SEC Commissioner Hester M. Peirce advocated for a flexible regulatory approach that allows firms to experiment with new technologies and provides investors with a wider selection of investment choices.

In a speech at the Financial Planning Association 2018 Major Firms Symposium, Ms. Peirce expanded on her recent remarks discussing ways in which the SEC can "facilitate fund adaption of technological and other innovations" for the benefit of investors. To achieve this, Ms. Peirce stated, the SEC must change its approach to individual products and practices by giving firms the flexibility to utilize new technologies, products, fee structures and methods for disclosure. Such an approach, Ms. Peirce argued, would allow investors to make more informed decisions about whether and how to invest. Ms. Peirce also chided the SEC again for its refusal to allow exchanges to list products based on bitcoin, saying that it should be up to investors (not the SEC) to decide whether such investments were good deals.

Ms. Peirce stated that, in order to permit investors to be sufficiently capable of assessing new technological innovations, the SEC must ensure that disclosures are written clearly. According to Ms. Peirce, changes to fund disclosure requirements in the last decade have not always factored in investors' ability to understand the information. Fund disclosure forms are still "predominately paper-based," "voluminous and . . . overwhelm[ing]," and "riddled with legalese and technical terms." Ms. Peirce urged the SEC to consider "shorter document[ation] that contains only key information," such as is required by the 2009 mutual fund summary prospectus.

Commentary / Steven Lofchie

Commissioner Peirce's arrival at the SEC is genuinely exciting to those who care about financial regulation, both in its implementation and philosophy. She is not just staking out positive positions, which is obviously a nice-to-have; she is establishing the intellectual underpinning of those positions, which is an essential-to-have if the positions are to be enduring and establishing a framework for approaching issues on an ongoing basis. By conceding that there are limits to the knowledge of regulators, and by conceding that investors left to their own devices may make bad decisions, she acknowledges the possibility of failure - which is essential if we are to take risks.

While in the current regulatory environment, Commissioner Peirce's views may seem radical, they would, in fact, return the SEC to its historical role as a regulator whose primary purpose is to mandate good disclosure, and then step aside and let investors decide how to invest.

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