Good morning.  This is an open meeting of the U.S. Securities and Exchange Commission, under the Government in the Sunshine Act.

Today, we will consider four items, two of which were deferred from the canceled meeting on December 5.  Specifically, the issues before the Commission are:

  1. whether to approve the 2019 budget of the Public Company Accounting Oversight Board ("PCAOB") and the related annual accounting support fee for the Board under Section 109 of the Sarbanes-Oxley Act of 2002; 
  2. whether to adopt Rule of Practice 194 pursuant to Section 15F(b)(6) of the Securities Exchange Act of 1934;
  3. whether to propose rules under Section 15F(i)(2) of the Securities Exchange Act of 1934 that would require security-based swap dealers and major security-based swap participants to comply with certain risk mitigation techniques with respect to portfolios of security-based swaps not submitted for clearing to a central counterparty; and
  4. whether to propose a new rule and rule amendments to allow funds to acquire shares of other funds (i.e., "fund of funds" arrangements), including arrangements involving exchange-traded funds, without first obtaining exemptive orders from the Commission. 

The variety of today's agenda items in itself, and in combination with the other initiatives the Commission has moved forward in the past weeks, is a good reminder of the broad range of issues the talented women and men of the SEC tackle every day. 

Our staff focuses on being effective and efficient in their work.  In that same spirit, I will keep my remarks on each item short, and defer to representatives of our Divisions and Offices to provide details. 

Thank You to Kara Stein

Of course, I would like to thank each of the Commissioners and their counsel for their engagement and contributions on each and every agenda item.  But I want to express particular appreciation, on behalf of myself, my colleagues, the SEC staff, and the American public, to Commissioner Kara Stein.  Kara, your commitment to the Commission's mission has been unwavering.  Every day, you bring passion and compassion to our work.  You recognize the importance of our capital markets to our economy and our nation, but you never forget that the large majority of our investors are long-term retail investors, and you advocate for them with intellect and vigor.   It has been a delight to serve with you.  I wish you the best in your future endeavors. 

Budget of the Public Company Accounting Oversight Board

Moving on to the first agenda item, the Commission will consider, as part of its oversight of the PCAOB, whether to approve the proposed 2019 budget and accounting support fee for the PCAOB. 

In November, the PCAOB released its five-year strategic plan, which serves as the foundation for the budget and guides the PCAOB's programs and operations.  It promotes high quality auditing through a strategy for forward-looking, responsive, and innovative oversight.  I commend the Board for seeking, for the first time, input from the public and its employees as it developed the strategic plan.     

I would like to welcome and thank Chairman Duhnke, the other Board members, and the PCAOB staff.  The Commission remains strongly committed to supporting the vital work you perform on a daily basis in furtherance of the public interest.

I also want to thank the SEC staff for the time and energy spent on the review of the PCAOB's 2019 budget and accounting support fee, including Chief Accountant Wes Bricker, Deputy Chief Accountant Marc Panucci, Godfrey Murangi, Giles Cohen, Matt Hodder, and Mark Jacoby, all in the Office of the Chief Accountant, as well as their colleague Jeff Minton, who left the Commission last week after two decades of service at the agency.  In addition, I would like to thank Chief Financial Officer Caryn Kauffman, Rick Taylor, Nikki Puccio, and Crystal Willis from the Office of Financial Management; Bryant Morris and Omid Harraf from the Office of the General Counsel; and Acting Chief Information Officer Charles Riddle and Bobby Sharma from the Office of Information Technology.

I will now turn to Wes Bricker, the SEC's Chief Accountant, for his remarks, to be followed by remarks from Commission CFO Caryn Kauffman and PCAOB Chairman Duhnke.

Title VII

Next, staff in the Division of Trading and Markets will make two recommendations important to standing-up our Title VII regime for security-based swap dealers and major security-based swap participants. 

The SEC has finalized many, but not all, of the Title VII rules that Congress directed it to establish pursuant to the Dodd-Frank Act.  The rules being presented today demonstrate our commitment to:  (1) implementing our Title VII regime; (2) establishing sound and efficient regulation of these important markets that is faithful to our mission to maintain fair, orderly, and efficient markets; and (3) more closely harmonizing our Title VII rules with the existing regulations of the Commodity Futures Trading Commission ("CFTC"). 

Harmonizing our rules with the CFTC's requirements, where possible, should help to minimize potential market disruptions and to create efficiencies for entities that have already established an infrastructure for compliance with analogous CFTC requirements.  Accordingly, earlier this year, I asked the Commission staff to actively engage with our counterparts at the CFTC to find ways to further harmonize our respective rules, where appropriate, to increase effectiveness as well as reduce complexity and costs.  Commissioner Peirce has been actively involved in this effort.   Her leadership and attention have been instrumental in moving our work on Title VII forward in a manner that is true to the law, embodies central tenets of our securities regulatory structure, and recognizes the established global infrastructure for swaps more generally.  I thank Commissioner Peirce and, on behalf of myself and my many Commission colleagues who are working diligently to stand up our Title VII regime, also thank CFTC Chairman Giancarlo, CFTC Commissioner Quintenz, and the CFTC staff for engaging cooperatively and productively on these matters.     

I also would like to commend the SEC's teams for their extensive work on these rulemakings.  In particular, I want to thank, from the Division of Trading and Markets, Natasha Vij Greiner, Devin Ryan, and Edward Schellhorn for Rule 194; Mark Wolfe, Carol McGee, and Andrew Bernstein for Risk Mitigation Techniques; and Ajay Sutaria for his assistance throughout the process on both rules.  I also want to thank Chyhe Becker, Vanessa Countryman, Narahari Phatak, Burt Porter, Diana Knyazeva, Claire O'Sullivan, Sai Rao, and Anne Yang from the Division of Economic and Risk Analysis; and Meridith Mitchell, Lori Price, Robert Teply, Donna Chambers, and Cynthia Ginsberg from the Office of the General Counsel.

