Mary Shapiro Chairman Securities and Exchange Commission

Credit Rating Agencies

Under the Dodd-Frank Act, the Commission is required to undertake approximately a dozen rulemakings related to NRSROs.  The Commission adopted the first of these required rulemakings in January, and in May, the Commission published for public comment a series of proposed rules that would largely implement this requirement.[1]  The proposed rules are intended to strengthen the integrity of credit ratings, including by improving their transparency.  Under the Commission’s proposals, NRSROs would, among other things, be required to:

• Report on their internal controls;
• Better protect against any conflicts of interest;
• Establish professional standards for their credit analysts;
• Publicly provide – along with the publication of any credit rating – disclosure about the credit rating and the methodology used to determine it; and
• Provide enhanced public disclosures about the performance of their credit ratings.

The proposals also would require disclosure concerning third-party due diligence reports for asset-backed securities.

The Act also requires the SEC to conduct three studies relating to credit rating agencies.  In December, the Commission requested public comment on the feasibility and desirability of standardizing credit rating terminology.[2]  The Act also requires (1) a two-year study on alternative compensation models for rating structured finance products and (2) a three-year study on NRSRO independence.

With respect to alternative compensation models, the Act directs the Commission to study the credit rating process for structured finance products and the conflicts associated with the “issuer-pay” and the “subscriber-pay” models.  The Act further requires the Commission to study the feasibility of establishing a system in which a public or private utility or a self-regulatory organization would assign NRSROs to determine the credit ratings for structured finance products.  Accordingly, in May the Commission published a request for public comment on the feasibility of such a system, asking interested parties to provide comments, proposals, data and analysis by September.[3]

In addition, the Act requires every federal agency to review its regulations that require use of credit ratings as an assessment of the credit-worthiness of a security and undertake rulemakings to remove these references and replace them with other standards of credit worthiness that the agency determines are appropriate.  

• In February 2011, the Commission proposed rule amendments that would remove credit ratings as conditions for companies seeking to use short-form registration when registering securities for public sale.  Under the proposed rules, the new test for eligibility to use Form S-3 or Form F-3 short-form registration would be tied to the amount of debt and other non-convertible securities a particular company has sold in registered primary offerings within the previous three years.[4]  In addition, prior to adoption of the Act, in April 2010 the Commission proposed new requirements to replace the current credit rating references in shelf eligibility criteria for asset-backed security issuers with new shelf eligibility criteria.[5]

• In March 2011, the Commission proposed to remove credit ratings from rules relating to what securities a money market fund can purchase.[6]  This proposal includes amendments to Rule 2a?7, which governs the operation of money market funds and requires these funds to invest only in highly liquid, short-term investments of the highest quality.  These proposed amendments would replace the current requirement that rated portfolio securities have received a first or second tier rating.  They are designed to offer protections comparable to those provided by NRSRO ratings and to retain a degree of risk limitation similar to the current rule. 

• In April 2011, the Commission proposed to remove references to credit ratings in rules concerning broker-dealer financial responsibility, distributions of securities, and confirmations of transactions.[7] 

In September 2010, as required by Section 939B of the Act, the Commission adopted a rule amendment to remove communications with credit rating agencies from the list of excepted communications in Regulation FD.[8]

In addition, the Dodd-Frank Act requires the SEC to conduct staff examinations of each NRSRO at least annually and issue an annual report summarizing the exam findings.  Our staff is in the process of completing the first cycle of these exams, but at our current funding level achieving that statutory mandate has required drawing away critical resources from other parts of our examination and NRSRO programs.

Volcker Rule

In January, the FSOC approved and released to the public a study formalizing its findings and recommendations for implementing Section 619 of the Dodd-Frank Act, commonly referred to as the Volcker Rule.[9]  Informed by these recommendations, the Commission staff is working closely with staffs from the federal banking agencies and the CFTC in drafting proposed rules to implement Section 619.  The agency staffs are consulting and coordinating efforts in order to assure that the proposed regulations are comparable and provide for consistent application and implementation across regulated entities subject to the Volcker Rule, to the extent possible.  We anticipate that the proposal will solicit comments on a variety of issues, including the costs and benefits of the proposed rule and its potential impact on competitiveness.

