Global Leaders Series: Commissioner Hester M. Peirce
U.S. Securities and Exchange Commission
Jeff Bandman, GDF Board Member, was joined by Commissioner Herster Peirce on the Global Leaders Series, in partnership with GBBC.
Prior to joining the SEC, Commissioner Peirce conducted research on the regulation of financial markets at the Mercatus Center at George Mason University. She was a Senior Counsel on the U.S. Senate Committee on Banking, Housing, and Urban Affairs, where she advised Ranking Member Richard Shelby and other members of the Committee on securities issues. Commissioner Peirce served as counsel to SEC Commissioner Paul S. Atkins. She also worked as a Staff Attorney in the SEC’s Division of Investment Management. Commissioner Peirce was an associate at Wilmer, Cutler & Pickering (now WilmerHale) and clerked for Judge Roger Andewelt on the Court of Federal Claims.
“The overarching theme is that we need clarity at the commission level”
Commissioner Peirce shared her views on the need for clarity from regulators, the best approaches for ensuring innovation flourishes, and building markets that work for everyone.
On providing clarity, Peirce pointed to three key areas: firstly, clarity over what is and is not a security. The intentionally broad definition of security has led to some confusion, particularly in the digital asset space. Secondly, Peirce noted the need to provide clarity to the broker dealers and other entities involved in this space on the parameters they are and are not allowed to do. Thirdly, Peirce highlighted that there is a need to provide a clear list of what the SEC is looking for, noting that the list of issues that may lead to a denial should be consistent with the approach taken in the past for exchange traded products:
“We’re looking for a level of certainty with regard to the underlying spot markets that I don’t think we’ve demanded in other cases, and we’re looking for a degree of surveillance of those markets that I don’t think we have demanded in other markets.”
Within this need for clarity, the view from Pierce is that innovation should be approached as an opportunity rather than a threat. She highlights that the new nominee for SEC Chairman, Gary Gensler, has a strong knowledge base on the subject of digital assets, which will be a strength in delivering the clarity needed.
That said, there are processes that will need to be optimised. Bandman and Peirce discussed the most efficient approaches to determining whether or not a product is classified as a security. Although No Action Letters have been used, these are time consuming. The Safe Harbor approach developed by Peirce has proved useful for companies that are already delivering their projects:
“We’re going to give you the opportunity to develop your network and sell tokens as you’re developing that network, but you have a three year period to do that. By the end of that three year period it should be clear that the things that are the tokens on the network are not securities.”
Peirce is keen to approach the incoming chairman with a Safe Harbour 2.0, which would build in more protection for purchasers. As with all of these projects, Peirce makes it clear to the community that feedback from the public is welcome and encouraged, and indeed crucial to embracing innovation.
Bandman and Peirce discussed the Safe Harbor for broker/dealers working with digital assets.While this approach is not yet perfect, Peirce is optimistic due to the high engagement on the subject from the public. Although the safe habor may have highlighted that the lines are more blurry than the SEC might hope, Peirce believes that it is important keep innovation in mind when developing these frameworks.
On the subject of partisan politics,Peirce believes cryptocurrency’s novelty offers an opportunity to encourage collaboration across the aisle:
“I think that’s one of the really nice things about crypto which is that it’s a new set of issues, and people on both sides of the aisle recognise the promise of the technology. There are sceptics of course on both sides of the aisle too, but I think there is a real joint understanding of the importance of having rules in place that provide more clarity and that allow some of this innovation to happen here in the United States. I’m optimistic that we can come together across partisan divides and work on this issue.”
Gamestop, or ‘the cousin of crypto’, as Bandman put it, was brought up as questions were opened to the audience. Peirce stressed that it is natural that the immediate reaction from regulators is a cautious one. However, it highlighted important considerations for the participation of retail investors in our markets. This includes exploring who we consider an accredited investor, and assessing traders’ understanding of the risks involved in their investments, in order to ensure that capital markets are accessible:
“I think we have to be very careful to guard our capital markets and to send the message that this is for everyone…everyone in society should be benefiting from the capital markets. If not, there’s no point for them to exist.”
Whether capital markets, bitcoin’s adoption by corporate investors, or DeFi, Peirce stresses a need for clarity, collaboration, and learning from public consultation as well as other jurisdictions in order to allow innovation to happen.
Global Digital Finance and the Global Blockchain Business Council would like to thank Commissioner Hester Peirce for her openness in this webinar. As stated by Commissioner Peirce, the views stated are her own and do not represent the SEC.
Continue the conversation in the video here: https://www.gdf.io/resources/webinars/
Press date : 23.02.2020
