirmed as Commissioner, will you support such a rulemaking? 

A.6. Before developing a position on the propriety of a rulemaking 

that imposed a uniform standard, I would need to see what the 

specific proposed standard is and analyze it in the context of the 

existing standards applicable to investment advisers and brokerdealers. Investor protection—including ensuring access to financial 

professionals for investors at all levels—is an essential consideration in any such analysis. If confirmed and presented with a proposed uniform standard, I would want to discuss this with my fellow Commissioners and consult the staff—including those who 

work directly with investors—to understand how the rulemaking 

would affect investors. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER 

FROM HESTER MARIA PEIRCE 

Q.1. Unelected Directors: The Committee on Capital Markets Regulation recently conducted a study examining the frequency with 

which corporate directors resign or decline to stand for re-election 

after failing to receive a majority of shareholder votes. The study 

finds that 85 percent of directors who received less than a majority 

of votes were still board members 2 years after the vote—so called 

‘‘unelected directors.’’ To protect the integrity of the shareholder 

vote in the face of the unelected directors problem, would you be 

supportive of a Commission regulation requiring, at a very minimum, that corporate boards disclose the specific reasons that an 

unelected director remain on the board despite the failure to receive a majority of shareholder votes? 

A.1. The Committee on Capital Markets Regulation and at least 

one investor group have made recommendations to the SEC regarding directors remaining on boards after failing to receive a majority 

vote. If confirmed, I would welcome the opportunity to review these 

recommendations, the Committee on Capital Markets Regulation 

study, and other relevant studies and data to understand—along 

with my fellow Commissioners and informed by the SEC staff— 

whether there is a need for a Commission regulation and, if so, 

whether a disclosure approach is appropriate. As with other issues 

in this area, an important consideration is the roles that State corporate law and SEC regulation play in building effective corporate 

governance that enables companies to operate efficiently and ensures accountability to shareholders. 

Q.2. Corporate Disclosures: The SEC uses outdated documents, instead of standardized data, to collect most corporate disclosures. 

This means companies must file the same information multiple 

times, and investors must hunt through documents for relevant inVerDate Nov 24 2008 11:06 Jul 27, 2016 Jkt 046629 PO 00000 Frm 00128 Fmt 6602 Sfmt 6602 L:\HEARINGS 2016\03-15 NOMINATIONS\HEARING\31516.TXT JASON
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formation (or pay aggregators to do it for them). The U.S. Chamber 

of Commerce has called on the SEC to consider a ‘‘company file’’ 

approach, in which companies would electronically update material 

information, rather than filing redundant documents. Last summer, Senator Crapo and I asked the SEC to work toward transforming its whole corporate disclosure system from documents to 

standardized data, which is a necessary first step for the ‘‘company 

file’’ to be possible. Do you believe that the SEC should modernize 

the corporate disclosure system in this manner? 

A.2. An important undertaking for the SEC is to eliminate redundant disclosures by companies and ensure that investors have 

ready access in a usable format to the information they need to 

make informed investment decisions. The SEC’s ongoing Disclosure 

Effectiveness initiative is a valuable step in identifying what the 

SEC can do to achieve these objectives. If confirmed, I look forward 

to working with my fellow Commissioners and the SEC staff on 

this initiative and related efforts to improve corporate disclosure. 

Discussions within the SEC and with people who prepare and use 

corporate disclosures will help me to determine how the SEC 

should modernize disclosure. As you have emphasized, any such 

approach should incorporate technology as a tool for maximizing 

the value of corporate disclosures. If carefully undertaken, the continuing move toward standardized data offers great promise for 

companies and investors. 

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