This year – 2025 – marks the start of a new presidential administration, which holds tremendous potential. It has been a privilege to serve these past couple of months as the Acting Chairman of the Securities and Exchange Commission.[1]

This year also marks a personal milestone – my thirtieth year of legal practice, which started out as a first-year associate in the ’40 Act practice of a major law firm. The practice was led by Richard “Dick” Phillips, one of the legends of the securities bar and, equally important, a former member of the SEC staff. Dick served the Commission during the 1960s in several capacities, including assistant to the chairman, assistant general counsel, and staff director of the SEC Corporate Disclosure and Investment Company Studies.

During that time, I learned a few things. First, I could distinguish between an open-end and a closed-end fund. And second, I learned to have a lot of respect for the SEC staff.

Thus, I jumped at the opportunity to join the staff in 2006. Since then, I have had many roles at the Commission, both as part of the executive staff and in the Division of Investment Management. I have been detailed to work on issues related to funds and asset managers at the Department of the Treasury, the Department of Labor, and the Senate Banking Committee. These experiences, and the terrific people with whom I have worked in public service, have contributed to how I now oversee and manage the Commission as acting Chairman during this transition period.

I am pleased to share my perspective today on my views as to the Commission’s upcoming work.

A Blueprint for SEC Rulemaking Processes

A core responsibility held by each SEC commissioner is the power to vote on how the agency should exercise its authority granted by the federal securities laws. Some of these votes are on the Commission’s various rule proposals and adoptions that govern market participants.

My roles as counsel to multiple commissioners, as well as being a rule-writer on the staff in the Division of Investment Management, have given me a unique view into all aspects of the rulemaking process. Rulemaking, when properly conducted, is not an easy task. But the legal and policy changes implemented through rulemaking can have profound effects on investors and the markets. It was a particular privilege to lead the rulemaking team that finalized the mutual fund summary prospectus rule in 2009. I saw first-hand the importance of a robust and informed rulemaking process in producing practical rules that serve the Commission’s mission. Not to mention, of course, that this process is required by law.[2]

During the past four years, however, I have expressed my concern about the changes to the Commission’s rulemaking processes – which were not for the better.[3] I have described these changes as “rulemaking shortcuts,” often taken in the name of expediency. Unfortunately, these shortcuts have returned to haunt the Commission in subsequent litigation. One of my objectives will be to set forth a blueprint for restoring the Commission’s rulemaking processes to the “gold standard” among regulatory agencies.

Meaningful Engagement with Stakeholders

The blueprint should start with restoring historical rulemaking comment periods. Recognizing the need for safeguards on federal agencies’ rulemaking authority, Congress enacted the Administrative Procedure Act.[4] Many of you are familiar with the “notice and comment” approach to rulemaking that is a key procedural requirement of that Act. An agency generally must publish a notice in the Federal Register and provide the public the opportunity to comment on the proposal. The notice requirement must “afford[] interested persons a reasonable and meaningful opportunity to participate in the rulemaking process.”[5] The Act does not provide a minimum period to receive comments on rule proposals.[6]But, a comment period of at least 60 days has been endorsed by the Administrative Conference of the United States for significant regulatory actions.[7] Further, executive orders issued by multiple past presidents from both political parties have all recognized the importance of a minimum 60-day comment period.[8]

During the past four years, a significant number of proposals had comment periods shorter than 60 days—45-day, and even 30-day, comment periods were the norm. This represented a notable shift from the Commission rulemaking process, which generally had 60-day comment periods, or even 90-day comment period for more complex rulemakings.[9] This represented a significant deviation from everything that I had been taught about rulemaking as a member of the staff in my nineteen years with the Commission.

