Transcript

1. Slide 1

   Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

2. Slide 1

   Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

3. Slide 1

   Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

4. Slide 1

   Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

5. Slide 1

   Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

6. Slide 1

   Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

7. Slide 1

   Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

8. Slide 1

   Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

9. Slide 1

   Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

10. Slide 1

    Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

11. Slide 1

    Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

12. Slide 1

    Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

13. Slide 1

    Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

14. Slide 1

    Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

15. Slide 1

    Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

16. Slide 1

    Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

17. Slide 1

    Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

18. Slide 1

    Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

19. Slide 1

    Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

20. Slide 1

    Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

21. Slide 1

    Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

22. Slide 1

    Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

23. Slide 1

    Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...

24. Slide 1

    Presenter's Notes: Speech by SEC Commissioner:Market Upheaval and Investor Harm Should Not be the New NormalbyCommissioner Luis A. AguilarU.S. Securities and Exchange CommissionCompliance Week 2010Washington, D.C.May 24, 2010Thank you for that kind introduction. At the start, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect those of the Commission, the other Commissioners, or the staff.A year ago I stood here and discussed the perils of "too big to fail," how the capital markets regulator should be structured coming out of regulatory reform, and why the SEC was best suited to that role.1 These issues, and many more, are still very much before us.In recent decades, financial regulation has been guided by a philosophy that presumed that the market could be trusted to regulate itself, to take care of investors, and to support our nation's economic development. As a result, new products and ways of doing business were developed in unregulated and opaque markets without proper oversight by regulators and without transparency to the public. While a lot of people in the financial sector were enriched,2 the majority of Americans are now paying the price.The financial crisis and its enormous costs to society were the direct result of years of deregulation, and they have sounded the alarm for change. The perils of fragmented regulation may also be seen in the May 6th market break the so-called "flash crash." This market breakdown and the difficulty in determining how and why it occurred are yet further stark reminders of the dangers of weak oversight of our tightly interconnected financial markets.More than a year after it reached its peak, the reasons for the financial crisis are still not fully understood. Moreover, information about how the capital markets actually work is shockingly difficult to obtain. This is disappointing, but it should not be a surprise. While our financial sector expanded at a record pace for years, deregulation was the "order of the day" for those in leadership positions. Regulatory budgets were cut,3 and regulatory authority was curtailed4 or not used.It is clear that the public is clamoring for significant reform and expects Washington to deliver.5 Against this backdrop of deregulation and confusion, it is apparent that Wall Street and Main Street are in a tug-of-war to see who wins the legislative debate. This struggle will continue as the House and Senate financial reform bills are reconciled in conference. Throughout this debate, the voices of Main Street investors have been few. By contrast, the voices from Wall Street are active, well-organized, well-financed, and extremely well-connected. And they are quick to argue that one proposed reform or another would certainly lead to undesirable effects.6 They argue this even though their powers of foresight failed utterly to anticipate the severity of the financial crisis before they were swept up in it. In fact, Wall Street accepts almost no responsibility for its role in causing the crisis, sometimes claiming instead that it was nothing but a "perfect storm."7 I know that the public casts a skeptical eye on such pronouncements, and so do I.Although the causes of the crisis are many and complex, it's clear that the responsibility is shared among Wall Street participants, legislators, and regulators. In particular, there can be little doubt that the biggest and most active market participants did in fact contribute greatly to the crisis. The short-term incentives that fueled the growth in the swaps markets, the growth in overly complex securitized assets, and the growth in trading volume came to overwhelm our marketplace and financial sector in general. Our financial sector lost touch with its primary mission facilitating efficient allocation of capital from investors to productive businesses that provide goods, services, and jobs. After the crisis, which caused trillions in losses and painful levels of unemployment and underemployment, we need to ask how our financial system so badly lost its way, and how so much damage was done to the American economy in the process.The financial crisis and the May 6th market break vividly demonstrate four points I would like to discuss today:First, while regulated and unregulated markets and entities are seamlessly connected, regulatory oversight is piecemeal;Second, the SEC must be able to conduct surveillance and to oversee the capital markets in real time;Third, we must reexamine the concept of the sophisticated investor, which underlies many regulatory gaps; andFourth, as we focus on changes to the regulatory landscape, we must remember the crucial role played by rigorous SEC enforcement of the securities laws.I. Interconnection Between Regulated and Unregulated Markets and Entities is Seamless, While Regulatory Oversight is PiecemealLet's begin by talking about the "flash crash." Today, the SEC-CFTC Joint Advisory Committee holds its first meeting,...