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Glassman Reviews Lessons Learned at SEC

Commissioner Cynthia Glassman, speaking to the Bond Market Association, reviewed some of the key lessons she has learned during her four and a half years at the SEC. She has seen what works and what does not in terms of the SEC's regulation of the markets and said the power of competition and the market's capacity for innovation cannot be overestimated.

Glassman said the SEC should set the standards and then let the markets and market participants compete. If the participants do not meet the standards, the SEC should take enforcement action, she said, but the SEC should not try to micromanage through regulation, staff action or enforcement precedent. Glassman also noted that "regulatory bottlenecks" for the approval of new market participants, practices or products can have anticompetitive implications that limit investors' choices.

Glassman added that micromanagement was one of her chief concerns about Regulation NMS. She said she doubted that its trade-through rule could be more effective than market forces in enabling investors to achieve their investment objectives. Glassman said the number of requests for regulatory approvals and exemptive action related to Regulation NMS, and the extension of time for compliance, confirm her misgivings.

The SEC's rules must be clear and must achieve their goals in a cost-effective manner with minimum disruption to the markets, according to Glassman. She emphasized the importance of empirical evidence in formulating sound rules. Glassman also called for better communication with investors, including the use of focus groups to make sure the SEC adopts understandable regulations.

Glassman believes the SEC must improve the timeliness of its projects. She said that the slow process of rulemaking, enforcement actions, examinations, inspections and exemptive applications affect peoples' lives and businesses. One of her early goals at the Commission was to undertake a comprehensive review of the SEC's rules and regulations to ensure that they continue to be relevant and efficient. Glassman said she would now also advocate a review of the SEC's processes and ways to speed up its reviews.

Jacquelyn Lumb