Providing thoughtful comments on rule proposals is even more challenging when the rule proposal is dense and the scope of the rulemaking is over-broad. It is nearly impossible when the Commission asks for public comment on multiple proposals affecting the same stakeholders at the same time. I was concerned to see this dynamic in considering the Commission’s 2022 proposal on open-end fund liquidity and swing pricing.[10] The scope of this proposal covered not only amendments to the 2016 liquidity risk management rule for funds, but went significantly further. Notably, it also proposed substantial changes to fund reporting requirements, mandatory swing pricing for funds, and a 4:00 pm “hard close” requirement. Commenters focused significantly on the swing pricing and hard close requirements, which would have fundamentally altered the way that open-end funds operate. The Commission later adopted only a subset of the proposal—the changes to Form N-PORT and N-CEN reporting requirements—without much public comment on those specific aspects to help us weigh the costs and benefits.[11]

There is a tool at the Commission’s disposal that could have been used when confronted with a comment file revealing the need for additional input. Indeed, the Commission has used this tool to great success in the past, although rarely in recent years.[12] This tool is the practice of re-proposing rules where appropriate, or in certain circumstances, re-opening the comment file for a rule proposal. Re-proposing rules has the benefit of taking into account issues that commenters have raised in iterating on the prior rule proposal. It also can respond to changed conditions in the markets. Re-proposal is also appropriate when significant time has passed since the original proposal.[13] While it is unlikely that every aspect of a Commission rulemaking proposal will be deemed perfect by commenters, some proposals generate comments that may affect important parts of the proposal. Thus, when significant changes to a proposal is contemplated, the Commission would be well-served to make use of re-proposals to focus attention on those changes.

A Framework for Getting “Back to Basics” on Rulemaking Processes

The Commission’s blueprint should include some “back to basics” steps to help ensure that each rulemaking proposal is as well-reasoned as possible. All Commission rulemaking actions should begin with an identification of the rule’s purpose. What problem is the Commission trying to solve, and is it squarely within its statutory authority to engage in rulemaking to solve that problem?

Public engagement is often important in determining if there is a problem to solve in the first place, and if so, the range of potential solutions. The simplest form of engagement is a meeting between stakeholders and the staff or Commissioners. Under this Administration, the Commission’s doors are open, and we are ready to have a productive dialogue. Some topics benefit from stakeholders having the opportunity to engage not just with us, but with each other. For these, public roundtables can be good options. Requests for information, concept releases, and advance notices of proposed rulemaking are additional means for obtaining feedback. These can help shape proposals, including by soliciting particular data to inform our efforts. Finally, investor testing can be particularly helpful in assessing disclosure effectiveness.[14] As a sidebar on disclosure—and to build on a key lesson from investor testing—one area I would like to explore is how funds can trim their summary prospectuses to the 3-4 pages the Commission originally envisioned, from the bloated 12-15 pages often seen today.[15]

Once the problem has been identified, there are two additional steps in our decision-making. First, is the proposed regulation likely to be effective or ineffective? Second, is the proposed regulation likely to be costly or not costly? We should strive for regulations that are both effective and not costly. Engagement with our stakeholders, as well as a robust comment period, help the Commission and staff experts weigh the question of whether a proposal will likely be effective.

A proper economic analysis will help us distinguish between approaches that are effective and efficient, versus those that are effective but costly. The Commission is required by statute to consider efficiency, competition, and capital formation in its rulemaking.[16] Our Division of Economic and Risk Analysis has developed robust procedures that build on this statutory mandate, recognizing that high-quality economic analysis is an essential part of our rulemaking.[17]

In my view, there remain areas where we could update these procedures to improve our assessment of rules’ economic impacts. Compliance, attorney, and other professional costs evolve substantially over time, and our staff is currently refining processes for ensuring that our estimates of these burden inputs are as up-to-date as possible. Another area where we could improve our burden analysis is how we think about rules’ impacts on small entities. The definitions our rules use for small funds and advisers were last updated over 25 years ago.[18] We are statutorily required to consider our regulations’ impact on small entities—but when our rules define only a tiny fraction of firms as “small,” I question how meaningful this consideration can be.[19] There are not many fund complexes with net assets of $50 million or less[20] and it would seem strange to treat a $60 million fund complex the same as an $11.6 trillion fund complex. I have asked the staff to develop recommendations on amending the small entity definitions, and I look forward to considering these.

