Questions directed at the SEC regarding regulation often go unanswered, indicating a decline in genuine interaction between the Commission and the public. This was stated by Commissioner Hester Peirce, reports The Block.
According to her, the agency’s staff lacks “bandwidth.”
“The root of the problem is that the Commission does not encourage staff to offer much more than a shrug, silence, slow walking, sighs. The culture in leadership has changed, and this has led to changes throughout the regulator in how we interact with industry representatives,” she lamented.
Peirce also touched on the provisions of Staff Accounting Bulletin 121 (SAB 121), approved in March 2022. The document contains recommendations for the custody of cryptocurrencies. In particular, banks are required to reflect them on their balance sheets. This makes the process costly and limits the ability of institutions to provide custodial services on a large scale.
In February, four industry organizations appealed to the SEC to ease SAB 121.
Peirce described the Bulletin’s provisions and related oral guidance from leadership as a “pernicious weed.”
She compared the situation, as in her 2019 speech, to Frances Eliza Burnett’s novel “The Secret Garden.”
According to the official, the agency has developed a “maze of staff guidance that serves to determine practice in the securities industry in a way that may contradict a plain reading of the rulebook.”
“Compliance is mandatory for anyone trying to avoid delays, denials, enforcement actions, and scrutiny from the SEC. In the end, everyone silently complies,” she explained.
In conclusion, Peirce emphasized that “rules of such broad application should be set by the entire Commission, not by staff who report only to the [SEC Chair Gary Gensler].”
In February, the House Financial Services Committee put forward a resolution to overturn SAB 121. This followed a statement by a Congressional watchdog on the need for the SEC to obtain legislative approval before advancing the Bulletin.
In March 2023, Senator Cynthia Lummis and Congressman Patrick McHenry highlighted the increased risks of client fund loss due to the collapse of a crypto custodian under the implementation of SAB 121.