00:00Chairman Atkins, under the previous administration, the SEC engaged in a
00:04regulation by enforcement approach. That chilled U.S. innovation in digital
00:09assets. It took away our leadership position in the digital assets arena and
00:13frankly drove digital asset innovation overseas. Now, thanks to your leadership
00:19and that of Acting Chairman Ueda, the SEC has taken important steps toward
00:23providing regulatory clarity for digital assets. Likewise, Congress is taking
00:28action right now by advancing my stablecoin bill, the Genius Act. And by
00:32undertaking that legislation, we're going to open the door to undertake even further
00:36legislation on market structure. Chairman Atkins, if you could just take a moment
00:40and explain why swiftly providing rules for the road for digital assets is
00:45important to America. Well, thank you, Chairman. Yes, it's, I think, vitally
00:52important because innovation doesn't, cannot occur in a vacuum. Innovation and new
01:00products, you know, depend on certainty. And the more certain the rules of the road
01:05are, the better then people can go and get legal opinions in order to do things and
01:11make investments so that they're sure of what they're investing in and that the
01:17rules will change down the road. So, unfortunately, you know, because we have for now, you know, almost a decade, you know, lack of certainty in this area, I think that has chilled the investment climate, at least in the digital asset space.
01:35Yeah, I certainly agree. And I sadly have seen innovators leaving America telling me they're going to start their next business in another country, this type of thing, simply because they lack the clarity that you're describing. So,
01:46I think it's much needed. I'd like to turn our conversation now, though, to another area that I think is something that has an issue here in America that's gone on far too long.
01:56And that has to do with the dominant proxy advisory firms. That's ISS and Glass-Lewis, to be specific. And they've been able to operate here in the United States with very little regulatory oversight.
02:06The firms have exploited their duopoly, and they've used it as a means to basically hijack corporate governance. And what they're doing is they're pushing
02:16costly and destructive partisan agendas through as they provide their recommendations. Think about it. U.S. public companies and their retail investors pay the price,
02:26as shareholder returns take the backseat to, quote, woke partisan agendas. These agendas are advocated by these so-called proxy advisors and the recommendations that they put forward for their clients.
02:38The firm's perverse influence on capital markets is only made more concerning by the fact that they're both foreign owned. ISS is 80% owned by a German entity that openly claims to, quote, allocate capital to sustainable initiatives.
02:53While Glass-Lewis is owned by a Canadian private equity firm, which is stated that ESG remains a, quote, key factor in investment decision making.
03:03Chairman Clayton attempted to address the problem by amending the proxy rules definition of solicitation to include proxy voting advice.
03:10His rulemaking imposed a baseline level of transparency and accountability on these firms.
03:15However, Chairman Gensler arbitrarily and capriciously reversed key parts of Clayton's 2020 rule. This allowed ISS and Glass-Lewis to continue their shakedown of American companies.
03:26Chairman Atkins, broadly speaking, do you have concerns about the activities of these proxy advisory firms? And I'm curious what measures the SEC might have taken thus far to address those concerns?
03:37Well, thank you, Mr. Chairman. I do have concerns about gamesmanship and abuse of the corporate governance process and the back and forth that's gone on over the last few years.
03:53So I want to be sure that we are able to address that and look into it, and that's going to be part of our program going forward.
04:02Good. I'm glad to hear it's a priority. ISS previously sued the SEC over Clayton's 2020 rulemaking. Under Gensler, the Commission dropped its defense of that rule.
04:11If the SEC were to resume its defense of the rule and do so successfully, the reasonable regulatory requirements imposed under Chairman Clayton would be restored.
04:19I urge the Commission to consider defending Clayton's rule and to explore every possible avenue to rein in the proxy advisors and shield the competitiveness of our U.S. capital markets.
04:28Now I'd like to turn to CSDD, another favorite. The European Union has adopted the Corporate Sustainability Due Diligence Directive, also known as CSDDD, to impose extraterritorial regulation on U.S. companies.
04:42Motivated by ESG and other progressive policy goals and arguably a desire to use regulators to kneecap more successful jurisdictions like ours, the rule imposes significant compliance burdens that will hamstring U.S. competitiveness.
04:57The EU's economic growth is evaporating thanks to the massively increased regulatory burdens that it has imposed on itself.
05:03Rather than reform its own failed regulatory state, the EU would prefer to undermine our economy by imposing growth-killing rules on U.S. businesses.
05:12Beyond its massive compliance costs, the CSDDD is an affront to U.S. sovereignty.
05:17Major policies impacting our businesses ought to be debated and decided by U.S. lawmakers, not faceless bureaucrats in foreign capitals.
05:25In recent weeks, even President Macron and Chancellor Merce have acknowledged that this extraterritorial regulation should be repealed.
05:32Chairman Atkins, I'd just like to know whether you're concerned about the extraterritorial regulation that's going on, and if so,
05:38if you could describe the harmful effects that we'll have on U.S. companies that are ensnared by the EU's rule.
05:44Well, thanks, Chairman.
05:45Yes, I do.
05:48I am very concerned about the extraterritorial effect of these rules, and particularly to small businesses in the supply chain, vendor chain, to multinational companies.
06:05Because by the terms of some of these directives, some of these requirements, especially third-party rights of litigation and action, is very threatening to manufacturers and other suppliers here in the United States.
06:27So I will definitely take steps with our counterparts abroad to make them understand how concerned we are and to push back on those effects on the United States company.
06:41I appreciate you making that a priority on the executive branch side.
06:44I think you can make a great deal of progress on the legislative branch side.
06:47I've introduced the Protect Act, which is reciprocal, and it would push back on this sort of extraterritorial jurisdiction as well.
