Opening Remarks at the Investor Advisory Committee Meeting

Chair Mary Jo White

June 7, 2016

Good morning and welcome to all attending by telephone today.  I understand that this special telephonic meeting may be the last for the Committee as presently constituted.  The new membership will be announced soon and will likely hold its first meeting next month.  I want to again express my gratitude, as I did at your meeting in Washington in April, to each of the members of the Committee for your service to date, including your evident hard work since your last meeting.
Today’s agenda covers two important issues: first, a recommendation regarding the enhancement of information for bond market investors; and second, a draft preliminary comment letter on the Commission’s recent concept release on Regulation S-K.  Both subjects are priority issues for me on which I have previously spoken, and I very much welcome the Committee’s input on both.
Fixed Income Markets
Probably not surprisingly,[1] I largely agree with the Committee’s draft proposed recommendations on the bond markets, which rightly recognize transparency as the hallmark of robust, resilient, and efficient market structures.
Fixed income market structure has been a long-time focus at the Commission, and other regulators are now intensifying their focus as well.  For example, regulators, including the SEC, have been looking closely at the U.S. Treasury market, with significant inter-agency cooperation.[2]  Last month, the SEC and Treasury announced the consideration of concrete steps to further enhance post-trade transparency to regulators of the U.S. Treasury cash market.  As your recommendation reflects, the SEC, FINRA and the MSRB have also been moving forward on a variety of reforms in the corporate bond and municipals securities markets.  At the Commission’s urging,[3] the MSRB proposed, and the Commission in 2014 approved, a best execution rule for the municipal bond market similar to FINRA’s best execution rule.[4]  And both SROs have since developed and published additional guidance on the best execution obligations of broker-dealers and municipal securities dealers.[5]
In 2014, I also urged both FINRA and the MSRB to move forward on markup and markdown disclosure rules, a reform also publicly supported by my fellow Commissioners.[6]  SEC staff has been dedicated to working closely with FINRA and MSRB as they develop rules that would require those disclosures.  I was very pleased when both FINRA and the MSRB issued their disclosure proposals in September and October of 2015, and I look forward to their finalized proposals.
In April and May, I attended the board meetings of both the MSRB and FINRA and took the occasion to urge them to complete their good work in this space expeditiously by filing robust and consistent final rule proposals with the Commission.  This disclosure is vital for investors, and today’s market structure more readily enables FINRA and the MSRB to craft meaningful transparency proposals, as dealers today often use technology to source liquidity for customer demand the same day they transact with a customer, and frequently within a much shorter period of time.  This development greatly simplifies compensation disclosure in principal transactions, which clearly should be made to investors.
One last note on fixed income:  enhancing pre-trade price transparency in the municipal and corporate bond markets should remain a very important objective for us all, as I have highlighted before.  The Commission staff continues to work through the very challenging issues inherent in such a transformative market structure change as it develops a recommendation for the Commission’s consideration.
Regulation S-K Concept Release
I am also pleased to see the Committee’s engagement on our recent Regulation S-K concept release.  While, as your draft letter reflects, the Committee members have differing views on a number of the issues raised, the draft comment letter helpfully discusses several of the most important areas, which I have also highlighted in my remarks on disclosure effectiveness.  I just want to briefly mention two of those areas.
First, the concept release addresses the important subject of the use of non-GAAP measures, on which I have spoken before,[7] and on which the staff has been quite actively engaged, including with its recent issuance of compliance and disclosure interpretations on May 17.  I very much welcome the Committee’s supportive views on this issue.  The use of non-GAAP measures is an area where companies, their audit committees, and others all need to focus on to ensure that practices are conforming to both the letter and spirit of our rules which are designed to better inform investors.  As with the recent staff work, we will continue to take the steps that are necessary to ensure that any non-GAAP measures work for investors, not against them.
The second point I will highlight is the presentation and delivery of disclosure.  As I said when we issued the concept release, fair and accurate disclosure means very little if it is provided in a manner that frustrates investors’ ability to review and understand it.  The issues identified in the Committee’s draft letter about the manner of delivery, layered disclosure, and the technology and data requirements that support delivery are all directly relevant to this challenge.  And, as I announced in April, the Division of Corporation Finance, as part of its disclosure effectiveness review, has brought together staff from OIT, DERA and the Office of the Investor Advocate to help develop our thinking and approaches, seeking input from a wide range of experts and users of disclosure.[8]  We very much welcome this Committee’s extensive knowledge and input.
Thank you.  I look forward to the Committee’s discussion.
[1] See Mary Jo White, Chair, U.S. Securities and Exchange Commission, Intermediation in the Modern Securities Markets:  Putting Technology and Competition to Work for Investors (June 20, 2014) (“Chair White Fixed Income Speech”), available at
[2] See Joint Staff Report:  The U.S. Treasury Market on October 15, 2014 (July 13, 2015), available at; Department of Treasury, Notice Seeking Public Comment on the Evolution of the Treasury Market, 81 FR 3928 (Jan. 22, 2016), available at
[3] See SEC Report on the Municipal Securities Markets (July 31, 2012), available at
[4] See MSRB Rule G-18 (Best Execution); Exchange Act Release No. 73764 (Dec. 5, 2014).
[6] See Chair White Fixed Income Speech, supra note 1; Statement on Edward D. Jones Enforcement Action by Commissioners Kara M. Stein and Michael S. Piwowar (Aug. 13, 2015), available at
[7] See Mary Jo White, Chair, U.S. Securities and Exchange Commission, Keynote Address at the 2015 AICPA National Conference:  “Maintaining High-Quality, Reliable Financial Reporting:  A Shared and Weighty Responsibility” (Dec. 9, 2015), available at
[8] See Mary Jo White, Chair, U.S. Securities and Exchange Commission, Statement at the Open Meeting on Regulation S-K Concept Release (Apr. 13, 2016), available at