Municipal Advisors

Section 975 of the Dodd-Frank Act requires the registration of municipal advisors with the Commission. This new registration requirement became effective on October 1, 2010, making it unlawful for any municipal advisor to provide advice to a municipality unless registered with the Commission.  Last September, the Commission adopted an interim final rule establishing a temporary means for municipal advisors to satisfy the registration requirement.[10]  In December, the Commission proposed a permanent rule creating a new process by which municipal advisors must register with the SEC. [11]  We have received approximately 1,000 comment letters on the proposal, including many expressing concerns regarding the treatment of appointed officials and traditional banking products and services.  We will give all of these comments careful consideration before adopting a final rule.

Broker-Dealer Audits and Custody Arrangements

In June, the Commission proposed amendments to its broker-dealer financial reporting rule in order to strengthen the audits of broker-dealers as well as its oversight of the way broker-dealers handle their customers’ securities and cash.[12]  The proposed amendments also would facilitate the ability of the Public Company Accounting Oversight Board to implement its new oversight authority over independent public accountants of broker-dealers that was provided in Section 982 of the Dodd-Frank Act.

Asset-Backed Securities

During the past year, the Commission has been active in implementing Subtitle D of Title IX of the Dodd-Frank Act, entitled “Improvements to the Asset-Backed Securitization Process.”  Most recently, on March 30, 2011, the Commission joined its fellow regulators in issuing for public comment proposed risk retention rules to implement Section 941 of the Act.[13]  Section 941, which is codified as new Section 15G of the Securities Exchange Act of 1934, generally requires the Commission, the Board, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and, in the case of the securitization of any “residential mortgage asset,” the Federal Housing Finance Agency and Department of Housing and Urban Development, to jointly prescribe regulations that require a securitizer to retain not less than five percent of the credit risk of any asset that the securitizer – through the issuance of an asset-backed security – transfers, sells, or conveys to a third party.  Section 15G also provides that the jointly prescribed regulations must prohibit a securitizer from directly or indirectly hedging or otherwise transferring the credit risk that the securitizer is required to retain.[14]

Under the proposed rules, a sponsor generally would be permitted to choose from a menu of four risk retention options to satisfy its minimum five percent risk retention requirement.  These options were designed to provide sponsors with flexibility while also ensuring that they actually retain credit risk to align incentives.  The proposed rules also include three transaction-specific options related to securitizations involving revolving asset master trusts, asset-backed commercial paper conduits, and commercial mortgage-backed securities.  Also, as required by Section 941, the proposal provides a complete exemption from the risk retention requirements for ABS collateralized solely by “qualified residential mortgages” (or QRMs) and establishes the terms and conditions under which a residential mortgage would qualify as a QRM.  We have received a number of comments regarding the QRM exemption, which we will carefully consider as we move forward with the interagency rulemaking process.  Although the original comment period was scheduled to close on June 10, 2011, in light of requests from various sources for an extension to allow sufficient time for data gathering and impact analyses related to the provisions of the proposed rule, we extended the comment period to August 1, 2011.

In January 2011, the Commission proposed rules in connection with Section 942(a) of the Dodd-Frank Act, which eliminated the automatic suspension of the duty to file reports under Section 15(d) of the Exchange Act for ABS issuers and granted the Commission authority to issue rules providing for the suspension or termination of this duty to file reports.  The proposed rules would permit suspension of the reporting obligations for ABS issuers when there are no longer asset-backed securities of the class sold in a registered transaction held by non-affiliates of the depositor.[15] 

The Commission also adopted rules in January 2011 implementing Section 943, on the use of representations and warranties in the market for ABS,[16] and Section 945, which requires an asset-backed issuer in a Securities Act registered transaction to perform a review of the assets underlying the ABS and disclose the nature of such review.[17] 

