Remarks Before the SEC Advisory Committee on Small and Emerging Companies

Good morning and welcome to the first public meeting we are holding with our new Chairman, Jay Clayton. Jay, welcome. This advisory committee is a dedicated and thoughtful group. At each meeting, they bring forth their best ideas about how to support and maintain healthy marketplaces for smaller companies, while maintaining appropriate investor protections. Like me, you will undoubtedly benefit from the Committee’s discussions of issues that are critical to both small and emerging companies and to investors.

Today’s agenda will (i) examine the underwriting of smaller offerings, (ii) provide updates on the tick-size pilot, (iii) discuss NASAA’s 2016 enforcement report, and (iv) consider draft recommendations on secondary market liquidity and broker-dealer finder status.

These agenda items all form part of a larger mosaic which includes varying perspectives on how best to support access to capital, how to best create economic incentives for intermediaries to either underwrite primary issuances or create secondary market liquidity for smaller entities, and how to best protect investors.

It has been noted that investment follows trust. Investor trust and investor confidence are central to the ability of small companies to initially raise capital and to continue to access it. When investors trust the market, they invest again; they repeat their engagement with the market. Such repeat engagement benefits all market participants, from the start-up that receives a second capital infusion, to the investor who can rest assured that there are appropriate investor safeguards in place that help protect them from fraud. In your meeting today, I encourage you to discuss how to best balance the creation of capital formation opportunities with strong investor protections.

I look forward to your discussions on the role of intermediaries at both the underwriting stage, and with respect to secondary market liquidity. Preliminary data from the tick-size pilot may provide all of us with initial insights into the efficacy of wider trading increments, their impact on secondary market liquidity for smaller stocks, and the potential costs to investors that may result from wider spreads. I also look forward to the NASAA report on 2015 enforcement efforts and trends. To effectively examine and understand the market for smaller companies, we need a holistic view of what is happening on the ground.

We all share the goal of facilitating capital access for smaller companies, which are the engines of our nation’s economic growth. We all share the goal of supporting healthy markets that provide the pathway for companies to grow and investors to engage in our markets. We also all share the goal of safeguarding investors and shoring up investor confidence. I look forward to hearing your perspectives on how best to achieve this balance going forward.

Thank you.