Further Policy Development– Where Do We Go From Here?

The Commission’s blueprint needs to prioritize effective and cost-efficient regulations that respect the limits of our statutory authority. We must be clear-eyed about how existing proposals fare under this rubric. Using this framework for analysis, the Commission could consider options that include withdrawing or re-proposing existing rule proposals. My concerns with some existing rule proposals, including those addressing the safeguarding of advisory client assets, outsourcing by investment advisers, ESG disclosures for funds and advisers, and digital engagement practices, are a matter of public record.[21] With respect to the safeguarding proposal, commenters expressed significant concern with the broad scope of the proposed safeguarding rule for investment advisers, which would extend the custodial requirements to virtually any asset, including crypto.[22] Given such concern, there may be significant challenges to proceeding with the original proposal. As such, I have asked the SEC staff to work closely with the crypto task force to consider appropriate alternatives, including its withdrawal.

In terms of recently-adopted rules, consideration should be given as to whether changed circumstances weigh in favor of taking a pause. We are reviewing and considering further action on whether certain rules that the Commission has adopted, but which are not yet effective, is appropriate. Some of these rules have been challenged in court. As one example, I have directed the staff to develop recommendations on re-proposing certain aspects of the recently-adopted Form N-PORT reporting requirements.[23] Additional input could help us consider if we struck the right balance or if there is new information in the time since commenters last weighed in that could inform a reconsideration. For instance, commenters raised concerns about more-frequent public disclosure of funds’ portfolio holdings. Among other issues, are these concerns heightened by continuing advances in artificial intelligence?

We also could consider extending or delaying the compliance dates for recently-adopted rules. This can assist firms by providing additional time to implement new rules in an orderly manner, when we become aware of challenges associated with the timing of the initial compliance dates. We used this approach earlier this year in the context of Form PF amendments[24] and then, last Friday, for fund names.[25] The staff is also considering recommending that the Commission extend the effective date for the recent amendments to Form N-PORT.

Turning to future rulemaking, the Commission should act like a super-sized freighter, not a speed boat – and that means returning to a smoother regulatory course than the rapid changes that have been promulgated over the last four years. Investors and the industry must be able to rely on us to act consistent with precedent and through an informed and thorough public process. Above all, we should be guided by our three-part mission: to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.

Just as our capital formation efforts lead to benefits for investors, the Commission’s investor protection role is crucial to facilitating the growth of capital markets. Simply put, investors who believe that our markets are rife with fraud will not invest. Our Division of Enforcement has a crucial mission to root out fraudulent actors from our markets and to take remedial action against market participants who do not abide by the statutes and regulations in place.

However, enforcement is not the sole tool of the Commission in order to achieve regulatory compliance. When there are areas where we observe compliance inconsistencies, we should remind firms of their obligations in order to flag common issues and, in the case of new requirements, ensure a smooth transition. The recent Accounting and Disclosure Information publication, or “ADI,” issued by staff in the Division of Investment Management this January provides an example of one way that we can do this effectively.[26] The Commission has adopted a number of rules that rely on the use of layered disclosure principles, requiring funds to deliver certain concise, investor-friendly information directly, with additional detail available online for those investors who want more information.[27]

The ADI publication was based on a staff review of current website posting practices under these rules and others that require information to appear online, including our summary prospectus rules and rules for funds operating as exchange-traded funds. The staff review found some common instances of non-compliance with the associated rules. For example, funds using a summary prospectus failed to include website addresses on the covers of their summary prospectuses indicating where the required online documents resided, and failed to include required hyperlinking within and between posted documents. And a number of ETFs did not include the information required by rule 6c-11 under the Investment Company Act of 1940, such as historic premium and discount information. If we are to continue to move forward in an increasingly digital world, compliance with basic posting requirements is essential.