We also are working on rules prohibiting material conflicts of interest in certain securitizations^[18] and rules requiring the disclosure of asset-level information regarding the assets backing each tranche or class of security.^[19] 

Corporate Governance and Executive Compensation

The Dodd-Frank Act includes an array of corporate governance and executive compensation provisions that require Commission rulemaking.  Among others, such rulemakings include:

• Say on Pay.  The Commission adopted rules in January that require, in accordance with Section 951 of the Act, public companies subject to the federal proxy rules to provide a shareholder advisory “say-on-pay” vote on executive compensation, a separate shareholder advisory vote on the frequency of the say-on-pay vote, and disclosure about, and a shareholder advisory vote to approve, compensation related to merger or similar transactions, known as “golden parachute” arrangements.[20]  The Commission also proposed rules to implement the Section 951 requirement that institutional investment managers report their votes on these matters at least annually.[21] 

• Compensation Committee and Adviser Requirements.  Section 952 requires the Commission to, by rule, direct the national securities exchanges and national securities associations to prohibit the listing of any equity security of an issuer that does not comply with new compensation committee and compensation adviser requirements.  In March 2011, the Commission issued a proposal to implement Section 952 that would require the exchanges to establish listing standards that require each member of a listed issuer’s compensation committee to be a member of the board of directors and to be “independent.”[22] 

The proposed rules also would direct the exchanges to prohibit the listing of any equity security of any issuer that is not in compliance with certain requirements relating to compensation committees and compensation advisers.  The proposal also would amend the Commission’s existing compensation consultant disclosure rules to require disclosure about whether the issuer’s compensation committee retained or obtained the advice of a compensation consultant; whether the work of the compensation consultant has raised any conflicts of interest; and, if so, the nature of any such conflict and how it is being addressed. The comment period for the proposal ended on May 19, 2011, and the staff is currently developing recommendations for final rules. 

• Incentive-Based Compensation Arrangements.  Section 956 of the Dodd-Frank Act requires the Commission along with six other financial regulators to jointly adopt regulations or guidelines governing the incentive-based compensation arrangements of certain financial institutions, including broker-dealers and investment advisers with $1 billion or more of assets.  Working with the other regulators, in March the Commission published for public comment a proposed rule that would address such arrangements.  The Commission has received voluminous comment letters on the proposed rule, and the Commission staff, together with staff from the other regulators, is carefully considering the issues and concerns raised in those comments before adopting any final rules.
  • Prohibition on Broker Voting of Uninstructed Shares.  Section 957 of the Act requires the rules of each national securities exchange to be amended to prohibit brokers from voting uninstructed shares on the election of directors (other than uncontested elections of directors of registered investment companies), executive compensation matters, or any other significant matter, as determined by the Commission by rule.  To date, the Commission has approved changes to the rules with regard to director elections and executive compensation matters for most of the national securities exchanges,[23] and we anticipate that corresponding changes to the rules of the remaining national securities exchanges will be considered by the Commission in the near future.

The Commission also is required by the Act to adopt several additional rules related to corporate governance and executive compensation, including rules mandating new listing standards relating to specified “clawback” policies,[24] and new disclosure requirements about executive compensation and company performance,[25] executive pay ratios,[26] and employee and director hedging.[27]  These provisions of the Act do not contain rulemaking deadlines, but the staff is working on developing recommendations for the Commission concerning the implementation of these provisions of the Act. 

Specialized Disclosure Provisions

Title XV of the Act contains specialized disclosure provisions related to conflict minerals, coal or other mine safety, and payments by resource extraction issuers to foreign or U.S. government entities.  The Commission published rule proposals for the three specialized disclosure requirements in December 2010, and the comment period ended on March 2, 2011.[28]  The staff is developing recommendations for the Commission’s consideration.  The Commission expects to consider adoption of final rules implementing these specialized disclosure provisions in the late summer or early fall of this year. 

