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January 4th, 2024
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Hester Peirce on personal liberty, crypto regs and retail investor particiation
Investment News | Mark Schoeff Jr. | Mar 22, 2021
During her first three years on the commission, Peirce was part of a Republican majority. With the likely confirmation of Gary Gensler as SEC chair, Democrats will have the edge.
Securities and Exchange Commission member Hester Peirce will soon have a new experience on the five-person panel. During her first three years, she was part of the Republican majority. Following the likely Senate confirmation of Gary Gensler as chair, Democrats will have a 3-2 edge.
Peirce, a former senior counsel for an SEC commissioner and a former attorney in the Division of Investment Management, is poised to be a colorful voice of dissent who champions personal liberty over extensive regulation. Her speeches and statements at SEC open meetings often are peppered with rhetorical flourishes, such as relating regulatory action to a proverb about a nail and a horseshoe.
See: Hester Peirce Says SEC Enforcement is Not the Way to Provide Crypto Clarity
IN: Some have said the SEC has become too political. Do you share that view?
HP: There is pressure from a lot of people outside of the agency, because we built this really wonderful system of disclosure by issuers, that then informs investors as they make their long-term financial decisions about where to put their money … And people say, ‘Well, let me think about how … to use it for some other kinds of objectives, other than objectives related to investments and capital formation.’ That’s where the problems arise. But I think to the extent that we can really keep focused, we can have a really productive upcoming set of years … under Chairman Gensler.
IN: How does your emphasis on personal liberty inform your approach to rulemaking and enforcement?
HP: I’m looking forward to convincing my fellow commissioners that personal liberty is something we need to be taking into account every time we make a regulatory decision. So, there’s a tension there, right? We have this job of protecting investors. But we’re not the parent of the investor, we’re a regulator. We let people spend money as they choose, if they earn it. And so I think we should be careful on the financial side not to overstep our bounds and tell people, ‘Well, this is how you should invest, or must invest.’
IN: Regulation of cryptocurrencies is one of your priorities. What would you like to see in that area?
HP: I think there are several areas where we need clarity. One is, I’ve set forth a framework for token distribution events that would allow people to do token distribution events under the cover of the safe harbor, which would require them to make certain disclosures to token purchasers, and would subject them to the anti-fraud parts of the securities laws, but … other parts of the securities laws wouldn’t apply for three years.
See: GameStop Testimony: When Short Sellers, Social Media, and Retail Investors Collide
Another area I think we need to provide clarity is for broker-dealers and investment advisers looking to engage with this asset class, either for themselves, or more likely for their customers and clients. We really do need to provide them a framework within which they can do that … consistent with the securities laws.
And then a third area, and I get asked about this all the time, about when an exchange-traded product for Bitcoin will get approved. I think we’ve seen … that Canada has an exchange-traded fund that’s up and running. But I think it’s a reminder to us that there’s a lot of demand in the marketplace — and not only that, but there are other ways that retail investors and institutional investors are getting access to this asset class, and so at some point you’ve got to ask the question whether we need to rethink the approach that we’ve taken with respect to these exchange-traded product applications.
IN: To what extent should ordinary investors be allowed into the private markets?
HP: People come to me all the time and they say, ‘Hester, why is it that in the United States you have to be rich to get rich?’
Even if we open the doors and said anyone can participate in the private markets, I would be cautioning people: Make sure you know what you’re buying, don’t ever rush into a decision, make sure that you ask a ton of questions. If you don’t get answers to those questions, you should turn the other way, run away.
But I do think that people should be able to spend their money as they want, as long as it’s clear to people, yes, here you’re within this category of investments that doesn’t get the same kind of disclosure oversight [as] public company investments do. And so I do think that we need to expand the doors, open the doors wider.
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