Now, I will turn it over to Brett Redfearn, Director of the Division of Trading and Markets, for the two Title VII recommendations.

Fund of Funds Arrangements

The final item on the agenda is a proposal to improve the regulatory framework for fund of funds arrangements.

Today, our Main Street investors increasingly rely on mutual funds, exchange-traded funds and other types of funds to save for retirement and meet their other financial goals.  Fund of funds arrangements can be an efficient way for Main Street investors to gain exposure to particular markets or asset classes or to invest their savings into a single, diversified professionally-managed portfolio.  For example, many retail investors use "target date funds" to invest in a diversified portfolio of assets that is rebalanced over time depending on the investor's expected investment time horizon.

For several decades, the Commission has regulated fund of funds arrangements through the exemptive order process.  This has led to costs and delays, and resulted in a regulatory regime where substantially similar fund of funds arrangements may be subject to different conditions.  This proposal is an important step in moving the fund of funds regulatory regime to a consistent, rules-based framework that continues to provide robust protections for investors.

I appreciate the extensive effort that went into preparing today's recommendation.  I would like to thank Dalia Blass, Sarah ten Siethoff, Timothy Husson, Brian Johnson, Daniele Marchesani, Melissa Gainor, Jacob Krawitz, Steven Amchan, Zeena Abdul-Rahman, Joel Cavanaugh, Timothy Dulaney, and John Foley from the Division of Investment Management; Lori Price, Marie-Louise Huth, Bob Bagnall, Mykaila DeLesDernier, and Maureen Johansen from the Office of the General Counsel; and Chyhe Becker, Xanthi Gkougkousi, Lauren Moore, Phatak Narahari, Adam Large, Rooholah Hadadi, Ralph Bien-Aime, Claire O'Sullivan, and Chantal Hernandez from the Division of Economic Risk and Analysis.

Now, I will turn it over to Dalia Blass, Director of the Division of Investment Management.

Other Initiatives

Finally, I note that the Commission has approved several other initiatives over the last week.  In addition to the items voted at this meeting, the individuals and teams working on the following initiatives have earned great praise:  (1) an examination of quarterly reporting practices, (2) adoption of a rule relating to disclosure of hedging practices or policies, (3) final rules to allow Exchange Act reporting companies to use Regulation A, (4) adoption of a transaction fee pilot for NMS stocks, and (5) the proposal that would exempt certain community banks from the Volcker rule. 

I would like to thank the following staff for their work on the hedging rulemaking:  Bill Hinman, David Fredrickson, Tamara Brightwell, Anne Krauskopf, Carolyn Sherman, and Nicholas Panos from the Division of Corporation Finance; Bob Stebbins, Bryant Morris, and Dorothy McCuaig from the Office of the General Counsel; Dalia Blass, Sarah ten Siethoff, Mark Uyeda, and Brian Johnson from the Division of Investment Management; and Chyhe Becker, Scott Bauguess, Hari Phatak, Olga Itenberg, Bridget Farrell, Mariesa Ho, Angela Knyazeva, Leanne Robinson, David Thetford, and Michael Wong from the Division of Economic and Risk Analysis.

And thank you to the following people for their work on the quarterly reporting concept release:  Bill Hinman, Betsy Murphy, Coy Garrison, Luna Bloom, Courtney Lindsay, Lilyanna Peyser, Kyle Moffatt, Lindsay McCord, and Craig Olinger from the Division of Corporation Finance; Marc Panucci, Giles Cohen, Kevin Vaughn, Duc Dang, Tom Collens, Matthew Hodder, and Sarah Esquivel from the Office of the Chief Accountant; Bryant Morris and Omid Harraf from the Office of the General Counsel; and Olga Itenberg from the Division of Economic and Risk Analysis.

I also appreciate the work of the following staff to complete the rules to allow Exchange Act reporting companies to use Regulation A:  Bill Hinman, Julie Davis, Betsy Murphy, Jennifer Zepralka, and Charles Guidry from the Division of Corporation Finance; Hari Phatak and Anzhela Knyazeva from the Division of Economic and Risk Analysis; and Bryant Morris, Dorothy McCuaig, and Shaz Niazi from the Office of the General Counsel.

The following individuals made substantial contributions to the Commission's adoption of a transaction fee pilot for NMS stocks:  Brett Redfearn, Christian Sabella, David Shillman, Richard Holley III, Johnna Dumler, Erika Berg, Benjamin Bernstein, and Andrea Orr from the Division of Trading and Markets; Meredith Mitchell, Lori Price, Robert Teply, Cynthia Ginsberg, Tracey Hardin, and John Capehart from the Office of the General Counsel; and Amy Edwards, Peter Dixon, John Ritter, Lauren Moore, Mike Willis, Hermine Wong, and Walter Hamscher from the Division of Economic and Risk Analysis.

Finally, the following SEC staff were integral to the proposal that would exempt certain community banks from the Volcker rule:  Carol McGee, Josephine Tao, Andrew Bernstein, Elizabeth Sandoe, Aaron Washington, Samuel Litz, and Roni Bergoffen from the Division of Trading and Markets; Brian McLaughlin Johnson, Sara Cortes, Aaron Gilbride, Matthew Cook, and Nicholas Cordell from the Division of Investment Management; Meridith Mitchell, Lori Price, Robert Teply, and Mykaila DeLesDernier from the Office of the General Counsel; and Chyhe Becker, Vanessa Countryman, Narahari Phatak, Diana Knyazeva, and Dasha Safonova from the Division of Economic and Risk Analysis.