Exempt Offerings

Under Section 926 of the Act, the Commission is required to adopt rules that disqualify securities offerings involving certain “felons and other ‘bad actors’” from relying on the safe harbor from Securities Act registration provided by Rule 506 of Regulation D.  The Commission proposed rules to implement the requirements of Section 926 on May 25, 2011.[29]  Under the proposal, the disqualifying events include certain criminal convictions, court injunctions and restraining orders; certain final orders of state securities, insurance, banking, savings association or credit union regulators, federal banking agencies or the National Credit Union Administration; certain types of Commission disciplinary orders; suspension or expulsion from membership in, or from association with a member of, a securities self-regulatory organization; and certain other securities-law related sanctions.  The comment period for this rule proposal ended on July 14, 2011.

In addition, the Commission proposed rule amendments in January that would implement Section 413(a) of the Act, which requires the Commission to exclude the value of an individual’s primary residence when determining if that individual’s net worth exceeds the $1 million threshold required for “accredited investor” status.[30]  The comment period on this proposal ended on March 11, 2011 and the staff is preparing final rule recommendations for the Commission.  This section was effective on the date of enactment of the Dodd-Frank Act; the implementing rules are designed to clarify the requirements and codify them in the Commission’s rules.

Financial Stability Oversight Council

In addition to the rulemaking activity described above, Title I of the Dodd-Frank Act created the FSOC, and with it, a formal structure for coordination among the various financial regulators to monitor systemic risk and to promote financial stability across our nation’s financial system.  FSOC has the following primary responsibilities:

• Identifying risks to the financial stability of the United States that could arise from the material financial distress or failure – or ongoing activities – of large, interconnected bank holding companies or nonbank financial holding companies, or that could arise outside the financial services marketplace;
• Promoting market discipline by eliminating expectations on the part of shareholders, creditors, and counterparties of such companies that the government will shield them from losses in the event of failure (i.e., addressing the moral hazard problem of “too big to fail”); and
• Identifying and responding to emerging threats to the stability of the United States financial system.[31]

As Chairman of the SEC, I am a voting member of FSOC.  Senior SEC staff and I have actively participated in the FSOC and found its focus on identifying and addressing risks to the financial system to be important and helpful to the SEC as a capital markets regulator.  The FSOC also has fostered a healthy and positive sense of collaboration among the financial regulators, facilitating cooperation and coordination for the benefit of investors and our overall financial system.  Since passage of the Dodd-Frank Act, the FSOC has taken steps to create an organizational structure, coordinate interagency efforts, and build the foundation for meeting its statutory responsibilities. 

To begin defining and implementing the process to identify and designate systemically important financial institutions (“SIFIs”) for heightened supervision by the Board, FSOC issued an advanced notice of proposed rulemaking soliciting public comment on the specific criteria and analytical framework for the SIFI designation process, with a focus on how to apply the statutory considerations for such designations, as well as a notice of proposed rulemaking.  FSOC is preparing additional guidance regarding the Council’s approach to designations and will seek public comment on it.

Financial Market Utilities (“FMUs”) are essential to the proper functioning of the nation’s financial markets.[32]  These utilities form critical links among marketplaces and intermediaries that can strengthen the financial system by reducing counterparty credit risk among market participants, creating significant efficiencies in trading activities, and promoting transparency in financial markets.  However, FMUs by their nature create and concentrate new risks that could affect the stability of the broader financial system.  To address these risks, Title VIII of the Dodd-Frank Act provides important new enhancements to the regulation and supervision of FMUs designated as systemically important by FSOC (“DFMUs”) and of payment, clearance and settlement activities.  This enhanced authority in Title VIII should provide consistency, promote robust risk management and safety and soundness, reduce systemic risks, and support the stability of the broader financial system.[33]  Importantly, the enhanced authority in Title VIII is designed to be in addition to the authority and requirements of the Securities Exchange Act and Commodity Exchange Act that may apply to FMUs and financial institutions that conduct designated activities.[34] 

FSOC established an interagency DFMU committee to develop a framework for the designation of systemically important FMUs, in which staff from the SEC has actively participated, and also published an advanced notice of proposed rulemaking seeking public comment on the designation process for FMUs. 

