Yesterday, the SEC released for public comment a draft of its proposed strategic plan, which outlines the SEC’s priorities through FY 2022.  The plan identifies three strategic goals related to investors, innovation and SEC performance.  According to the press release, the plan “highlights the SEC’s commitment to serving the long-term interests of Main Street investors; becoming more innovative, responsive, and resilient to market developments and trends; and leveraging staff expertise, data and analytics to bolster performance.”  While not exactly long on detail, the plan does provide a general idea of SEC priorities.

The first goal identified in the plan is one that SEC Chair Jay Clayton has frequently emphasized: to “focus on the long-term interests of our Main Street investors.” The SEC intends to pursue this goal through five initiatives:

  • “Enhance our understanding of the channels retail and institutional investors use to access our capital markets to more effectively tailor our policy initiatives.” This initiative is designed to allow the SEC to better address new and emerging risks (and facilitate additional investment opportunities) by gaining insight into different ways that investors invest.
  • “Enhance our outreach, education, and consultation efforts, including in ways that are reflective of the diversity of investors and businesses.” The purpose here is to expand outreach to retail investors and small businesses to hear various perspectives, taking into account that all investors are not alike.
  • “Pursue enforcement and examination initiatives focused on identifying and addressing misconduct that impacts retail investors,” including issues such as securities custody and penny stock trading.
  • “Modernize design, delivery, and content of disclosure so investors, including in particular retail investors, can access readable, useful, and timely information to make informed investment decisions.” There are several rulemaking proposals pending here to revise business and accounting disclosure, but whether they will actually lead to disclosure that is readable by retail investors, well that’s quite a hill to climb. (See, e.g., this PubCo post and this PubCo post.) Modernization of EDGAR is also mentioned.
  • “Identify ways to increase the number and range of long-term, cost-effective investment options available to retail investors, including by expanding the number of companies that are SEC-registered and exchange-listed.” This initiative relates to the familiar lament regarding the decline in the number of public companies and SEC intentions to improve the environment for public companies. (See this PubCo post and this PubCo post.)

The second goal is to “[r]ecognize significant developments and trends in our evolving capital markets and adjust our efforts to ensure we are effectively allocating our resources,” which the SEC intends to pursue through four initiatives:

  • “Expand market knowledge and oversight capabilities to identify, understand, analyze, and respond effectively to market developments and risks,” which calls on the SEC to monitor the market for technological and commercial developments and to adapt appropriately.
  • “Identify, and take steps to address, existing SEC rules and approaches that are outdated,” which, the SEC expects, “will improve and bring greater involvement in, and acceptance of, our rulemaking efforts.”
  • “Examine strategies to address cyber and other system and infrastructure risks faced by our capital markets and our market participants,” which will focus on ensuring that market participants manage cybersecurity risk and appropriately inform investors of risk and incidents.  See this Cooley Alert  for a discussion of the SEC’s recent cybersecurity guidance.
  • “Promote agency preparedness and emergency response capabilities.”

The third goal is to “[e]levate the SEC’s performance by enhancing our analytical capabilities and human capital development,” which the SEC intends to pursue through five initiatives:

  • “Focus on the SEC’s workforce to increase our capabilities, leverage our shared commitment to investors, and promote diversity, inclusion, and equality of opportunity among the agency’s staff.”
  • “Expand the use of risk and data analytics to inform how we set regulatory priorities and focus staff resources, including developing a data management program that treats data as an SEC-wide resource with appropriate data protections, enabling rigorous analysis at reduced cost.”
  • “Enhance our analytics of market and industry data to prevent, detect, and prosecute improper behavior.”
  • “Enhance the agency’s internal control and risk management capabilities, including developing a robust and resilient program for dealing with threats to the security, integrity, and availability of the SEC’s systems and sensitive data.”
  • “Promote collaboration within and across SEC offices to ensure we are communicating effectively across the agency, including through evaluation of key internal processes that require significant collaboration.”

Posted by Cydney Posner