We should also periodically consider whether our Enforcement resources are being appropriately deployed in keeping with our investor protection mandate. I am particularly concerned about fraud targeting seniors. These individuals are relatively more likely to have amassed wealth over time, and they can be easy targets for financial abuse. Protecting seniors is a priority of the Commission, and this work ranges from enforcement, public education and outreach, and the development of regulatory policy.[28] The Commission has historically held “senior summits” in coordination with state securities regulators, FINRA, and others. These were paused following the financial crisis in 2008. Nearly 17 years later, the time is past due to reconvene these or similar events. Much has changed during this period—for example, senior fraud has become highly technological, reflecting seniors’ embrace of smart phones and social media. We need to take these developments into account in focusing on how seniors can safely prepare for their golden years.

Facilitating Innovation and Retirement Savings

Finally, this brings me to the next theme I’d like to explore—how can we be more flexible in our regulatory approach to facilitate appropriate innovation? As an agency we should be asking, how can this innovation best serve the interests of American investors, and how can innovation help meet the particular challenges these investors face today?

The last four years have been marked by an inflexible approach to innovation. We are not merit regulators. Not all products will succeed, but that does not make them inappropriate. As an example, the ETF market has grown enormously in the last 20 years, covering everything from broad market indexes to niche sectors and alternative asset classes. However, for every three ETFs launched in the last ten years, one has shut down.[29] In my view, this doesn’t reveal a general concern about ETFs as a product. Instead, this shows the natural process of experimentation, and market forces of supply and demand at play.

I keep this in mind as an example of the truly exciting things we can accomplish for investors if we embrace product innovation. While this innovation can be facilitated through rulemaking, I would be remiss not to mention another path for experimentation—the exemptive application process. We view this process as a laboratory where we can review new ideas from market participants. This gives the opportunity to consider the benefits of new products, as well as potential risks to investors and the market.

You will recall that ETFs started through the exemptive application process, and eventually the Commission codified certain conditions for ETFs to operate without obtaining an exemptive order.[30] ETFs now account for approximately 30% of total net assets that investment companies manage.[31] One innovation may be funds offering both mutual fund and ETF share classes. More than two years have passed since the most recent set of exemptive applications for ETF share class relief was filed. I have directed the Commission staff to prioritize their careful review of the many applications filed for this relief, and I look forward to considering their recommendations.

One challenge for the fund industry to explore is how products can be developed that help Americans who have saved in IRAs and 401(k)s successfully manage their finances in retirement. Americans have a significant fear of running out of money. However, they should also be able to use their savings to enjoy their retirement years. Even if a worker has theoretically saved enough for a comfortable retirement, how can he or she be sure that the family’s nest egg is not drawn down too soon, or too quickly?

This complex problem requires not only the best innovative minds in the industry to develop financial products that meet this need, but also collaboration between the SEC, Department of Labor, and state insurance regulators. We should be committed to coordinating closely with these parties as we consider the needs of investors and their retirement investments. During the first Trump Administration, there was a close relationship between the SEC and the Department of Labor on retirement security issues. I have already reached out to the new leadership at DOL and hope that we can have a similar relationship.

Conclusion

To conclude my remarks – a lot of which have been focused on SEC rulemaking – I am reminded of the Navy SEALs, who train a few miles away from here in the surf off Coronado. The SEALs have a saying, “slow is smooth and smooth is fast,” which is a reminder to take the time to do things carefully and methodically, rather than rush and risk actions that are not fully thought through. The same can be said for agency rulemaking and minimizing our risk to future litigation challenge.

Thank you for your attention and I would like to invite you to discuss any of these points with me and my staff. I would be remiss if I did not take the opportunity to thank the hardworking staff of the Commission who are dedicated to fulfilling our mission. As an SEC employee for nearly 19 years, I continue to be inspired by their diligence and professionalism. Thank you and enjoy your conference.

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