On March 28, 2011, FSOC published a notice of proposed rulemaking to provide further information on the process it proposed to follow when reviewing the systemic importance of FMUs.  The FSOC finalized this rule earlier this week.[35]

New Commission Offices

In addition to the Whistleblower Office mentioned earlier, the Dodd-Frank Act requires the Commission to create four new offices within the Commission, specifically, the Office of Credit Ratings, Office of the Investor Advocate, Office of Minority and Women Inclusion, and Office of Municipal Securities.  As each of these offices is statutorily required to report directly to the Chairman, the creation of these offices is subject to approval by the Commission’s Appropriations subcommittees to reprogram funds for this purpose.[36] 

While reprogramming approval is a necessary step in moving forward to create these new offices, the provision of additional funding to staff them at adequate levels also would be necessary for the SEC to fully execute the new responsibilities.  In the meantime, the initial functions of the offices are being performed on a limited basis by other divisions and offices. 

Cost-Benefit Analyses

We are keenly aware that our rules have both costs and benefits, and that the steps we take to protect the investing public impact both financial markets and industry participants who must comply with our rules.  This is truer than ever given the scope, significance and complexity of the Dodd-Frank Act.  Our Division of Risk, Strategy, and Financial Innovation, which has been expanded in both stature and size, directly assists our rule writers in analyzing the economic impact of those rules.

When engaging in rulemaking, we analyze the direct and indirect costs and benefits of the Commission’s proposed decisions against alternative approaches, including, the effects on competition, efficiency and capital formation.  We invite the public to comment on our analysis and provide any information and data that may better inform our decision making.  In adopting releases, the Commission responds to the information provided and revises its analysis as appropriate.  This approach helps ensure a regulatory framework that strikes the right balance between the costs and the benefits of regulation.[37]

Funding for Implementation of the Dodd-Frank Act

The provisions of the Dodd-Frank Act expand the SEC’s responsibilities and will require significant additional resources to fully implement the law.  To date, the SEC has proceeded with the first stages of implementation without the necessary additional funding.  As described above, implementation up to this point has largely involved performing studies, analysis, and the writing of rules.  These tasks have taken staff time from other responsibilities, and have been done almost entirely with existing staff and without sufficient investments in areas such as information technology.

It is incumbent upon us to use our existing resources efficiently and effectively as we strive to fulfill statutory mandates, protect investors and achieve our mission.  That said, the new responsibilities assigned to the agency under the Dodd-Frank Act are so significant that they cannot be achieved solely by wringing efficiencies out of the existing budget without also severely hampering our ability to meet our existing responsibilities. 

The budget justification the SEC submitted in February in connection with the President’s FY 2012 budget request estimates that, over time, full implementation of the Dodd-Frank Act will require a total of approximately 770 new staff, of which many will need to be expert in derivatives, hedge funds, data analytics, credit ratings, or other new or expanded responsibility areas.[38]  The SEC also will need to invest in technology to facilitate the registration of additional entities and capture and analyze data on these new markets.

The Dodd-Frank Act requires the SEC to collect transaction fees to offset the annual appropriation to the SEC.  Accordingly, regardless of the amount appropriated to the SEC, the appropriation will be fully offset by the fees that we collect and will have no impact on the nation’s budget deficits. 

If the SEC does not receive additional resources, many of the issues highlighted by the financial crisis and which the Dodd-Frank Act seeks to fix will not be adequately addressed, as the SEC will not be able to build out the technology and hire industry expertise and other staff desperately needed to oversee and police these new areas of responsibility.  Examples of likely impacts include: 

• The implementation of rules for the OTC derivatives markets will be delayed, depriving financial firms and market participants of the legal certainty they need to make routine investment decisions, upgrade systems and technology infrastructure, and improve risk management opportunities for manufacturers, pension funds, municipalities, and others.  Even after the rules are eventually finalized, market participants will face further delays and uncertainty due to the lack of adequate Commission staff to process and review on a timely basis requests for registrations or other required approvals.  Further, the Commission will be unable to conduct adequate oversight and examinations of registered swap market participants, or to use newly-available data to surveil the security-based swap markets for excessive risks or other threats to our markets and investors.

