In remarks to the Financial Stability Oversight Council, SEC Chair Jay Clayton offered observations on the current state of the capital markets and efforts undertaken by the SEC to mitigate systemic risk.

Market Function

Chair Clayton affirmed the SEC's commitment to providing targeted regulatory assistance, guidance and relief to market participants in order to "facilitate continuing, orderly and fair market function." He stated that the SEC has aided key participants within the securities market infrastructure in making the transition to remote working environments. He explained that the aid includes coordinating efforts with the New York Stock Exchange and the CBOE Options Exchange to close their physical trading floors, and begin fully electronic operations.

Chair Clayton reported that since the beginning of the COVID-19 pandemic, the SEC found no operational issues within the securities market that are "systemically adverse" to market infrastructure. He noted only minimal differences in prices between exchange-traded funds and the underlying basket.

Market Monitoring

Consistent with the SEC's ongoing monitoring efforts of its capital markets, Chair Clayton cited the creation of the COVID-19 Market Monitoring Group. He highlighted the group's two main priorities, which are to: (i) identify and address COVID-19-related impacts on both market participants and the market as a whole; and (ii) collaborate with other regulatory and public sector officials. Chair Clayton emphasized the importance of work done by the SEC with the FSOC and foreign counterparts to address capital markets-related issues.

In addition, Mr. Clayton highlighted internal initiatives, including:

  • organizing efforts to "identify, analyze and clarify" interconnections within varying aspects of the financial markets; and
  • examining the future impact and risks of investment strategies subjected to mechanistic rules, guidelines or restrictions regarding holdings of assets (e.g., references to ratings, downgrades, etc.).

Issuer Disclosure

Chair Clayton stated that the SEC is monitoring and offering guidance on corporate filings and disclosures for both issuers and foreign companies listed in the United States to help ensure that disclosures are clear and accurate. He highlighted two recent public statements on corporate and municipal disclosures that promote comprehensive disclosure practices for issuers. He said that the SEC wants these companies to provide investors with "as much information as practicable regarding their current financial and operating status."

Originally published 15 May 2020

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