The Securities and Exchange Commission (SEC) is expected to make dramatic improvements to the regulation of environmental, social, and government reports due to new initiatives. However, the new system is already fit for purpose, according to SEC Commissioner Hester Peirce.

Peirce cautioned against the department taking a more prescriptive approach in an interview with Law360, claiming that the new principles-based process was already capable of dealing with these issues.

“We have a principles-based disclosure framework that is rooted in materiality and intended to be flexible so it can be used by issuers across industries. The materiality standard is derived from U.S. Supreme Court case law, which tells us that information is material if there’s a substantial likelihood that a reasonable investor would consider the information important in making a financial decision about the company. That’s an objective test that we can look at.”

When it comes to whether a new transparency system should be implemented, Peirce believes securities regulations are not the best mechanism for enacting policy priorities. A greater emphasis should be on ensuring that more people have access to capital markets.

“I worry about using the securities laws to implement policy preferences. Our capital markets are valuable and they’ve functioned very well to help people live better lives and achieve prosperity. Our goal should be to ensure that more Americans can participate in those capital markets. It shouldn’t be to inject political issues into the capital markets.”

When asked about new SEC Chairman Gary Gensler’s thoughts on the issue, Peirce said it was too early to speculate on his likely preferred route.

“I have known Chairman Gensler for a long time, and he is knowledgeable about the capital markets and he loves the role that the capital markets play in the country. I’m sure he’s meeting with tons of people and hearing lots of different perspectives. And I’m sure that will continue as he settles in. So it’s just really too early for me to speculate about the approach that he’s going to take in this area.”

Commissioner Peirce’s remarks, on the other hand, point to the need for a greater focus on capital access, particularly as the US economy continues to recover from the COVID-19 pandemic.


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