• Oversight of vital clearing functions and expected new securities-based swap data repositories will be wholly inadequate.  The average transaction volume cleared and settled by clearing agencies is approximately $1.8 trillion a day.  For the current actively-registered nine clearing agencies, the SEC has approximately ten examiners devoted to them, with limited on-site presence in only three of those.  This situation will worsen as more clearing agencies register with the SEC as a result of Dodd-Frank.

• The SEC will continue to have only a skeletal crew to handle analysis of complex legal and regulatory issues that will increase significantly as more than 750 advisers to hedge funds and private equity funds begin to register with the Commission.  Even after shifting staff from other important program areas, the SEC’s Division of Investment Management will be able to dedicate only a handful of staff to this area.

The Dodd-Frank Act also established a $50 million SEC Reserve Fund to allow the SEC to respond to unexpected market events (such as the May 6^th market plunge), invest in multi-year IT projects, and manage authorized programs during continuing resolutions.  If this fund is eliminated or the SEC is not permitted to access the fund, it would have significant consequences for important IT projects, such as building out the infrastructure to take in, manage and analyze the significant amounts of critical new data we will soon receive from previously unregulated markets, including a segment of the $600 trillion OTC derivatives market and hedge fund and other private fund advisers.  Without the appropriate IT infrastructure, our ability to establish effective monitoring regimes will be significantly hindered.

Section 967 Organizational Assessment

While additional resources are needed to implement the Dodd-Frank Act, it is also critical that we use existing resources effectively and efficiently.  In order to implement our new responsibilities and to effectively supervise the changing financial markets, the SEC is carefully examining its operations and processes to maximize efficiency and effectiveness.  Section 967 of the Dodd-Frank Act directed the agency to engage the services of an independent consultant to study a number of specific areas of SEC internal operations.  This organizational assessment was recently performed by the Boston Consulting Group, Inc. (“BCG”) ^[39] and is providing valuable guidance and structure for our efforts.  Among other issues, the organizational assessment raises significant issues regarding SEC resources and questions whether the statutory design of the four new offices creates management complexity, duplication and a need for new support capacity when many of their functions already exist at the SEC.  SEC staff is currently reviewing the recommendations of the study and will be moving forward with those suggested changes that could improve organizational effectiveness. 

Conclusion

Though the SEC’s efforts to implement the Dodd-Frank Act have been extensive, we know our work is far from over and we are committed to finishing the job.  Thank you for inviting me to share with you our progress to date and our plans going forward.  I look forward to answering your questions.

[1] See Release No. 34-64514, Proposed Rules for Nationally Recognized Statistical Rating Organizations (May 18, 2011), http://www.sec.gov/rules/proposed/2011/34-64514.pdf.

[2] See Release No. 34-63573, Credit Rating Standardization Study (December 17, 2010), http://sec.gov/rules/other/2010/34-63573.pdf. 

[3] See Release No. 34-64456, Solicitation of Comment to Assist in Study on Assigned Credit Ratings (May 10, 2011), http://www.sec.gov/rules/other/2011/34-64456.pdf.

[4]  See Release No. 33-9186, Security Ratings (February 9, 2011), http://www.sec.gov/rules/proposed/2011/33-9186.pdf.

[5]  See Release No. 33-9117, Asset-Backed Securities (April 7, 2010), http://www.sec.gov/rules/proposed/2010/33-9117.pdf.

[6] See Release Nos. 33-9193; IC-29592, References to Credit Ratings in Certain Investment Company Act Rules and Forms (March 3, 2011), http://www.sec.gov/rules/proposed/2011/33-9193.pdf.

[7]  See Release No. 34-64352, Removal of Certain References to Credit Ratings Under the Securities Exchange Act of 1934 (April 27, 2011), http://www.sec.gov/rules/proposed/2011/34-64352.pdf.

[8] See Release No. 33-9146, Removal from Regulation FD of the Exemption for Credit Rating Agencies (September 29, 2010), http://www.sec.gov/rules/final/2010/33-9146.pdf.

[9]  The FSOC Volcker Rule study and recommendations can be found at http://www.treasury.gov/initiatives/Documents/Volcker%20sec%20%20619%20study%20final%201%2018%2011%20rg.pdf.  See also, http://sec.gov/spotlight/dodd-frank/volckerrule.htm.

[10]   See Release No. 34-62824, Temporary Registration of Municipal Advisors (September 1, 2010), http://www.sec.gov/rules/interim/2010/34-62824.pdf.

[11]   See Release No. 34-63576, Registration of Municipal Advisors (December 20, 2010), http://sec.gov/rules/proposed/2010/34-63576.pdf. 

[12]   See Release No. 34-64676, Broker-Dealer Reports (June 15, 2011), http://www.sec.gov/proposed/2011/34-64676.pdf.

[13]   See Release No. 34-64148, Credit Risk Retention (March 30, 2011), http://www.sec.gov/rules/proposed/2011/34-64148.pdf.

[14]   See § 78o-11(c)(1)(A).

[15] See Release No. 34-63652, Suspension of the Duty to File Reports for Classes of Asset-Backed Securities Under Section 15(d) of the Securities Exchange Act of 1934 (January 6, 2011), http://www.sec.gov/rules/proposed/2011/34-63652.pdf. 

[16] See Release No. 33-9175, Disclosure for Asset-Backed Securities Required by Section 943 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (January 20, 2011), http://www.sec.gov/rules/final/2011/33-9175.pdf.

[17] See Release No. 33-9176, Issuer Review of Assets in Offerings of Asset-Backed Securities (January 20, 2011), http://www.sec.gov/rules/final/2011/33-9176.pdf.

[18] See Section 27B of the Securities Act, as added by Section 621 of the Dodd-Frank Act. 

[19]  See Section 942(b) of the Dodd-Frank Act. In April 2010, the Commission proposed, among other things, to require that, with some exceptions, prospectuses for public offerings of ABS and ongoing Exchange Act reports contain specified asset-level information about each of the assets in the pool.   See Release No. 33-9117, Asset-Backed Securities (April 7, 2010), http://www.sec.gov/rules/proposed/2010/33-9117.pdf.  The April 2010 proposals, if adopted, would implement the requirements for registered offerings of Section 942(b). 

[20] See Release No. 33-9178, Shareholder Approval of Executive Compensation and Golden Parachute Compensation (January 25, 2011), http://www.sec.gov/rules/final/2011/33-9178.pdf. 

[21] See Release No. 34-63123, Reporting of Proxy Votes on Executive Compensation and Other Matters (October 18, 2010), http://www.sec.gov/rules/proposed/2010/34-63123.pdf.

[22] See Release No. 33-9199, Listing Standards for Compensation Committees (March 30, 2011), http://www.sec.gov/rules/proposed/2011/33-9199.pdf.

[23] See Release No. 34-62874 (September 9, 2010), http://www.sec.gov/rules/sro/nyse/2010/34-62874.pdf (New York Stock Exchange); Release No. 34-62992 (September 24, 2010), http://www.sec.gov/rules/sro/nasdaq/2010/34-62992.pdf (NASDAQ Stock Market LLC); Release No. 34-63139 (October 20, 2010), http://www.sec.gov/rules/sro/ise/2010/34-63139.pdf (International Securities Exchange); Release No. 34-63917 (February 16, 2011), http://www.sec.gov/rules/sro/cboe/2011/34-63917.pdf (Chicago Board Options Exchange); Release No. 34-63918 (February 16, 2011), http://www.sec.gov/rules/sro/c2/2011/34-63918.pdf (C2 Options Exchange, Incorporated); Release No. 34-64023 (March 3, 2011), http://www.sec.gov/rules/sro/bx/2011/34-64023.pdf (NASDAQ OMX BX, Inc.); Release No. 34-64121 (March 24, 2011), http://www.sec.gov/rules/sro/chx/2011/34-64121.pdf (Chicago Stock Exchange); Release No. 34-64122 (March 24, 2011), http://www.sec.gov/rules/sro/phlx/2011/34-64122.pdf (NASDAQ OMX PHLX LLC); Release No. 34-64186 (April 5, 2011), http://www.sec.gov/rules/sro/edgx/2011/34-64186.pdf (EDGX Exchange); Release No. 34-64187 (April 5, 2011), http://www.sec.gov/rules/sro/edga/2011/34-64187.pdf (EDGA Exchange). 

[24] See Section 954 of the Dodd-Frank Act.

[25] See Section 953(a) of the Dodd-Frank Act.

[26] See Section 953(b) of the Dodd-Frank Act.

[27] See Section 955 of the Dodd-Frank Act.

[28] See Release No. 34-63547, Conflict Minerals (December 15, 2010), http://www.sec.gov/rules/proposed/2010/34-63547.pdf; Release No. 33-9164, Mine Safety Disclosure (December 15, 2010), http://www.sec.gov/rules/proposed/2010/33-9164.pdf, Release No. 34-63549, Disclosure of Payments by Resource Extraction Issuers (December 15, 2010), http://www.sec.gov/rules/proposed/2010/34-63549.pdf.

[29] See Release No. 33-9211, Disqualification of Felons and Other “Bad Actors” from Rule 506 Offerings (May 25, 2011), http://www.sec.gov/rules/proposed/2011/33-9211.pdf.

[30] See Release No. 33-9177, Net Worth Standard for Accredited Investors (January 25, 2011), http://www.sec.gov/rules/proposed/2011/33-9177.pdf.

[31]  See Dodd-Frank Act § 112(a)(1).

[32]  Section 803(6) of the Dodd-Frank Act defines a financial market utility as “any person that manages or operates a multilateral system for the purpose of transferring, clearing, or settling payments, securities, o other financial transactions among financial institutions or between financial institutions and the person.” 

[33]  See Dodd-Frank Act § 802.

[34]  See Dodd-Frank Act § 805.

[35] http://www.treasury.gov/initiatives/Documents/Finalruledisclaimer7-18-2011.pdf.

[36]  The Senate Committee on Appropriations’ Subcommittee on Financial Services and General Government Appropriations provided reprogramming approval to the Commission on July 14, 2011.  

[37]   After reviewing cost benefit analyses included in six of our Dodd-Frank Act rulemaking releases, the SEC’s Inspector General issued a report last month.  While the Office of Inspector General (“OIG”) is continuing to review the Commission’s cost benefit analyses, this report concluded that “a systematic cost-benefit analysis was conducted for each of the six rules reviewed.  Overall, [the OIG] found that the SEC formed teams with sufficient expertise to conduct a comprehensive and thoughtful review of the economic analysis of the six proposed released that [the OIG] scrutinized in [its] review.” See U.S. SEC Office of the Inspector General, Report of Review of Economic Analyses Performed by the Securities and Exchange Commission in Connection with Dodd-Frank Rulemakings (June 13, 2011) http://www.sec-oig.gov/Reports/AuditsInspections/2011/Report_6_13_11.pdf at 43.   We look forward to continuing to work with the OIG as it conducts a further review.

[38] See the SEC’s FY2012 Congressional Budget Justification http://www.sec.gov/about/secfy12congbudgjust.pdf.

[39] On March 10, 2011, BCG submitted to the SEC and to the Congress its Report, U.S. Securities and Exchange Commission: Organizational Study and Reform.  The report is available to the public at www.sec.gov/news/studies/2011/967study.pdf.